The insurer's cancellation of a policy based upon a misrepresentation of the vehicle being covered was deemed justified by the Hawaii Intermediate Court of Appeal in Farmer v. Pacific Specialty Ins. Co., 2010 Haw. App. LEXIS 525 (Haw. Ct. App., Sept. 30, 2010).
The insured purchased a policy for a used motorcycle that was later stolen. The policy was issued for a 2000 Harley-Davidson. After the motorcycle was stolen, an investigation showed it was not a Harley-Davidson, but a kit bike that was obtained through a magazine. The insurer refunded the premiums and rescinded the policy.
The insured sued, seeking judgment for $20,000, the value of the stolen motorcycle. The trial court determined the motorcycle was not a Harley-Davidson and, although the insured had not engaged in fraud or intentional misrepresentation, he had made a material misrepresentation that the motorcycle was a Harley-Davidson in the insurance application. The trail court relied on Haw. Rev. Stat. 431:10-209, which states, in part, "A misrepresentation shall not prevent a recovery on the policy unless made with actual intent to deceive or unless it materially affects either the acceptance of the risk or the hazard assumed by the insurer."
On appeal, the insured argued the trial court should not have relied on the statute because he did not misrepresent the manufacturer of the motorcycle as being Harley-Davidson. Instead, the insured merely provided the certificate of title for the motorcycle which indicated that it was a Harley-Davidson.
An agent for the insurer testified, however, that the insured told her the motorcycle was a Harley-Davidson. Accordingly, there was substantial evidence to support the finding that a misrepresentation was made. The insurer had also testified that the misrepresentation was material to the acceptance of the risk it assumed and the policy would not have been issued had it known the motorcycle was a kit bike. The insured failed to argue on appeal that the district cort's finding of materiality was erroneous, and thus waived the claim.
