Avoid Material Misrepresentation in Business

Many policyholders think that the application for their commercial vehicle policy is not very important and, therefore, does not have to be totally accurate. This is not true. When reviewing the claim that you filed, your insurance company will look at your application for accuracy. If any false information is found, your insurer may be unable to approve your claim. Information that is purposefully left off of the application is also a cause for concern. Material misrepresentation (or MMR) can be proven if information is found that would have prevented the company from accepting your application from the beginning. Here are some common mistakes made by small business owners that could lead to a claim of material misrepresentation.


  1. One example of material misrepresentation is claiming a lower value for items that the company will replace in order to get a lower premium. For instance, if you obtain a very expensive lawn mower for your lawn care company, you might say that it is worth less in order to prevent your premium from going up. If your lawnmower is damaged by a hail storm, and the insurance company finds out you were not honest about its value, your claim could be denied. The same goes for listing a higher value for an item in order to get more money for the loss.

  2. Another common misrepresentation is information about the drivers of the covered commercial vehicle. If you have several employees who operate the auto used for your company who are unlisted on your application, your claim could be denied when one of your employees sustains an injury and damages the vehicle in an accident. Many policyholders withhold the information about drivers to conceal a bad driving record or a criminal record in an attempt to lower their premiums. In the end, this will not pay off. The same goes for leaving a driver off of the policy because he or she does not have a valid driver’s license. Listing yourself as the primary driver, when another employee operates your commercial vehicle more than you do, can also be cause for denial.

  3. Misrepresenting the address of your company or the location where the vehicle is typically stored can also cause a claim denial. This is a common practice because premiums can be much higher if your business is in a busy downtown location versus a quiet, rural area. This misrepresentation can be very serious, however.


Not reading your policy is not a defense for material misrepresentation. Even if a preparer or an employee created your application, it is your responsibility as the named policyholder to be certain that everything is correct. Courts do not differentiate between unintentional and intentional misrepresentation, and therefore you must be absolutely certain that no one left anything out.

The best way to avoid having your claims denied and/or policy voided is to be completely honest on your application. A raised premium can be tough, especially for a small business, but a large loss due to an accident, vandalism or other perils can be much, much worse. It is your duty to avoid misrepresentation, as the insurance company has no obligation to investigate the details of your application before a claim is placed. If you have falsified a claim of a stolen commercial vehicle several times, this will raise a red flag and can cause your insurance to be voided by your insurance company. Maintain an organized record of all of your property and its value, your drivers and all other pertinent information to back up the facts on your application.

Don't put yourself and your business at risk by misrepresenting your information. Be honest with your insurer, and the insurance company will do its best to provide the right coverage for your needs. If you still have questions, give one of our specialists at Infinity Insurance a call at 1-800-INFINITY. They can provide you with a commercial auto insurance quote and guide you through the insurance process.

The materials available in the Knowledge Center are for informational purposes only and not for the purpose of providing legal advice. You should contact legal counsel to obtain advice with respect to any particular issue or problem. Use of this website or any of the links contained within the website do not create representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.