How Incorrect Application Answers Turn into Material Misrepresentation and Lost Coverage

Insurance applications are legal documents, and the accuracy of the information provided is far more important than many associations realize. Material misrepresentation occurs when information on an application is inaccurate or incomplete in a way that influences an insurer’s underwriting decision. When this happens, the consequences can extend far beyond higher premiums and, in some cases, can result in coverage being voided altogether. A real-world example shared at a national law and insurance conference illustrates just how serious this risk can be. The case involved a liability claim that reached the excess liability carrier. As part of its coverage determination, the carrier reviewed the original application and focused on questions related to updates made within the community. The association had indicated that updates had occurred within the past 30 years. During the investigation, the carrier searched for permits supporting those statements and found none. As a result, the carrier refunded the premium and denied the claim, treating the policy as if it had never existed because of the incorrect information provided on the application years earlier. This outcome highlights why accuracy on insurance applications is critical for all types of coverage. Insurance carriers rely on the information provided by the association to evaluate risk and issue policies. If that information is later found to be materially inaccurate, even if the error was unintentional, the carrier may have the right to rescind the policy. Intent is often less important than whether the information influenced the underwriting decision. For this reason, insurance applications should be reviewed carefully before they are signed. It is strongly recommended that a Board member review and sign the application, as the Board is ultimately responsible for the information submitted on behalf of the association. When details are unclear or documentation is limited, it is better to disclose that uncertainty rather than make assumptions. This situation commonly arises with building components, particularly those that fall under owner control and may not be fully known to the association. Obtaining and reporting accurate information protects the community long before a claim ever occurs and helps ensure that coverage responds as expected when it is needed most.

Owners’ Question: Does Making Improvements Inside My Unit Change How an Insurance Claim Is Handled?

Yes, it can. In many communities, governing documents require owners to notify the Board when improvements exceed a certain scope or value. This information is important because insurance carriers—particularly excess and surplus lines carriers or those that review governing documents during the claims process—may closely examine unit details when determining how a claim is handled. If improvements were made without proper notification or documentation, coverage under the association’s policy may be impacted, and the owner may need to rely on their own HO-6 policy, if coverage is available. In the event of a claim, the owner may be asked to provide proof of what was changed, when the work was completed, and whether approvals were obtained. Keeping permits, invoices, and written approvals on file helps clarify responsibility and can reduce delays or disputes during the claims process.

Coverage Corner: The Board’s Involvement in Unit Owner Property Claims

When a unit owner experiences property damage, the Board does not manage the claim directly, but it should be notified and kept informed of any incident affecting the interior of a unit. Damage often occurs within the unit owner’s walls, yet if the association has responsibility to insure any portion of that property, the Board’s early involvement is essential. Prompt awareness allows the Board to gather information, monitor the progress of the loss, and help determine whether the association should file a claim under its master policy or consider handling the situation internally when it makes financial sense, particularly when the loss approaches the deductible amount. The Board’s role is to connect with the owner, collect relevant details, and consult with the association’s insurance agent to guide next steps. It is important to note that asking questions or seeking advice does not automatically mean that a claim should be opened. When Boards delay involvement, it can slow claim progress and create financial impacts, especially when portions of the loss are not covered or when construction timelines are affected. If a management company handles day-to-day operations, claims handling may not be included in their service agreement, making Board engagement even more critical. Ultimately, the decision to file a claim rests with the Board. Even in communities not required to carry property coverage, the association may still play an important role if it is responsible for maintaining commonly maintained elements. Poor restoration or failure to bring repairs back to appropriate standards can create future liability, reinforcing the importance of staying engaged throughout the process.

Update of the Month: Short-Term Capital Project Planning

This is a point in the year when capital planning deserves more than a quick glance at the reserve study. A closer look at the projects realistically anticipated within the next five years—rather than relying solely on the long-range schedule—helps the Board understand where timing, funding, or scope may need adjustment. Roof sections, mechanical systems, exterior components, and infrastructure often deteriorate faster than expected, and early visibility is essential for effective planning. A defined five-year outlook is also valuable beyond budgeting. When an association can clearly articulate what work is planned, what has been completed, and what is being monitored, it significantly strengthens the conversation during insurance renewals. Insurers respond positively to communities that demonstrate intentional planning rather than reactive repairs. This level of detail supports stronger underwriting discussions and reinforces confidence in how the association manages risk and capital over time.