What could happen if an insurer is misled by a fraudulent application?

When an insurer is misled by a fraudulent application, the most significant outcome is that the insurance policy could be canceled entirely. This consequence stems from the principle of utmost good faith, or "uberrima fides," which requires both parties in an insurance contract to act honestly and not conceal or misrepresent material facts.

If it is discovered that the application included fraudulent information, the insurer has the right to void the contract because the foundation of the agreement was built on falsehoods. This means that any obligations on the part of the insurer to pay claims or provide coverage can be nullified.

While retaining premiums and potential legal consequences for the insured might occur in some circumstances, the primary and most direct action an insurer can take in response to a fraudulent application is to cancel the policy itself, restoring their position to what it would have been had the fraud not occurred.