Insurer Cannot Cancel Policy for Misrepresentation and Retain Premium Under Florida Law
Insurance Law Update
Gonzalez v. Eagle Insurance Company
Florida Appellate Court
A Florida appellate court held that an insurer cannot cancel an automobile insurance policy for misrepresentation and retain the premiums paid by the insured. In Gonzalez v. Eagle Insurance Company, ---So.2d---, 2006 WL 2520655 (Fla.App., Sept. 1, 2006), Gonzalez failed to disclose that her son was an additional driver in her automobile insurance application. When her vehicle was stolen and Gonzalez filed a claim, her insurer denied coverage, canceled the policy and refused to refund her premium. Gonzalez filed a declaratory judgment action seeking return of the premium and the trial court sustained the insurer’s motion to dismiss.
The Third District Court of Appeals of Florida reversed, holding that allowing an insurer to unilaterally rescind a policy and retain the premium would be tantamount to the insurer “having its cake and eating it too.” The court held that when an insurer learns of a misrepresentation, it can either cancel the policy from its inception and return the entire premium to the insured, or it can waive the fraud, keep the premium earned through the date of cancellation, and accept responsibility for the claim. In no case, however, can an insurer rescind a policy and keep the premium.