Snapshot: insurance claims and coverage in USA

Insurance claims and coverage

Can a third party bring a direct action against an insurer for coverage?

As a general rule, such direct actions are not permitted in most states absent an unsatisfied judgment against the in sured. A few states and US territories, however, generally allow a third party to bring a direct action against a liability insurer before a judgment has been entered against the insured tortfeasor. For example, Wisconsin (Wisconsin Statutes 632.24) permits injured persons to bring an action directly against a tortfeasor’s negligence liability insurers.

Louisiana (Louisiana Revised Statutes 22:1269) narrowed its long-standing direct action statute as of 1 August 2024. Previously, it broadly permitted an injured party to bring an action jointly against the tortfeasor and its insurer. It also permitted an injured party to bring an action against the insurer alone, under certain circumstances. As revised, an injured person may not bring a direct action against an insurer (alone or jointly against the tortfeasor) except in limited circumstances, including when:

• the insured is insolvent;
• a citation or other process cannot be made on the insured;
• the cause of action is for damages as a result of an offence between children and their parents or between married persons;
• the insurer is an uninsured motorist carrier; or
• the insured is deceased.

And even when one of these exceptions is satisfied, the insurer may not be named in the caption of the case.

Many states, such as New York, allow a third-party claimant to bring a direct action against an insurer when a judgment against the insured is unsatisfied. New York Insurance Law 3420 New York by statute also allows direct actions in certain situations when an insurer denies coverage of a personal injury or wrongful death claim based on late notice, unless the insurer or the insured has commenced a declaratory judgment action within 60 days of the insurer’s denial of coverage and named the injured person or other claimant as a party to the action. Minnesota, by statute, permits direct actions by the state of Minnesota against an insurer for coverage of environmental response costs related to mixed municipal solid waste disposal facilities that are caused by the insured and covered by the insurer’s policy. Minnesota Statutes 115B.444.

Case law in the United States is split as to whether and when a settlement between the policyholder and insurer, according to which the insurer has been released from liability under the policy, can bar a subsequent direct action against the insurer by a third-party claimant. Compare Sales v US Underwriters Ins Co, 1995 WL 144783 (SDNY 3 Apr 1995) with Continental v Employers Ins Co, 60 AD3d 128 (1st Dept 2008).

A third party may also bring a direct action against an insurer if an insured assigns that right to the third party. Some policies require the insurer to consent to any assignment, although some states have public policies that provide that restrictions on assignment are unenforceable , or unenforceable once a loss has been incurred. See, for example, Oregon Revised Statutes 31.825 (allowing assignments of liability insurance); Jawad A. Shah, MD, PC v State Farm Mut. Auto Ins. Co., 920 N.W. 2d 148 (Mich. App. 2018) (finding clause prohibiting assignments to be void on the ground of public policy).

Can an insurer deny coverage based on late notice of claim without demonstrating prejudice?

Whether an insurer can deny coverage based on late notice without a showing of prejudice depends on the language of the policy, the jurisdiction and the type of insurance policy involved. Some states, such as New York in certain instances, require that policies issued in the state contain provisions dealing with whether and to what extent prejudice is required to defeat coverage based on late notice.

Concerning occurrence-based policies, most states do not permit an insurer to deny coverage based on late notice unless the insurer has been prejudiced by the delay. Triyar Hosp. Mgmt. LLC v QBE Specialty Ins. Co., 2023 WL 2372049 (CD Cal 17 Jan 2023) (applying California law); Cooper v Gov’t Employees Ins. Co., 237 A. 2d 870 (N.J. 1968). New York, which used to be known for its rule that late notice bars coverage regardless of prejudice, modified its common law rule as to certain types of liability policies issued or delivered in New York by amending section 3420 of the New York Insurance Law, effective from 17 January 2009, to prohibit an insurer from denying coverage under certain circumstances owing to late notice absent prejudice to the insurer. The statute also shifts the burden of showing prejudice depending upon the tardiness of the notice. Certain states, such as Georgia, do not require a showing of prejudice but permit a policyholder to rebut a late notice defence by showing that the failure to provide timely notice was justified under the circumstances. Foreshee v Employers Mut Cas Co, 711 SE2d 28 (Ga App 2011).

