In the case of Conley v Tennessee Farmers, the Court of Appeals held that a misrepresentation as to prior foreclosure on an application is sufficient to void coverage as such misrepresentations increased the risk of loss as a matter of law. The Court of Appeals held:
An applicant’s history of past foreclosures can assist the insurer in determining if it should inquire further as to whether that party will be financially capable of making premium payments or maintaining the property. It thus seems apparent to us that not accurately answering Tennessee Farmers’ question concerning prior foreclosures increased the risk of loss because Tennessee Farmers was ‘denied information that it, in good faith, sought and deemed necessary to an honest appraisal of insurability.’
(Citations omitted). There were some factual twists in this case, but it was undisputed that the applicant had objectively misrepresented her involvement in a prior foreclosure proceeding. Ms. Conley did have explanations for the foreclosure, and argued she was not on the loan that was associated with the property that went into foreclosure. The Court nonetheless held that a misrepresentation as to prior foreclosure on the application constituted an increase in the risk of loss within the meaning of T.C.A. § 56-7-103, which provides as follows:
56-7-103. Misrepresentation or warranty will not avoid policy – Exceptions. – No written or oral misrepresentation or warranty therein made in the negotiations of a contract or policy of insurance, or in the application therefor, by the insured or in the insured’s behalf, shall be deemed material or defeat or void the policy or prevent its attaching, unless such misrepresentation or warranty is made with actual intent to deceive, or unless the matter represented increases the risk of loss.
The fact she did not intentionally make the misrepresentation was not relevant, since the matter did increase the risk of loss.