Skip to Main Content
Services Talent Knowledge
Site Search


Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

March 28, 2017

New York Appellate Court Holds That Insurer May Rescind Policy Based on Unintentional Material Misrepresentation in Application for Policy

In general, an insurer may rescind an insurance policy where it can show that its insured made a material misrepresentation of fact when he or she obtained the insurance policy, i.e., that the insurer would not have issued the policy had it known the facts misrepresented. Recently, the New York State Appellate Division, Second Department reiterated the principle that an insurer may rescind a policy based upon a material misrepresentation in an application for insurance, even where the misrepresentation was mistakenly or innocently made. See Estate of Gen Yee Chu v. Otsego Mut. Fire Ins. Co., ____ A.D.3d ___, 2017 NY Slip Op 01536 (2d Dep't March 1, 2017).

In 1991, Chien Min Chu and his former wife purchased a three-story house, which contained three separate dwelling units, each with its own kitchen, bathroom, and separate entrance. However, Mr. Chu alleged that he believed the house was a legal two-family dwelling based on the certificate of occupancy and real property tax bills. In 2006 the Chus applied for and obtained a fire insurance policy from Otsego Mutual Fire Insurance Company, indicating on their application form that the number of families in the dwelling was two. After the house was damaged by a fire, Otsego rescinded the policy on the ground that the Chus had made a material misrepresentation of fact by stating on the application that the house was a two-family dwelling.

The Chus sued Otsego, alleging breach of the policy, and after a trial, the court granted Otsego's motion for judgment as a matter of law based on the evidence presented at trial, concluding that Otsego had established that it would not have insured the premises if it had been aware that it was a three-family dwelling and not a two-family dwelling.

On appeal, the Appellate Division, Second Department affirmed, holding that Mr. Chu's own testimony at trial established that his house was structurally configured as a three-family dwelling, thus rendering the statement on his insurance application a misrepresentation. Further, the Court held, plaintiff's testimony that he believed his house was a legal two-family dwelling was irrelevant because an insurer may rescind a policy even if the material misrepresentation was innocently or unintentionally made. Finally, Otsego established that the Chus' misrepresentation was material through the testimony of its witnesses and documentary evidence, including its underwriting guidelines, which established that Otsego did not insure three-family dwellings, and would not have issued the subject policy if the Chus had disclosed that the house contained three dwelling units.

The Otsego decision is a reminder that policyholders and their insurance agents and brokers must carefully examine applications for insurance to ensure that no factual misrepresentations are made. A claim that a misrepresentation was made unintentionally is not a valid defense for the policyholder. Likewise, insurers should maintain written policies or guidelines regarding their underwriting practices in the event rescission of a policy based upon a material misrepresentation is necessary. An insurer will have the burden to produce evidence that it would not have issued the subject policy had it known the fact(s) that were misrepresented.

Should you have questions regarding the information presented in this alert, please contact Anthony J. Piazza, Chair of the firm's Insurance Coverage & Regulation Practice Area, at (585) 295-4420 or


Click here to sign up for alerts, blog posts, and firm news.

Featured Media


Fourth Department Finds Language in 1980 Statute Is Gender Neutral for Purposes of Child Victims Act


Priority of Federal Tax Lien on Personal Property: Secured Lender vs. IRS


COVID-19 Business Interruption Update: New York High Court Affirms in Favor of Insurer


USFWS Introduces General Permit for Bald and Golden Eagle Incidental Take


ORES Executive Director Issues First Denial of Section 94-C Permit Application Following Applicant's Partial Loss of Site Control


New Details About OPWDD Spending in the New York State FY 2025 Executive Budget

We're Growing in DC!

We’re excited to announce Barclay Damon’s combination with Washington DC–based Shapiro, Lifschitz & Schram. SLS’s 10 lawyers, three paralegals, and four administrative staff will join Barclay Damon while maintaining their current office in DC’s central business district. Our clients will benefit from SLS’s corporate, real estate, finance, and construction litigation experience and national energy-industry profile, and their clients from our full range of services.

Read More

This site uses cookies to give you the best experience possible on our site and in some cases direct advertisements to you based upon your use of our site.

By clicking [I agree], you are agreeing to our use of cookies. For information on what cookies we use and how to manage our use of cookies, please visit our Privacy Statement.

I AgreeOpt-Out