What makes a misrepresentation material in an insurance context?

In the context of insurance, a misrepresentation is considered material when it leads the insurer to issue unwarranted coverage. This means that the misrepresentation affects the insurer's decision-making process regarding whether to provide coverage or under what terms. If an insured person provides information that is incorrect or misleading and the insurer relies on that information in extending coverage, the misrepresentation is material because it directly impacts the risk assessment and the decision to issue the policy.

For instance, if an applicant fails to disclose past claims history or certain risk factors that are relevant to the coverage being sought, the insurer might end up covering a risk it would not have otherwise accepted or would have accepted under different terms. As a result, the materiality of the misrepresentation hinges on its influence on the insurer’s actions regarding the issuing of the policy.

While intentionality and impact on premiums are important in insurance ethics, they do not encapsulate the essential aspect of misrepresentation's material impact on the insurer's coverage decisions. Additionally, the discovery of a misrepresentation by an investigator does not inherently determine its materiality; rather, it is the effect of the misrepresentation on the insurer's coverage issuance that is pivotal.