Misrepresentation on an Insurance Application Cost Insured $760,732.96


Misrepresenting a Material Fact on an Insurance Policy Allows Insurer to Rescind

Howard “Anthony” Jesmer (Jesmer) appealed the grant of summary judgment against him in this insurance coverage dispute. Jesmer argued that the district court erred in concluding that his answer to a question on an insurance application rendered his policy void under Tennessee law. In Howard Anthony Jesmer v. Erie Insurance Company, No. 21-5186, United States Court of Appeals, Sixth Circuit (September 30, 2021) reviewed what is needed to rescind a policy in Tennessee.


On January 30, 2018, Jesmer applied for property insurance to cover “comprehensive perils” to his home in Arlington, Tennessee. As part of the application process, Jesmer and his father, Howard Jesmer (Howard), met with an Erie agent at 310 Fields Drive. Jesmer answered the insurance application’s questions about the property. As Jesmer answered the questions orally, the insurance agent completed the written questionnaire. Jesmer answered “no” to the question “Is Applicant conducting any business or occupational pursuits at the premises?”

The application warned that “[a]n incorrect answer, intentional or not, to any information may jeopardize [Erie’s] acceptance of this application.” Jesmer and the agent signed the completed application. Jesmer “glanced” at the application before signing it.. Erie issued a policy on the property providing coverage for certain residential and property losses from February 1, 2018 to February 1, 2019.

In October 2018, Jesmer filed a timely proof of loss under the insurance policy stating that a “fire of unknown origin [had] completely burned [his] dwelling and all its contents.” Jesmer claimed $760,732.96 in covered losses. Erie denied Jesmer’s claim, and its agent subsequently informed Jesmer’s counsel that the claim had been denied, in part, because at the time the application for insurance was completed, Mr. Jesmer was working in a business owned by his father known as H&M Recycling. That business was being operated from the Insured location which involved keeping tow trucks and vehicles on the premises. After Mr. Jesmer’s father moved from the insured location, Mr. Jesmer continued the business from the premises. Jesmer sued Erie.

It was undisputed that at the time Jesmer signed the insurance application, he was working for his father Howard’s towing company, H&M Auto Recycling (H&M), and had been doing so since approximately the age of seventeen. H&M acquires automobiles and either disassembles them for scrap or fixes them for resale. In approximately 2015, Howard moved the business from its previous location in Mississippi to the Jesmer’s property.

Jesmer testified at deposition that his work for H&M consisted of “picking up vehicles” and driving them wherever directed by his father. H&M paid Jesmer $1, 000 in cash weekly to do this work. Jesmer regularly kept H&M tow trucks at the property for use when dispatched on a call.  Howard, the father, explained that Jesmer’s job was to “run” the business from the property, and that it was helpful for Jesmer to live at the house because doing so would prevent people from “stealing” the company vehicles.

Lisa Keller, an underwriter for Erie who was familiar with the insurance policy issued to Jesmer, stated in an affidavit attached to Erie’s summary judgment motion that “[h]ad the application submitted by Anthony Jesmer disclosed that he was operating his father’s business out of the insured premises the policy would not have been written because Erie Insurance Company’s risk of loss would have increased.”


Under Tennessee law, only certain misrepresentations in an application for insurance render a policy void from inception. The pertinent statute states:

No written or oral misrepresentation or warranty made in the negotiations of a contract or policy of insurance, or in the application for contract or policy of insurance, by the insured or in the insured’s behalf, shall be deemed material or defeat or void the policy or prevent its attaching, unless the misrepresentation or warranty is made with actual intent to deceive, or unless the matter represented increases the risk of loss.

In Tennessee, in order to avoid coverage under the statute, an insurer must prove two things:

  1. that the answers to the questions on the application were false.
  2. that the misrepresentation was material, which requires proving either that the false answers were given with the intent to deceive the insurer or that the false answers increased the risk of loss.

If a misrepresentation is found to increase the risk of loss, the policy is voidable under the statute even if the misrepresentation was innocently made. The issues of whether a misrepresentation exists and whether false answers were given with “intent to deceive[]” are questions of fact to be determined by the factfinder. Once it is determined that a misrepresentation exists, it is a question of law, not fact, for the court as to whether the misrepresentation increased the risk of loss.

The court concluded that reasonable minds could not disagree that Jesmer’s insurance application misrepresented his business and occupational pursuits at the property, and that, as a matter of law, this misrepresentation increased Erie’s risk of loss. Jesmer and his father both testified that at the time of the application, Jesmer regularly stored tow trucks, and sometimes stored towed vehicles, on the premises.

Under Tennessee law, Jesmer was ultimately responsible for ensuring that his insurance application contained truthful information. An insured has the duty to read the application for insurance and to verify the information. Jesmer would have been responsible for the application’s content even if he had not read the application at all.

Jesmer’s tow-trucking activities on the premises were business pursuits within the meaning of Tennessee law because they were both motivated by profit and regular or continuous.  Jesmer argued that “[t]here was nothing going on at the residence except the tow trucks were parked at the residence until Anthony Jesmer was dispatched on a call” and that “vehicle[s] from a tow” were occasionally, though “rarely,” “brought back to the location if it was to[o] late to deliver the vehicle to its desired location.” However, the constant presence of the tow trucks on the property- specifically for the purpose of allowing Jesmer to readily dispatch them from his home-suffices to show that Jesmer’s tow-trucking activity on the premises was a customary engagement or a stated occupation of the insured. Given the undisputed testimony that at least “four to eight” tow trucks always were at the location at any given time, the court concluded that Jesmer’s tow-trucking activity at the premises was a continuous and ongoing business pursuit on behalf of himself and H&M.

To determine whether a misrepresentation increased an insurer’s risk of loss, Tennessee courts look to whether the misrepresentation is of such importance that it naturally and reasonably influences the judgment of the insurer in making the contract. Tennessee law does not require the insurer to establish that the policy would not have been issued if the truth had been disclosed. It is sufficient that the insurer was denied information which it sought in good faith and which was deemed necessary to an honest appraisal of insurability.

Answering “no” to the relevant question, while simultaneously storing tow trucks and occasionally towed vehicles on the premises, Jesmer denied Erie the opportunity to make an informed determination regarding whether, and at what cost, it was willing to insure Jesmer’s property. Common sense additionally indicates that the presence of H&M tow trucks and occasionally towed vehicles on the premises would increase the value of the insured personal property and the risk of loss.

Because Jesmer’s insurance application contained a material misrepresentation that rendered the policy void under Tennessee law, the District Court’s decision was affirmed.


People who acquire insurance by misrepresenting material facts forget that the covenant of good faith and fair dealing devolves equally on the insured as it does on the insurer. In this case Jesmer failed to inform the insurer, in good faith, of the risks of loss he asked it to take. The underwriter’s testimony established that the misrepresentation was material to the insurer who would have refused to insure Jesmer if it knew that he was conducting a business on the premises, a risk greater than that of a normal homeowner who does not store tow trucks and damaged vehicles on the premises. He was, therefore, his worst enemy.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to my articles at https://zalma.substack.com,  the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at https://www.rumble.com/zalma ; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/  The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4


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