Courts are much more likely to deny coverage for late notice regardless of prejudice under a ‘claims made and reported’ policy, where notification of a claim within a certain time is an express part of the insuring agreement, rather than merely a contractual condition. See, for example, Pine Bluff School District v Ace American Insurance Company, 984 F3d 583 (8th Cir 2020) (applying Arkansas law).

Is an insurer subject to extra-contractual exposure for wrongful denial of a claim?

Most jurisdictions allow an insured to recover some form of extra-contractual damages if an insurer acts in bad faith in certain circumstances (under both first-party and third-party insurance policies), such as when it wrongfully fails to settle a case within policy limits and that failure results in a judgment against the insured in excess of policy limits, or when it is found to have wrongfully denied a defence or indemnity, and thereby breached its duty of good faith and fair dealing. Ellington v Cure Auto Insurance, 2017 WL 3081717 (NJ App Div 20 July 2017) (failure to settle); Gray v Zurich Ins Co, 419 P2d 168 (Cal 1966) (failure to defend); Gruenberg v Aetna Ins. Co., 510 P.2d 1032 (Cal. 1973); Ark. Code 23-79-208 (creating a 12 per cent penalty where there is a failure to timely pay). The standard of conduct as to what constitutes bad faith, however, varies by state, ranging from failure to act reasonably to gross disregard of an insured’s interests to wilful misconduct. Pavia v State Farm Ins Co, 82 NY2d 445 (1993). In some states, various unlawful claims handling practices are identified by statute, but several of these statutes permit enforcement only by the state rather than by private action. For example, New York makes it unlawful for insurers to engage in several listed prohibited practices, but with no private right of action. New York Insurance Law 2601; Rocanova v Equitable Life, 634 N.E.2d 940 (N.Y. 1994).

Certain states, such as Florida, permit a cause of action for bad faith if the insurer does not take affirmative action to settle a case within policy limits, even absent a settlement demand from the underlying claimant, when liability is clear enough and damages serious enough that an excess judgment is probable. Florida Statutes 624.155. Powell v Prudential Prop. & Cas. Ins. Co., 584 So. 2d 12 (Fla. Dist. Ct. App. 1991).

Depending on the jurisdiction, an insured may be able to recover punitive or consequential damages, or both, when the insurer has acted in bad faith. Some states, however, limit recovery of punitive damages to situations involving egregious conduct directed at the public at large. New York Univ. v Continental Ins. Co., 87 N.Y. 2d 308 (1995).

What triggers a liability insurer’s duty to defend a claim?

Because the duty of an insurer to provide a defence is contractual, courts generally look to the wording of the insurance policy to determine whether and to what extent an insurer is obliged to defend a claim. Generally, the duty to defend is broader than the duty to indemnify.

Where the policy imposes a duty to defend certain claims, most courts determine the existence of a duty to defend a given claim based upon some form of the ‘four corners’ rule. Atlantic Mut Ins Co v Badger Medical Supply Co, 528 NW2d 486 (Wis 1995). Under this rule, an insurer’s defence obligation is determined by comparing the allegations of the claimant’s complaint to the policy provisions. If, accepting the complaint’s allegations as true, there is even a single claim that would require the insurer to indemnify the insured in the event of a judgment, an insurer is usually obliged to defend the entire action, although in some jurisdictions the insurer may be able to allocate the defence costs to particular claims if the costs incurred are severable. American and Foreign Ins Co v Jerry’s Sports Center, Inc, 948 A2d 834 (Pa Super 2008). There may also be a duty to defend against certain claims that, if true, would fall within an exclusion when the insured denies the allegations. Wintermute v Kansas Bankers Sur Co, 630 F3d 1063 (8th Cir 2011) (applying Arkansas law).

