CEOs Signing Insurance Applications

A bank client is in the final stages of changing insurance companies. The insurer wants a signed application. The CEO looks over the app. He is busy and trusts his CFO. He signs the document and moves on.

Six months later a claim comes up. The insurer turns the claim down because there is a pertinent question on the application that was answered incorrectly.

Your applications matter. In bank management liability and the financial institution fraud-bond, the application often becomes a part of the policy. Misstatements can mean coverage is excluded.

Some insurer applications include definitive statements, “All information here is true.” Others a more forgiving, “All statements are true to the best of my knowledge.”

Be cautious. It is impossible for anyone to know everything in your organization. Most applications are complex and take many different people to gather the information. Don’t make definitive statements. Add in terms like, “As far as I know,” or, “To the best of my knowledge.”

Ask that the insurer recognizes that you have made a good-faith effort in completing the application. Some insurers have endorsements or policy provisions that agree not to penalize you for misstatements.