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Richard Seamans, Jr. dba Route 7 Auto v. National Casualty Company
Docket No. INS-05-2036, Decision Issued September 13, 2005.

The insured requested a hearing following receipt of a notice of cancellation of garage insurance coverage citing fraud or material misrepresentation as the reason for cancellation. At hearing, the company argued that the insured’s failure to disclose one aspect of his driving record on the insurance application constituted a misrepresentation material to the underwriting of the policy. The insured maintained that the agent knew about the issue at the time of application, and the insured was not required to disclose the issue on the application because the matter is in dispute.
Held: For the company. A company may cancel such a policy if it can demonstrate “[f]raud or material misrepresentation made by or with the knowledge of the named insured in obtaining the policy, continuing the policy or in presenting a claim under the policy.” 24-A M.R.S.A. § 2908(2)(B).
The insured’s often contradictory testimony impacted his credibility. Although the insured maintained that the agent knew of the issue on his driving record, no testimony was provided from the agent and there is otherwise insufficient evidence to demonstrate this position. There is further insufficient evidence to demonstrate that the issue on the insured’s driving record is in dispute. The lack of disclosure on the application is a misrepresentation. Materiality of the misrepresentation is “determined solely by the probable and reasonable effect which truthful answers would have had upon the insurer.” See York Mutual Ins. Co v. Bowman, 2000 ME 27 ¶ 10, 746 A.2d 906, 909. It is conceivable that knowledge of the issue would have caused the company reasonably to have fixed a higher premium, a different coverage amount, or not to have issued coverage at all; therefore, the misrepresentation is material, and the company has demonstrated that the requirements of § 2908(2)(B) have been met.

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