Auto policy may be cancelled if policyholder misstated information when applying

On May 6, 2020, the Ohio Supreme Court found that specific language in an insurance policy was sufficient to warn the insured that misstatements as to warranties in her application for the policy rendered the policy void from the beginning (Nationwide Mut. Fire Ins. Co. v. Pusser, (Slip Opinion No. 2020-Ohio-2778)).

The Court found that Nationwide Mutual Fire Insurance Company plainly incorporated the policyholder’s application into the policy, and the policy also stated that answers provided to questions in the application are warranties, which “if incorrect, could void the policy from the beginning.” Therefore, the policyholder was sufficiently warned of the possibility of the insurance policy to be void.

The Court’s decision reversed the Seventh District Court of Appeals, which found the phrase “could void the policy” too ambiguous to decline coverage. However, the Supreme Court found the “nonmandatory” nature of the word “could” does not change the fact that Nationwide warned that a misstatement in the application voids the policy from the beginning. The policyholder was still sufficiently warned of the possibility of the insurance policy to become void if the policyholder failed to provide the accurate information required on the application.

In this case, the policyholder failed to properly identify other operators in the household on the application. The other operator in the household, which was not disclosed on the application, was operating the vehicle when an accident occurred. Since the Court found Nationwide’s incorporation of the application into the policy was proper, Nationwide’s action to decline coverage was appropriate.