Accordingly, state supreme court decisions concerning non-marine insurance policies often have implications for marine insurers and insureds. In a recent Alaska case, a cabin owner falsely stated in an application for insurance that the cabin was his primary residence. The cabin was subsequently destroyed by fire. The Alaska Supreme Court affirmed the trial court s decision that the residency mis-statement was material to the insurer s acceptance of the risk, permitting the insurer to rescind the insurance policy and deny coverage. The insured argued that certain Alaskan insurance statutes limited an insurer s remedy for application mis-statements to cancellation of the policy.
Cancellation terminates a policy only from and after the cancellation date.
Cancellation would not enable an insurer to avoid coverage for a loss if a mis-statement were discovered only after a loss occurred. The Court held that the statutory cancellation remedy did not eliminate the historical common law remedy of recission of the contract from its inception. Accordingly, recission of the contract and denial of the cabin owner s claim was warranted. This decision underscores the importance of insurance application accuracy. Material inaccuracies, however innocent they may be, may enable an insurer to deny coverage for a loss that otherwise would have been covered.