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ATTORNEY FOR APPELLANT
Anthony V. Luber
South Bend, Indiana
ATTORNEYS FOR APPELLEE
Jerry E. Huelat
Tracy A. Helmer
Michelle A. Blackwell
Michigan City, Indiana
SUPREME COURT OF INDIANA
THOMAS FOSTER, )
v. ) Supreme Court
) Cause No. 71S04-9807-CV-390
AUTO-OWNERS INSURANCE, CO., )
) Indiana Court of Appeals
Appellee-Defendant. ) Cause No. 71A04-9702-CV-74
APPEAL FROM THE ST. JOSEPH SUPERIOR COURT
The Honorable Jerome Frese, Judge
Cause No. 71D04-9505-CP-461
ON PETITION TO TRANSFER
December 10, 1998
We hold, as we have before, that an insurance company may void coverage based on
a material misrepresentation in the application. We also hold that the submission of an
application containing accurate information does not put the insurance company on inquiry
notice of that information to cure misstatements or omissions in another application. Factual and Procedural Background
In February 1994, Auto-Owners Insurance Company issued a policy for fire insurance
to Thomas Foster covering rental residential property at 422 South Jackson Street in South
Bend. Foster had applied for the coverage by signing a written application on February 9,
1994. At or about the same time Foster had submitted applications for several other rental
properties he owned in the South Bend area. All of these applications had been filled out by
Mary Lawson, a representative of ISU/Cassaday, Neeser, and Brasseur Insurance Agency,
based on information provided by Foster in a telephone conversation on February 3, 1994.
All of these applications were denied except the one for 422 South Jackson.
The application for 422 South Jackson contained a false statement. In answer to the
request to List all losses for past 5 years at this or other location, the box None was
checked. In fact, Foster had suffered at least three fire losses in the immediately preceding
five years. Foster's signature appears on the application below the Applicant's Statement
which provides: I declare the facts in this application to be true and request the Company
to issue this insurance and any renewals thereof in reliance thereon. Foster's policy was
issued by Auto-Owners on February 25 with coverage effective February 3, 1994. The
rejected applications are not in the record. Foster supplied an affidavit stating that he
believed they contained the information requested.
On May 10 and 15, 1994 the property at 422 South Jackson suffered fire losses.
Foster submitted claims to Auto-Owners, and when the claims were rejected Foster sued
Auto-Owners on the insurance contract. Auto-Owners moved for summary judgment,
arguing that, as a matter of law, it was entitled to rescind the insurance contract because
Foster made material misstatements in his application and that Auto-Owners would not have
issued the policy if it had been informed of Foster's prior loss history.See footnote
The trial court
granted summary judgment for Auto-Owners.
The Court of Appeals reversed, finding a material issue of fact as to whether Foster's
multiple accurate applications put Auto-Owners on inquiry notice of his loss history. We
granted transfer and now affirm the trial court.
Standard of Review
Summary judgment is appropriate when the designated evidence shows that there is
no genuine issue of material fact and that the moving party is entitled to judgment as a matter
of law. Ind. Trial Rule 56(C). Although Foster has the burden of persuading us that the
grant of summary judgment was erroneous, we carefully assess the trial court's decision to
ensure that Foster was not improperly denied his day in court. Erie Ins. Co. v. George, 681
N.E.2d 183, 186 (Ind. 1997); Mullin v. Mun. City of South Bend, 639 N.E.2d 278, 280-81
(Ind. 1994). All facts and reasonable inferences drawn from those facts are construed in
favor of the nonmoving party. Wright v. Carter, 622 N.E.2d 170, 171 (Ind. 1993).I. Material Misrepresentation and Lawson's Relationship to Auto-Owners
Foster argues that two genuine issues of material fact preclude summary judgment:
(1) did Lawson's relationship to Auto-Owners impute her knowledge to the insurance
company, and (2) was Auto-Owners on inquiry notice of Foster's loss history based on other,
apparently accurate, applications rejected by Auto-Owners.
As we recently stated in Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 672
(Ind. 1997), a material misrepresentation or omission of fact in an insurance application,
relied on by the insurer in issuing the policy, renders the coverage voidable at the insurance
company's option. The material misrepresentation prevents a meeting of the minds as to
the risk to be insured. Id.; see also Stockberger v. Meridian Mut. Ins. Co., 182 Ind. App.
566, 577, 395 N.E.2d 1272, 1279 (1979) (insurance contract requires a meeting of the minds
of the parties). Auto-Owners designated uncontradicted evidence, including affidavits from
a claims representative and an underwriter, that if Foster had provided accurate information
about his prior fire losses, Auto-Owners would not have issued the policy for 422 South
Jackson. [A] misrepresentation or omission is 'material' if knowledge of the truth would
have caused the insurer to refuse the risk. Guzorek, 690 N.E.2d at 672. [C]overage of the
incurred loss would be voided if the misrepresentation affected that risk, but not all coverage
would necessarily be voided. Id. at 673. Because the loss -- fire damage -- is precisely the
subject of the omission on Foster's application the omission plainly affected the risk for
which Foster now seeks coverage.
Foster disputes neither the fact that he signed the application nor that it contained a
misrepresentation. Rather, he contends that there is a genuine issue of material fact as to
whether he made any misrepresentation. He contends he gave truthful information to the
insurance agent Lawson, and that Lawson was an authorized representative of Auto-Owners.
