There are a few issues here that need to be clarified for our insureds out there who may be dealing with an insurance company making accusations of misrepresentations.  First, the rules are different depending on whether the alleged misrepresentation occurred before the loss or after the loss.  The one I see more often is the misrepresentation that occurs during the application process. That topic is certainly worthy of several posts on its own, but suffice it to say here that a material misrepresentation on an insurance application that increases the risk of loss can completely void the policy, meaning that the insurance company will refund the premiums as if the policy never existed at all.  As for misrepresentations that occur after the loss during the claim process, the law is much more generous to the insured.  In those cases, to avoid its obligations under the policy, the insurance company has the burden to show that the misrepresentation was intentional and designed to deceive. A simple mistake isn’t enough. For example, if an insured fills out his proof of loss and makes a mistake in adding his personal property inventory and thus fills in the wrong number on the proof of loss, that would not be an intentional misrepresentation.  

 

Another requirement is that the alleged post-loss misrepresentation be material in nature.  So what is material?  In Nix v. Sentry Ins., 668 S.W.2d 462 (Tenn. Ct. App. 1983), the Court of Appeals dealt with precisely that question.  In that case, the issues at trial centered around whether the plaintiff had committed arson and whether the plaintiff had made material misrepresentations regarding what property was actually destroyed by the fire and its value.  The trial court found that there was no arson, but that there had been misrepresentations concerning the value of the property destroyed in the fire. The judge therefore found that the insurance company had no liability for the loss.  On appeal, the Tennessee Court of Appeals reversed, holding:

 

When the false swearing is in the application it forms the basis upon which the contract rests, and if fraud enters into it the policy would be voided even though the policy does not so provide.  But after the loss occurs then voiding the policy is in the nature of a penalty or forfeiture; in other words, in such cases the holding is virtually that, although the insured has had a loss, and may be entitled to recover from it, yet, as he has been guilty of fraud in the proofs, he must have his policy vacated and set aside as a punishment for such fraud, or attempted fraud.  In the latter case, as in all cases of forfeiture, a strict construction should be adopted, and the forfeiture not enforced except on the plainest grounds, if at all.

 

Nix, 666 S.W.2d at 463-64.  Most importantly to the issue of materiality, the court also noted "that if rights are to be forfeited under the terms of this insurance policy, the concealment or misrepresentation made must be relative to the loss claimed."  In that case, the insurance company pointed to alleged misrepresentations concerning the insured’s financial condition which might have provided a motive for arson, but did not point to any specific misrepresentations in the proof of loss.  Because the court found there was no arson, any misrepresentations concerning the insured’s financial condition were not material to the issue of his valuation of certain personal property, and the policy could not be voided.  

 

Nix is a very important case, and can be incredibly useful in insurance disputes.  It obviously isn’t a license to misrepresent material facts, but it does substantially limit an insurance company’s ability to void a policy altogether when the alleged misrepresentations just don’t have anything to do with the issues at hand. 



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Photo of Brandon McWherter Brandon McWherter

J. Brandon McWherter is a Nashville-based lawyer and member of McWherter Scott & Bobbitt PLC, which has offices across the State of Tennessee and elsewhere across the Southeast.  Licensed in Tennessee, Arkansas, and Mississippi, he has dedicated his practice to assisting insurance…

J. Brandon McWherter is a Nashville-based lawyer and member of McWherter Scott & Bobbitt PLC, which has offices across the State of Tennessee and elsewhere across the Southeast.  Licensed in Tennessee, Arkansas, and Mississippi, he has dedicated his practice to assisting insurance policyholders with their claims against insurance companies, including claims for bad faith.

For well over a decade, McWherter’s practice has been focused almost exclusively on the prosecution of first party property insurance claims for policyholders.  His interest in this area of the law first started around 2003 when a tornado struck Jackson, Tennessee, where he lived and worked at the time.  Since then, McWherter has represented hundreds or thousands of policyholders whose claims have been underpaid or denied.  He advises and advocates for owners of commercial properties, industrial facilities, residential properties, churches, business owners, and other insurance policyholders.

Since he started counting in 2013, McWherter has assisted his clients in obtaining well in excess of One Hundred Million Dollars ($100,000,000) in settlements, awards, and jury verdicts against insurance companies.

In 2018, McWherter was inducted as a fellow in the American College of Coverage Counsel, which is an invitation-only organization designed to facilitate and encourage the association of lawyers who are distinguished for their skill, experience, and high standards of professional and ethical conduct in the practice or teaching of insurance coverage and extra-contractual law and who are dedicated to excellence in this area of practice.

McWherter has been featured as a “Super Lawyer” or “Rising Star” by SuperLawyers every year since 2010.  Since 2013, he has been selected each year  for inclusion in U.S News and World Reports’ The Best Lawyers in America in the field of Insurance Law.  He also enjoys an AV Preeminent ranking by Martindale-Hubbell for legal ability and ethical standards.

Mr. McWherter is a lifelong Tennesseean and received his law degree from the University of Memphis. While in law school, he was a member of the University of Memphis Law Review, and served on the Editorial Board as Notes Editor.

In advocating for clients, McWherter has trudged through fire scenes and crawled storm-damaged roofs, quizzed consulting construction experts and experts for hours on end, and deposed and cross-examined hundreds of adjusters, experts, consultants, and other professionals within the insurance industry.  He reads insurance policies nearly every day and has a working knowledge of the customs and practices of insurance companies in investigation, estimating, and payment of claims.  McWherter counsels clients on presentation of claims, assists in compiling the evidence necessary to validate the amounts owed, and then enforces his clients’ rights, if necessary, via the judicial system and other alternative dispute resolution options, such as appraisal.

Several of McWherter’s cases have developed the law governing insurance disputes in the State of Tennessee, most recently including the Tennessee Supreme Court’s 2019 decision in Lammert et al. v. Auto-Owners Ins. Co., which held that insurers may not depreciate the costs of labor in determining their actual cash value payment obligations when the policy does not clearly allow it.

When not working, you will usually find Mr. McWherter with his wife, Angela, and his two daughters. He is an avid golfer and a lifelong bass fisherman, neither of which he does as often as he would like.

Practice Areas

  • Representation of policyholders in claims and litigation against insurance companies
  • Bad faith insurance litigation
  • Insurance-based consumer class actions

Professional Associations

  • Tennessee Bar Association
  • Arkansas Bar Association
  • Mississippi Bar Association
  • Tennessee Trial Lawyers Association
  • American Trial Lawyers Association (past member)
  • American Bar Association (past member)

Education

  • B.S.B.A. – Union University (1998)
  • J.D. – University of Memphis (2001)

Bar Admissions

  • Tennessee
  • Mississippi
  • Arkansas
  • Fifth Circuit Court of Appeals
  • Sixth Circuit Court of Appeals
  • United States District Court for the Western District of Tennessee
  • United States District Court for the Middle District of Tennessee
  • United States District Court for the Eastern District of Tennessee
  • United States District Court for the Northern District of Mississippi
  • United States District Court for the Southern District of Mississippi
  • United States District Court for the Eastern District of Arkansas