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AGENTS OF FRAUD: Misrepresentation and Fraud within the Summary Judgment Context

Fraud, Concealment, and Material Misrepresentation are well known and often-pled defenses in the Insurance industry. So much so, that many adjusters overlook the practical application of the defenses within the litigation setting. In this article, I will briefly review the basis of the defenses and more practically, the timing of their application. That is to say, “When does each defense apply and how quickly can I get my case dismissed?”

The answer is not always the same as it is very fact driven but often, Summary Judgment will be your vehicle. This question is particularly pressing given the ongoing conflagration and disbarment of Scott Strems. For more on that, check out the article, “SUSPENSION OF FLORIDA LAWYER ACCUSED OF CAUSING ‘GREAT PUBLIC HARM’ JUSTIFIED” by Amy O’Conner. The Insurance Journal (July 16, 2020) online publication.


Virtually every policy of insurance whether related to real property, auto, commercial lines, or excess coverage will contain the following provision, or something very similar:

Concealment or Fraud … with respect to all “insureds” covered under this policy, we provide no coverage for loss … if, whether before or after a loss, one or more “insureds” have: (1) Intentionally concealed or misrepresented any material fact or circumstance; (2) Engaged in fraudulent conduct; or (3) Made material false statements…

First, note the language related to who is committing the fraud, concealment, or misrepresentation. The policy expressly references the “Insureds.” This derives from the fact that the contract obligation is directly between the carrier and a defined person or set of people (e.g. Mr. and Mrs. Smith). For the policy / contract to apply, there must be “privity” between the parties. A third party cannot claim benefits unless there is some legal assignment of the right to that party from dear Mr. Smith. The third party must “stand in the shoes” of the insured via Power of Attorney, Assignment of Benefits, Direct Pay Authorization or some other legal transfer.

However, that does not mean a law firm, contractor, or other “third party” can simply throw out false statements and harbor the Insured from dismissal. Plaintiff’s counsel (including the Strems Law Firm) will frequently state they have no control over third parties and are, therefore, not bound by any of their questionable actions. This is simply inaccurate. When that “third party” is standing in the shoes of the insured as an Assignee, they obtain not only the benefits of the policy but the legal obligations as well. With true “third parties” the analysis can be a bit more difficult but the provision still applies.

Whether we are dealing with a spouse, child or some random lunatic calling the carrier during the claims process, the analysis is the same. We need to determine who has the legal right under the policy and whether that person caused or permitted the fraud, concealment or misrepresentation to occur.

A prime example in one of my recent cases involves an Insured and his girlfriend who attempted to secure benefits under coverage for Additional Living Expenses (“ALE”). ALE pays for out-of-pocket costs following a covered loss related to room and board, food or similar items. The insured’s girlfriend created a lease, submitted it to the carrier and then attempted to collect the ALE directly. The Insured testified he had no express contract with the girlfriend and did not endorse her behavior through assignment or other legal transfer of rights. However, we know conclusively the Insured sent emails afterward inquiring about payments related to ALE and his counsel specifically demanded policy limits under the coverage. The email was “explained away” as a simple inquiry by the Insured. In reality, the Insured never advised the Carrier or any third party that the “lease” was, in fact, fraudulent and he confirmed direct knowledge of its submission.

When combined with the ongoing demand for ALE by his counsel, a clear case of misrepresentation exists (and potentially outright, intentional fraud), which brings me to my second point:


Fraud, to some extent, is a condition of the mind that requires intentional, knowing or “volitional” behavior. A material misrepresentation on the other hand has no “mens rea” component.

Looking back to our policy language, note subparagraph one references “intent” but the third subparagraph does not. The only question under a material misrepresentation defense is if a fact was presented by the Insured (or his agent) and if that fact is “material” to application of the policy. If a materially false representation is made, the policy is void and coverage ceases for all provisions under the policy.

