Case Title: Portillo v. Nationwide Mutual Fire Ins. Co.

Citation: 

Docket Number: 072504

State: virginia

Court: Virginia Supreme Court

Date: 2009-01-16T00:00:00Z

Document:
PRESENT: Hassell, C.J., Keenan, Koontz, Kinser, Goodwyn, and 
Millette, JJ., and Stephenson, S.J. 
 
RIGOBERTO PORTILLO 
 
 
 
OPINION BY 
v.  Record No. 072504    SENIOR JUSTICE ROSCOE B.STEPHENSON, JR. 
 
 
 
January 16, 2009 
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY 
 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Gaylord L. Finch, Jr., Judge 
 
 
The issue in this appeal is whether the trial court erred in 
declaring void an insurance policy issued by Nationwide Mutual 
Fire Insurance Company (Nationwide). 
I 
 
The facts are not in dispute.  In February 2004, Anael Lopez 
Portillo filed an insurance application (the Application) with 
Nationwide, seeking insurance coverage for his newly purchased 
motor vehicle.  The Application required the applicant to "list 
all household members of driving age and non-resident operators."  
Only Anael and his sister are listed on the Application.  Under 
the heading "Financial Responsibility/Relationship," the 
Application poses the following question:  "Have all drivers who 
have access to the vehicles been indicated on this application?"  
In response, the Application bears a "Y," indicating an 
affirmative answer.  Just before Anael's signature on the 
Application, there appears the following statement:  "I have 
disclosed all drivers who have access to the vehicles indicated on 
the application."  To further indicate compliance with this 
disclosure requirement, to the right of the statement there is a 
check mark next to "Yes."  In the Application's "Closing 
Statement," the applicant certifies, "I hereby declare that the 
facts stated in the above application are true."  Nationwide 
issued a policy based upon the Application. 
In July 2004, Jose C. Lopez, Anael’s nephew, was operating 
the vehicle when it was involved in a single-vehicle collision.  
Rigoberto Portillo, another of Anael’s nephews, was a passenger in 
the vehicle and was seriously injured. 
Following the collision, Anael reported the loss to 
Nationwide.  A representative from Nationwide sent Anael a letter 
stating that the policy was void because Anael had not disclosed 
in the Application that Lopez was a member of Anael’s household 
who was of driving age. 
II 
Rigoberto filed a declaratory judgment action seeking to 
compel Nationwide to provide insurance coverage under the policy.  
At trial, portions of Anael’s deposition were read into evidence.  
In the deposition, Anael admitted that, at the time he completed 
the Application, Lopez was twenty-one years of age, licensed to 
drive, and a full-time resident of his household.  Anael stated, 
however, that he had never given Lopez permission to drive his 
vehicle and that he had never seen Lopez driving his vehicle. 
 
2
A representative of Nationwide testified that, when Anael 
reported the loss following the July 2004 collision, he told her 
that he had permitted Lopez to borrow his car to run an important 
errand.  Another Nationwide representative testified that 
Nationwide did not learn until after the July 2004 collision that 
Lopez was a resident of Anael’s household.  According to this 
representative, if Nationwide had known that Lopez was a full-time 
resident of Anael’s household when Nationwide issued the policy, 
the insurance premium would have been 74% greater than the premium 
charged for the policy issued. 
 
The trial court held that Nationwide clearly proved that 
Anael had made four misrepresentations in the Application that 
were material because they would have "cause[d] the insurer to 
reject the risk or accept it only at a higher premium rate."  The 
court, therefore, ruled that the policy was void.  We awarded 
Rigoberto this appeal. 
III 
 
Rigoberto contends that materiality is determined only by 
whether Nationwide would have issued the policy and that 
Nationwide, had it known of Lopez, would have issued the policy, 
but at an increased premium.  Nationwide contends that an increase 
in premium, in itself, is sufficient to support a finding of 
materiality.  It also points out that it was denied the 
opportunity to conduct a full "eligibility investigation." 
 
3
 
A misrepresentation is material to the risk to be assumed by 
an insurance company if the representation would reasonably 
influence the insurer's decision whether to issue the policy.  
Time Ins. Co. v. Bishop, 245 Va. 48, 52, 425 S.E.2d 489, 492 
(1993); Mutual of Omaha Ins. Co. v. Echols, 207 Va. 949, 953-54, 
154 S.E.2d 169, 172 (1967).  The insurer has the right to know the 
full truth in order to permit it to make inquiries and assess 
whether to assume the risk.  Hawkeye-Security Ins. Co. v. 
Government Empl. Ins. Co., 207 Va. 944, 947, 154 S.E.2d 173, 176 
(1967); Chitwood v. Prudential Ins. Co. of Am., 206 Va. 314, 318, 
143 S.E.2d 915, 918 (1965); Fidelity Bankers Life Ins. Corp. v. 
Wheeler, 203 Va. 434, 437-38, 125 S.E.2d 151, 153 (1962); Inter-
Ocean Ins. Co. v. Harkrader, 193 Va. 96, 100-01, 67 S.E.2d 894, 
897 (1951).  It is the insurer's "opportunity to estimate the risk 
under its contract" that is taken away by an applicant's 
misstatement of material facts.  Inter-Ocean Ins. Co., 193 Va. at 
101, 67 S.E.2d at 897.  As we have explained, "[a] knowledge or 
ignorance of such [material] facts would naturally and reasonably 
influence the judgment of the insurer in making the contract or in 
establishing the degree or character of the risk or in fixing the 
rate of premium."  Id. 
IV 
 
In the present case, the Application required Anael to "list 
all household members of driving age."  There is no dispute that 
 
4
 
5
Anael failed to list Lopez, who was 21 years old, a licensed 
driver, and a full-time resident of his household.∗  This 
misrepresentation deprived Nationwide of the opportunity to make 
inquiries and assess whether to assume the risk of issuing a 
policy to Anael.  The knowledge of an additional potential driver 
would reasonably have influenced Nationwide's judgment.  In 
addition, knowledge of the fact of an additional household 
resident of driving age would have influenced Nationwide's fixing 
of the rate of premium.  As the Nationwide representative 
testified, Nationwide would have charged a higher premium had it 
known of this fact.  The misrepresentation also was relevant to 
the claim made against the policy.  Therefore, the 
misrepresentation was material, and the trial court did not err in 
declaring void the Nationwide policy issued to Anael. 
V 
 
Accordingly, we will affirm the judgment of the trial court. 
Affirmed. 
                     
 
∗ In his first of two assignments of error, Portillo 
contends that the trial court erred in finding a material 
misrepresentation because Lopez "did not meet Nationwide's own 
definition of a driver."  The Application, however, required 
Anael to list all "household members of driving age."  This 
assignment of error, therefore, is without merit.