Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent co-insurance clause.Some time later,the building was damaged by fire.
-Smith's failure to disclose the true value of the property to the insurer is misrepresentation,and would allow the insurer to avoid paying anything to Smith when the loss occurred.

Question

Quizplus · Accepted Answer

Smith's failure to disclose the true value of the property is not necessarily misrepresentation unless it was a material fact that influenced the insurer's decision to provide coverage. The co-insurance clause means Smith must insure at least 80% of the property's value to receive full coverage for partial losses. If underinsured, Smith would receive a reduced payout, but not necessarily nothing.

Smith Owned a Concrete Block Building Valued at $200,000