In most jurisdictions, courts will also consider extrinsic evidence outside of the four corners of the complaint in determining whether the insurer has a duty to defend, at least in certain circumstances, such as where the extrinsic facts are relevant to the duty to defend but not the merits of the underlying action. In many of these cases, however, extrinsic evidence of actual facts has been used to impose the duty to defend rather than permit the insurer to defeat it. But see West Bend Mut Ins Co v US Fidelity and Guar Co, 598 F3d 918 (7th Cir 2010) (applying Indiana law, whose minority position holds that there is no duty to defend where extrinsic facts reveal a claim to be ‘patently outside’ a policy’s coverage). Texas, a traditionally strict four-corners state, has more recently opened the door to consideration of extrinsic evidence, at least in narrow circumstances. Monroe Guaranty Ins. Co. v BITCO General Insurance Corp., 640 S.W. 3d 195 (Tex. 2022) (allowing extrinsic evidence where gap in complaint and evidence is relevant to coverage and not liability).

For indemnity policies, what triggers the insurer’s payment obligations?

Under an indemnity policy, an insurer’s obligation to provide indemnification for defence costs and other loss is determined by a comparison of the scope of coverage afforded by the policy and the claim submitted for indemnity. If the claim falls within the coverage provided by the policy, the claim will be covered. A complaint may include both covered and uncovered claims, and only covered claims in a complaint are generally subject to indemnity. Estate of Bradley ex rel Sample v Royal Surplus Lines Ins Co, Inc, 647 F3d 524 (5th Cir 2011) (applying Mississippi law).

Where a policy places the duty to defend on the insured, and not the insurer, it will often require the insurer to advance legal fees as they are incurred, rather than holding them back until after the underlying dispute is resolved. If a claim is ultimately determined to be not covered, the insured will typically be required to pay advanced sums back to the insurer under a policy provision or quasi-contract theory, although courts in some jurisdictions have held that advanced fees cannot be recouped absent an explicit contractual provision. Compare Buss v Superior Court, 939 P. 2d 766 (Cal. 1997) (granting insurer recoupment) and General Agents Ins. Co. v Midwest Sporting Goods Co., 828 N.E. 2d 1092 (Ill. 2005) (finding no recoupment absent express contractual provision).

Is there a period beyond which a life insurer cannot contest coverage based on misrepresentation in the application?

For life insurance, state statutes generally require a one- or two-year contestability period beyond which a life insurer cannot contest coverage based on a misrepresentation in the application, although some jurisdictions permit contestation even after the general contestability period where the misstatement was made with intent to defraud. Compare New York Insurance Law 3203 (fraud exception) with Cal. Ins. Code § 10113.5 (no fraud exception). A contestability period allows an insurer a limited time in which to investigate statements made by the insured in its application to determine whether the statements were truthful. If the misrepresentation is discovered within the contestability period, the life insurer may deny coverage even if the fact misrepresented had nothing to do with the cause of the insured’s death. Carroll v Jackson Nat. Life Ins. Co., 307 S.C. 267, 414 S.E. 2d 777 (1992).

Are punitive damages insurable?

Whether and to what extent punitive damages are insurable varies by jurisdiction. In some states, such as Arizona and Georgia, there is no public policy against insurance for punitive damages, and an insurance policy providing coverage for such damages will be enforced under its terms. Other states, however, have a public policy against insurability of punitive damages, at least when imposed to punish the wrongdoer, such as New York and California. Home Ins. Co. v Am. Home Prods. Corp., 75 N.Y.2d 196 (1990); PPG Indus., Inc. v Transamerica Ins. Co., 20 Cal. 4th 310 (1999). Not all ‘punitive’ damages, however, are imposed as punishment, and when they are imposed under a state law that views the damages as compensatory, they may be viewed as insurable, even in a jurisdiction that generally bars coverage for punitive damages. Similarly, punitive damages imposed on account of vicarious liability for the acts of another may be viewed as insurable even by a state that generally bars punitive damages coverage, such as Pennsylvania. Bensalem Racing Ass'n, Inc. v ACE Prop. & Cas. Ins. Co., 2017 WL 5927496 (Pa. Super. Ct. Nov. 30, 2017).