The “materiality of the misrepresentation” in an application for insurance is a question of fact to be resolved by a jury when the facts are in dispute and reasonable minds could differ as to their application. However, when the facts are not in dispute, the question of materiality becomes a question of law and is resolved by the Court. The net result and timing are very different.

In our example above, if the Insured admits his direct knowledge of the lease, its fraudulent nature, and his email “inquiring” about the benefit payment, there is no question of fact for a jury to resolve. He has conceded the point after one deposition. My client does not need to incur the significant costs of a jury trial and, in fact, summary judgment is appropriate in the scenario.

However, if the Insured claims he has no knowledge of the lease and the third party was committing truly independent fraud, we are likely stuck with a jury trial on a disputed issue – that is, did the Insured “make” the material misrepresentation. Invariably there will be “facts” pointing in different directions on the issue. Did the girlfriend trick the insured into blindly signing a lease? If so, should the Insured still be accountable for not exercising due diligence? Was the insured drunk when he signed it? Does that matter? Did the Insured advise the carrier he had no recollection of the email he sent? Any of the foregoing “facts” may be enough to force a jury trial. A carefully crafted deposition is key to fighting off these “factual” disputes and securing talented litigation counsel plays an important role in that effort.

For more on that issue, please see, “A Winning Strategy for Selecting the Defense Counsel Your Organization Needs and Deserves” by Laz Rodriguez, August 2020. WALTON LANTAFF SCHROEDER & CARSON LLP News and Education.


There are three main vehicles for a court to resolve a lawsuit- a Motion to Dismiss, a Motion for Summary Judgment, and Trial. The costs increase the further you move to the right on the list.

A motion to dismiss may be filed if the pleading, on its face — meaning the literal words in Plaintiff’s Complaint — show the Insured made a Material Misrepresentation. In the thousands of Complaints, I have reviewed, I have seen only one where a plaintiff’s attorney was so incompetent that a material misrepresentation was laid out in the Complaint; and even then, the Court permitted “amendment” to remove the offending statement. The takeaway being, a successful Motion to Dismiss at the pleadings stage is a true rarity.

That means your best alternative is Summary Judgment. A summary judgment motion can be filed when there are facts established through the discovery process to show there is no “genuine issue of material fact.” Typically, the fastest route to summary judgment is by written discovery — Interrogatories and Requests for Admission. Courts are reluctant to grant summary judgment on written discovery unless the replies are extremely clear in application. A crafty plaintiff’s attorney can answer most discovery without ever answering anything of substance. To ferret out the facts, costly Motions to Compel are needed.

A good alternative to extensive paper discovery fights is the deposition. Rather than pursuing motions to compel, hearings, tremendous time in “document review” and the like, a Carrier can elect to set the deposition of the insured via Subpoena Duces Tecum. The subpoena will require production of all relevant materials (and cuts out the need for written Requests for Production). This saves time and money. Once the deposition is secured, talented litigation counsel can sniff out underlying issues and put an insured on the spot. Unlike written discovery where Plaintiff attorneys artfully draft answers, a deposition is free-moving and the role of the attorney is limited to evidentiary or procedural objections. The “words” in reply must come from the insured directly. Many of today’s high-volume Plaintiff’s firms employ young attorneys who have little time to prepare an Insured for every issue that may arise during deposition. The insured must rely on his or her own truthful and complete recollection of events. When an evasive answer is given, it is abundantly clear and follow up questions quickly put to bed the issue or reveal “concealment.” Either way, with effective counsel, your facts are established.

Once the deposition testimony is finalized, Summary Judgment is filed and set for hearing. If granted, the case is over. You have won after conducting one deposition and simply confirming the facts within you claim file.

In the event an Insured continues the fraud, concealment or material misrepresentation through perjury, you are likely on a full trial track. You will have no alternative but to set all relevant factual witnesses, conduct paper discovery and likely retain experts. It becomes even more imperative at that point for a carrier to select experienced trial counsel.

For more information on WLSC’s approach to litigation management, be it through Summary Judgment or Trial, please click here:

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