As a result, Foster asserts that he made no misrepresentation. He argues that the trial court's
finding that Lawson was a limited agent is not supported by the designated materials and that
contrary evidence presents a genuine issue of fact.
Even if there are factual issues as to the nature of Lawson's agency, their resolution
is immaterial to the issues in this case. Foster's signature on the application makes him
responsible for the misrepresentation regardless of Lawson's capacity as an agent. In
Metropolitan Life v. Alterovitz, 214 Ind. 186, 14 N.E.2d 570 (1938) an applicant for life
insurance signed his application as it was filled out by the insurance company's doctor
without correcting errors made by the doctor regarding his treatment history. This Court held
that the insurance company was entitled to void the contract based on fraud and
misrepresentation and reversed a jury verdict for the beneficiary of the policy. Although the
insurance company's own doctor had included the incorrect information on the application
after being told the correct information by the applicant, the Court found that an applicant
for life insurance contract was not relieved from the duty of exercising the same ordinary
care and prudence that is required in every other business transaction. It is the duty of every
man to read what he signs. Id. at 196, 14 N.E. 2d at 574; see also Federal Kemper Ins. Co.
v. Brown, 674 N.E.2d 1030 (Ind. Ct. App. 1997) (applicant for insurance is chargeable with
fraud based on his signature certifying the contents of the application as true and correct),
trans. denied, 690 N.E.2d 1190 (Ind. 1997) (table).See footnote
In sum, because Foster signed the
application, he is responsible for the information in it, including the inaccurate report of loss
history, regardless of the nature of Lawson's agency relationship with Auto-Owners.
Accordingly, there is no genuine issue of material fact as to Auto-Owners right to void the
contract based on the material misrepresentation on the application.
II. Inquiry notice
Foster argues that the rejected applications for insurance on other properties put Auto-
Owners on inquiry notice of his prior fire losses. He argues that Auto-Owners issued the
policy on 422 South Jackson with notice of his losses and therefore waived the right to void
the coverage. The Court of Appeals found that the evidence of Foster's simultaneous filing
of applications with inconsistent information created a question of fact as to Auto-Owners'
constructive notice of the accurate information. Accordingly, the Court of Appeals reversed
the trial court's grant of summary judgment for Auto-Owners.
Foster is correct that an insurer cannot avoid coverage where it had knowledge of the
facts notwithstanding the material misrepresentations, or where a reasonable person would
have investigated further Guzorek, 690 N.E.2d at 674; Johnson v. Payne, 549 N.E.2d 48,
51-52 (Ind. Ct. App. 1990). However, the insurer may rely on representations of fact in the
application without investigating their truthfulness and has no duty to look beneath the
surface of the representations on the application. Guzorek, 690 N.E.2d at 674; see also
State Farm Mut. Auto. Ins. Co. v. Price, 181 Ind. App. 258, 261, 396 N.E.2d 134, 137
We find no designated evidence in this record to support a finding that Auto-Owners
was in fact on notice of the omissions in the 422 South Jackson application based on the
submission of applications for other property owned by Foster or from any other source.
Foster's evidence consists of his affidavit that he submitted multiple applications for
insurance on other properties that were all rejected. He also states that he believed these
contained all the proper information. Assuming that his affidavit is sufficient to establish
that the other applications contained accurate accounts of his loss history, this is insufficient
to create a genuine issue of material fact.
Foster cites no authority from this Court or any other court holding that the
submission of applications, some of which contain complete and accurate information, cures
material omissions in another application. Foster designated no evidence suggesting that in
the midst of processing hundreds or thousands of applications Auto-Owners did in fact cross-
check the accuracy of an application against others submitted by the same applicant. As a
matter of law we find no obligation to do so. Imposing this obligation would create the
opportunity to play a catch-me-if-you-can game that would ultimately generate additional
costs to insurers and no legitimate benefit to insureds. It is not unreasonable to demand that
an insured supply accurate and complete information, read the application before signing it,
and suffer the consequences if an omission or misstatement in the application is material to
a subsequent loss. In this case the undisputed evidence is that if an accurate application had
been filed Foster would have been rejected altogether for excessive fire loss history.
Accordingly, there is no issue of the appropriate remedy for the omissionSee footnote
and the trial court
correctly entered summary judgment for Auto-Owners.
The trial court's grant of summary judgment to Auto-Owners is affirmed.
SHEPARD, C.J., and DICKSON, SULLIVAN, and SELBY, JJ., concur.
In the alternative, Auto-Owners argued that it was relieved from performing under the contract
because Foster breached the contract by failing to cooperate with Auto-Owners request for documents related
to its investigation of the fires. In light of our disposition of the other issues, we need not and do not address
In Fed. Kemper the insurance agent and the applicant intentionally withheld information about a
driver to obtain a better rate. Although Auto-Owners does not allege collusion on the part of Foster and
Lawson, the rule articulated by Fed. Kemper is still applicable as is that of Alterovitz.
An omission that does not relate to the loss incurred may require a different result. See Guzorek,
690 N.E.2d at 673 (leaving open the question whether, if the misrepresentation did not affect the risk,
coverage would necessarily be voided).
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