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A question of rescission

A question of rescission

A question of rescission
March 01
09:38 2023


Digested from case reports published online


A question of rescission

In May 2019, Damon McDowell and Deeanna Lawson purchased a homeowners policy from Allstate Vehicle and Property Insurance Company for a derelict house McDowell intended to remodel. After a fire, Allstate sought to rescind the policy, claiming that McDowell digitally signed an application whereon he falsely answered a question regarding whether he would occupy the house within 30 days. McDowell contended that he never saw the application; never signed it; and that his answer was not false because he entered the property within 30 days to store personal property and begin renovations. McDowell also asserted that Allstate never demonstrated that the 30-day occupancy question on the application was material to its decision to issue the policy, in part because the question conflicted with the terms of the policy.

The circuit court granted summary judgment in favor of Allstate’s decision to rescind the policy. McDowell appealed.

On appeal, McDowell argued that the circuit court erred in finding that there were no questions of material fact surrounding whether McDowell’s answer to the 30-day occupancy question was both false and material to Allstate’s decision to issue the policy. McDowell argued that the circuit court erroneously found that Allstate had, as a matter of law, established its right to rescind the policy.

Evidence exists that, within the 30 days after applying for insurance, McDowell was visiting the house and conducting repairs and renovations to ready the house for habitation.

In the context of this case where McDowell claims he was initially entering the property to conduct renovations, the question “will the residence be occupied” appears ambiguous. The ambiguity is heightened because, in two places, the policy provides that “[a] dwelling under construction is not considered vacant or unoccupied.” The general rule is that an “insurer is not at liberty to deny coverage, after a loss has occurred, on the basis of an answer to an insurer’s question that is ambiguous or too general to evoke a material response.”

Finally, the record is unclear as to whether McDowell ever made or affirmed any representation regarding occupying the property within 30 days. McDowell contends he did not know he completed an application; he insists he answered questions from his agent, Patrick Hambrick, received a proposal for insurance that persuaded him to buy an Allstate policy, and then later answered questions by phone that were asked by Lilly Hoover, an employee of Hambrick. Further, many of the blanks on Allstate’s six-page application (such as those regarding the size or the re-placement cost of the house) were completed using information supplied by Allstate, not McDowell.

McDowell testified he had no recollection of seeing or signing the application, in person or electronically, and insisted he would not have signed the application because of its errors. Further, McDowell proffered a copy of the application that did not contain his signature or initials, and that contradicted Allstate’s claim that McDowell electronically signed and initialed the application.

In his deposition, McDowell argued that he would never have signed the version of the application proffered by Allstate, if he had seen it, because it contained errors. For instance, the application identifies the co-owner of the house (Lawson) as an “Occupant Non-Relative,” despite her never intending to reside in the house. Conversely, the application omits McDowell’s daughter, who he asserts was going to reside in the house. The application also incorrectly stated McDowell’s wife’s birthday, and McDowell insists he would never have signed an application where his wife was listed as being 18 years younger than she really was.

The court found that substantial questions of material fact existed regarding whether McDowell made a false representation about his occupancy of the house.

Allstate’s policy incorporates the “West Virginia Standard Fire Policy” and contains language that Allstate “shall not be liable for loss occurring … while a described building … is vacant or unoccupied beyond a period of sixty consecutive days.” McDowell contended that Allstate’s application impermissibly narrowed the coverage provided in the Standard Fire Policy by shortening the allowable vacancy period from 60 consecutive days to only 30 days. It is axiomatic that any conflict between a statute and an insurance policy provision is resolved in favor of the statute.

The court concluded that questions of material fact existed concerning whether Allstate’s 30-day occupancy question was material to its decision to issue the policy to McDowell. Accordingly, the court found that the circuit court erred in granting summary judgment to Allstate. The case was remanded for further proceedings.

McDowell v. Allstate Vehicle and Property Insurance Company—Supreme Court of Appeals of West Virginia—November 17, 2022—No. 21-0603.




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Jim Brooks

Jim Brooks

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