By Marc Zimet, Esq. of Jampol Zimet LLP An insurer does not have to provide coverage when the insuredaEUR(TM)s business operation and use of the premises was not in accordance with that listed on the insurance application. In Nationwide Mutual Fire Insurance Co. v. Almco Ltd., a federal judge for the District of Columbia ruled that where an insuredaEUR(TM)s application requested insurance for a aEURoedeli,aEUR? the insurer did not have to provide coverage under the policy when a shooting occurred at the insuredaEUR(TM)s entertainment venue resulting in personal injury claims. Defendant Almco Ltd. had plans to open a delicatessen. It obtained insurance from Travelers Casualty Insurance Co. of America from 2011 to 2012. That policy stated Almco operated a fast-food restaurant. However, during that time period Almco not only provided food, but offered billiards, entertainment, and alcohol upon the premises. In 2012, Almco obtained a new policy from Nationwide. That application provided that Alcmo operated a deli, and did not serve alcohol, have entertainment, nor billiards. Approximately six months after Almco obtained the new insurance, a shooting occurred upon the premises during a private event at which alcohol was being served to guests. Several guests suffered injuries and Almco tendered the claims to Nationwide. In 2013, Nationwide sued Almco, seeking declaratory judgment that it owed no duty to provide coverage under the policy due to false statements. Under District of Columbia statute, an insured may be barred from coverage where a false statement is made with the intent to deceive, or a false statement materially affects the acceptance of risk or hazard assumed by an insurer. Almco moved for Summary Judgment arguing it did not intend to deceive Nationwide. However, neither party disputed that false representations were made at the time the application was submitted. On NationwideaEUR(TM)s Motion for Summary Judgment, the District Judge found material representations existed in the application, stating, aEURoe[a] disco is not a deli and the risks posed by the combination of billiards, booze and entertainment are materially different from the hazards that could arise out of a corned beef on rye.aEUR? Because there was no genuine dispute as to whether the false statement affected NationwideaEUR(TM)s acceptance of risk or hazards assumed, the Judge entered judgment for Nationwide. aEURoeThe test of materiality is whether the representation would reasonably influence the insureraEUR(TM)s decision as to whether it should insure the applicant.aEUR? (Westhoven v. New England Mut. Life. Ins. Co. (1978) 384 A.2d 36, 38.) aEURoe[W]here evidence warrants, materiality may be found as a matter of law.aEUR? (Jannenga v. Nationwide Life Ins. Co. (1961) 288 F.2d 169, 172.) The court found that Nationwide set forth sufficient evidence to demonstrate it would not have provided the policy to Almco had it been aware of the true nature of the business operations. Under California law, generally speaking, misstatements or concealment of any material facts in an application for insurance, even if unintentional, entitle the insurer to rescind the insurance policy. (LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1267.) Pursuant to Insurance Code ? 332, aEURoeeach party to a contract of insurance shall communicate to the other, in good faith, all facts within his knowledge which are or which he believes to be material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining.aEUR? Misstatement or concealment of aEURoematerialaEUR? facts is ground for rescission even if unintentional. The insurer need not prove that the applicant-insured actually intended to deceive the insurer. However, under California law there are also exceptions to this general rule, including that an insurer cannot rescind a policy based upon facts that it knew, which it would have known through the exercise of ordinary care, or those of which the other waives communication. Insurers should take care in issuing policies to ensure applications are fact checked and cross referenced with any other facts known to the insurer that may demonstrate the application is incomplete or fails to disclose material facts. While an insurer may have the right to rescind a policy where an insured fails to disclose material facts, in the event the insurer knew or should have known of the facts, it may not be capable of rescinding and may be liable under the terms of the policy. If you are an insurer and believe an insured failed to disclose material facts to you on an application such that the policy may be rescinded, or if you would like to review your current procedures to ensure you are minimizing your risks, please contact Marc Zimet at mzimet@jzlaw.com and Alan Jampol at ajampol@jzlaw.com or call (213) 689-8500