Even where a policy contains an express choice-of-law provision (many policies do not), there are often significant choice of law questions when the public policy of the state in which a punitive damages judgment has been rendered differs from the public policy of the jurisdiction identified in the policy. In such a situation, the decision may depend on the forum in which the public policy issue is determined, as some courts hold that a strong public policy may override the parties’ choice of law. That said, the Supreme Court of the United States recently unanimously held that, in the context of marine insurance contracts, choice-of-law provisions are presumptively enforceable, with narrow exceptions. Great Lakes Ins. SE v Raiders Retreat Realty Co., LLC, 144 S. Ct. 637 (2024). Some policies (especially certain directors’ and officers’ liability (D&O) policies) include a clause providing that insurability for punitive damages will be governed by the law of the jurisdiction that is the most favourable to the insured, so long as that jurisdiction has one of several specified relationships with the parties or the underlying claim against the insured. In some other policies, coverage disputes are resolved by arbitration, and the arbitrator is contractually directed to enforce coverage for punitive damages regardless of the law that might otherwise apply to the policy.

What is the obligation of an excess insurer to ‘drop down and defend’, and pay a claim, if the primary insurer is insolvent or its coverage is otherwise unavailable without full exhaustion of primary limits?

Whether an excess insurer is obliged to ‘drop down’ is generally a matter of contract. Courts usually look to the policy wording to determine whether and when an excess insurer is required to drop down. American States Insurance Company v Insurance Company of Pennsylvania, 800 Fed. Appx. 452 (9th Cir. 2020) (applying California law). Certain insurance programs (particularly D&O liability insurance programs) include one or more excess policies that expressly provide for drop down coverage as a feature of the policy.

Absent an express drop down feature, there is a distinction between compelling an insurer to drop down so that it assumes the obligations of an underlying insurer when the limits of the underlying insurance have not been paid by anyone, and requiring the excess insurer to provide coverage when the insured, rather than the underlying insurer, has paid some or all of the amount of the underlying policy limit. In the latter situation – particularly if the excess policy merely requires exhaustion of the underlying insurer’s limits, without expressly requiring that such exhaustion is through full payment of limits by the underlying insurer – some courts refuse to excuse the excess insurer from its obligations. Sometimes this is because the courts, reluctant to provide the excess insurer with what the courts view as a windfall, construe the term ‘exhaustion’ to include cessation of the underlying insurer’s liability rather than full payment of its limits. Maremont Corporation v Ace Property & Casualty Insurance Company, 100 F Supp 3d 417 (D Del 2015). Such courts often enunciate a public policy rationale, noting that if the entire underlying limit has been paid by someone, the excess insurer has not been prejudiced. Similarly, where a failure of the underlying insurer to pay the full amount of its limits is because of a settlement between that insurer and the insured, some courts reason that to permit the excess insurer to avoid coverage because of the settlement would defeat the public policy in favour of settlement. GenCorp v AIU Ins Co, 297 F Supp 2d 995 (ND Ohio 2003). Many courts, however, will enforce the literal terms of an excess policy that require, as a condition of coverage, exhaustion of the underlying policy by full payment of limits by the underlying insurer. National Union Fire Ins Co of Pittsburgh, Penn v Travelers Ins Co, 214 F3d 1269 (11th Cir 2000) (applying Florida law). Some jurisdictions have addressed this issue by statute, eg, N.J. Stat. Ann. 17:30A-12 (settling primary layer deemed exhausted for triggering excess layer).

What is an insurer’s obligation if the policy provides that the insured has a self-insured retention or deductible and is insolvent and unable to pay it?

