A Different Track: Mississippi Supreme Court Affirms Voiding of Auto Policy for Failure to Disclose 16-Year Old Son

Posted by

Contrary to many states, which are reluctant to void automobile policies, the Mississippi Supreme Court in Jones v. Safeway Insurance Company, Case No. 2014-CA-00180-SCT, 2015 Miss. ELXIS 456 (Sept. 3, 2015), upheld the voiding of an automobile liability policy because the named insured failed to disclose her 16-year old son. In a win for insurers, it held that auto policies should be treated as any other insurance contract.

The relevant facts are as follows: Michelle Busby applied for and obtained an automobile liability insurance policy.  The application form required disclosure of “all regular frequent drivers and all residents of household fourteen years or older.” Michelle lived with her 16-year-old son, William. William was driving his mother’s car when he was involved in a three-vehicle accident for which he was found at fault.

The insurer denied the liability claim asserting that the failure to disclose William rendered the policy void. It filed a declaratory judgment action seeking a declaration that the policy was effectively void and the trial court granted its motion for summary judgment.

In affirming the summary judgment ruling, the Mississippi Supreme Court acknowledged that courts, in the past, had been reluctant to invalidate policies based on misrepresentations of the insured when “the invalidation would deny innocent beneficiaries the right to recover.” In this case, the denial would be to the injured plaintiffs in the underlying tort case against William and his mother. The Mississippi Supreme Court rejected this notion of placing insurance contracts on a different track, e.g., an outcome-oriented interpretation, as opposed to reading the contract like you would any other contract.

In analogizing the case before it to the application process for life insurance policies, the court held that the failure to disclose William saved the insured a 209-percent increase in premium. The insurer did not bargain for William’s risk in charging for a significantly lower risk and, in the end, it would not have issued the policy if the insured would not have not accepted the higher rate if the true facts had been known.