Claim for Material Misrepresentation in the Inducement of an Insurance Contract Does Not Require Submission of a Written Application for Insurance

On November 29, 2016, the First Department issued a decision in CIFG Assur. N. Am., Inc. v. J.P. Morgan Sec. LLC, 2016 NY Slip Op. 08029, holding that a claim, under Insurance Law § 3105, for material misrepresentation in the inducement of an insurance policy need not be based on a written application for insurance. The court explained:

It is defendant's position that CIFG's allegations do not establish that Bear Stearns was an "applicant for insurance" under Insurance Law § 3105. As the clearest indicator of legislative intent is the statutory text, the starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof. Because the term "applicant" is not defined in Insurance Law § 3105, it should be construed in accordance with its common, everyday meaning. The term "applicant" is broadly defined as "[o]ne who requests something" (Black's Law Dictionary 115 [9th ed 2009]).

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Defendant suggests that in order to be an "applicant," there must be a written application for insurance. However, Insurance Law § 3105 contains no requirement that the misrepresentation be contained in a formal application. Nor is there any evidence in the record that a written application was required in order to obtain the insurance provided by CIFG. In any event, CIFG alleges that the misrepresentations were contained, inter alia, in various offering documents, and that Bear Stearns specifically requested the precise type of insurance CIFG issued. To accept defendant's myopic reading of the term "applicant" would render an insurance misrepresentation claim meaningless, because it would leave CIFG without a remedy against the very entity that is alleged to have made the misrepresentations that induced CIFG to issue the insurance.

(Citations omitted).