Hixcox Dedicated Corporate Member, Ltd. v. Susan E. Taylor

Hot Springs, Arkansas, commercial litigation lawyers represented the Plaintiff in an insurance coverage dispute case.

Susan Taylor made one or more material misrepresentations in applying for property insurance covering her home in Hot Springs, Arkansas, and violated the
policy’s “Concealment or Fraud” coverage condition. Therefore, the court held, the
insurer properly declared the policy void ab initio and denied coverage for loss
caused by a fire that destroyed the home.

A fire destroyed the Hot Springs Property on August 6, 2018. The Claims
Manager for Syndicate 33 directed the insurer’s third party administrator to conduct
a claim investigation. The administrator reported several “red flags” raising the
possibility of arson, but the cause of the fire remained inconclusive due to the extent
of the damage and lack of physical evidence.

Hiscox also investigated potential misrepresentations made in the ACORD
policy application, and counsel conducted an Examination Under Oath of Taylor on
September 5 in Hot Springs. Parsons determined that Taylor made several
misrepresentations, underwriters at B&W and Hiscox London Market confirmed they
were material, and Parsons directed that the policy be rescinded ab initio. Hiscox
returned the policy premium to Taylor. Taylor’s counsel mailed it back, stating she
disagreed with the decision to rescind the policy.

On October 15, 2018, Hiscox commenced this diversity action seeking a
declaratory judgment that it properly rescinded the policy ab initio; Hiscox has no
duty to pay for loss for the fire at the Hot Springs Property; and, alternatively, “there
was no coverage for the claim regarding the fire at the Property pursuant to the
policy’s ‘Concealment or Fraud’ condition.” The Complaint for Declaratory
Judgment alleged six distinct material misrepresentations by Taylor in answering
questions on the Lloyd’s policy application.4 Taylor answered the Complaint and
filed counterclaims for breach of contract, bad faith claim handling, and improper
rescission. She also filed a third party complaint against B&W but those claims were
dismissed in April 2020, before the close of discovery.

Under Arkansas law, an insurer may rescind coverage because of fraud or
material misrepresentation. See Ferrell, 816 S.W.2d at 595. If a misrepresentatio
is material to the risk, “the fact that the misrepresentation was made innocently and
in good faith is of no moment.” 2 Couch on Insurance 3d § 31:82 (rev. 2024). “A
misrepresentation is a statement of fact that is untrue or a failure to disclose a fact in
response to a specific question.” Shipley v. Ark. Blue Cross & Blue Shield, 333 F.3d
898, 904 (8th Cir. 2003).

Affirmed