Tempelis v. Aetna Casualty & Surety Co
In Tempelis v. Aetna Casualty & Surety Co., 169 Wis. 2d 1, 485 N.W.2d 217 (Wis. 1992), the Wisconsin Supreme Court held that a clause, which is substantially similar to the clause in this case, is ambiguous. Arising in the context of a fire insurance policy, in Tempelis, 485 N.W.2d 217, the insureds created fraudulent receipts for living expenses and made false statements with regard to their fire insurance.
In denying coverage, Aetna relied upon the policy clause that provided: "We do not provide coverage for any insured who has: a. intentionally concealed or misrepresented any material fact or circumstance; b. made false statements or engaged in fraudulent conduct; related to this insurance." Id. 485 N.W.2d at 219.
The court determined that this policy language was ambiguous as to the extent to which a material misrepresentation would void coverage:
"When read by a reasonable person in the position of the insured, we conclude the policy is reasonably susceptible to more than one construction. A reasonable insured could read the policy in at least one of two different ways: 1) as canceling coverage only for the subsection or element of the claim to which the material misrepresentation relates; or 2) canceling coverage of the entire claim for any material misrepresentation. The policy language is therefore ambiguous." Id. 485 N.W.2d at 221.
Accordingly, the court determined that only the portion of the insurance claim to which the fraud related was void, and coverage should be denied for that portion alone. See id. 485 N.W.2d at 222.
The court added:
"Although our decision is based on the fact that we conclude that the Tempelises' insurance policy is ambiguous, it is understandable why other courts have simply refused to allow a material misrepresentation that relates to one element of a claim, e.g., additional living expenses, to void coverage of the entire claim. Such an interpretation of an insurance contract could produce extremely harsh results. For example, if an insured had a two million dollar insurance policy, and he or she submitted one fraudulent receipt for a $ 50 meal, the policy would void coverage of his or her entire insurance claim, including the two million dollar coverage of the home." Id.