Insurance policy voided over alleged fraud in application
James Boudreau purchased "Errors and Omissions" coverage for his appraisal business from General Star National Insurance. In each of three years, when he filled out his application for renewal, he interpreted the insurer's questionnaire literally and answered "no" to this question: "The applicant has not been disciplined by any state licensing board or other regulatory agency as a result of appraisal activities within the past 5 years." Turns out, he had been disciplined within the past five years, but not for activity engaged in within five years. When he had a claim and sought protection, General Star discovered the earlier discipline and canceled his policy.
The Court of Appeals recognized that there was ambiguity in the form of the insurer's question, but concluded that it could resolve the ambiguity and protect the insurer's underwriting process by interpreting the sentence as the insurer apparently intended. As a result, Boudreau's insurance was voided from the outset and he was not afforded the coverage that he thought he had purchased. Whether an innocent misinterpretation, or an ounce too much cleverness, Boudreau should not have gambled that a Court would elevate his interest over an insurer's in the age of the Engler Majority.