Whether an insurer remains obliged to pay under a contract of insurance when the insured is incapable of satisfying a self-insured retention (SIR) owing to its insolvency varies by jurisdiction. There are two general schools of thought. The public policy approach provides that an insurer is responsible for the amount of covered loss in excess of the SIR notwithstanding that the SIR has not been paid. Phillips v Noetic Specialty Ins Co, 919 F Supp 2d 1089 (SD Cal 2013). The strict contract interpretation approach construes the insurance contract strictly and finds that an insurer’s obligations under a policy with an SIR are not triggered until the insolvent insured has paid the SIR. Pak-Mor Mfg Co v Royal Surplus Lines Ins Co, 2005 WL 3487723 (WD Tex 3 November 2005). Neither of these schools of thought requires an insurer to drop down and pay the SIR for the insured in the event of the insured’s bankruptcy or insolvency.

Some states, like Illinois, that follow the public policy approach have enacted legislation requiring liability policies to include a provision that the insured’s bankruptcy will not relieve the insurer of its obligations under the policy. 215 ILCS 5/388. In those states, even if a policy expressly makes the payment of an SIR a condition precedent to coverage, the obligation of the insurer to pay covered amounts in excess of the SIR amount remains despite the insured’s inability to satisfy the SIR. States that follow the strict contract interpretation approach rely on the law of contracts and treat payment of the SIR as a strict condition of coverage even if the insured is insolvent.

If the insured’s policy contains a deductible amount that is included within the limits of a policy, rather than an SIR over which the policy limits apply, the inability of the insured to pay the deductible generally does not relieve the insurer from its obligation to pay covered claims and expenses. In general, the insurer would have the duty to pay without regard to the payment of the deductible by the insured and, in turn, would have to seek reimbursement for the amount of the deductible from the insured. In such cases, the insurer is generally considered a creditor of the insured concerning the amount of the deductible paid on the insured’s behalf.

What is the order of priority for payment when there are multiple claims under the same policy?

Certain types of policies contain provisions setting forth the priority of payments when there are multiple claims under the same policy or claims against multiple insureds. For example, D&O policies often include provisions indicating that the individual insured’s claims should be paid first before the insured organisation is paid, or that in the event of an insolvency of the insured organisation, pre-petition claims will be given priority over post-petition claims, or both. If not specified in the policy, jurisdictions look at different factors in determining priority of payment. Such factors include potential liability, excess exposure and ripeness for settlement.

No uniform law exists on allocation when multiple claims are made to the same policy. Some courts have allowed an insurer, when faced with multiple claims against one insured, to exhaust its policy limits in settling one claim, even if that leaves another claim unsettled, where the settlement is reasonable. Pride Transp v Cont’l Cas Co, 511 Fed Appx 547 (5th Cir 2013) (applying Texas law). However, where there are multiple insureds under one policy, some jurisdictions have held insurers to be in violation of their duty of good faith if the settlement of one claim against one insured favours one insured over another. Shell Oil Co. v. Nat'l Union Fire Ins. Co., 44 Cal. App. 4th 1633 (1996). Many jurisdictions have not ruled on the specific issue of whether an insurer can enter into a settlement benefiting one insured to the detriment of others. In several instances, insurers facing uncertainty as to how a settlement on behalf of fewer than all insureds will be viewed have commenced interpleader actions, seeking a judicial determination of how the policy limits should be distributed. QBE Specialty Insurance Company v Uchiyama, 2023 WL 6796159 (D Haw 13 Oct 2023).

How are payments allocated among multiple policies triggered by the same claim?

Case law concerning allocation of coverage for a claim that triggers multiple policies in various years is complex and conflicting. Several different theories have evolved concerning policies that contain standardised terms that do not deal specifically with the allocation issue. Many of these theories were developed in connection with asbestos insurance coverage cases and then were subsequently used in pollution coverage cases, which many courts view as analogous.

While there are variations, the following theories are ones generally relied on by the courts:

• The ‘exposure’ theory: under which, the policies in effect at the time of the exposure to the hazardous substances are triggered. In personal injury product liability cases, the exposure period is the time during which the underlying claimant was exposed to the product. In pollution cases, the exposure period is the time during which hazardous substances were released or deposited at the site; Zurich Ins Co v Raymark Industries, Inc, 514 NE2d 150 (Ill 1987).
• The ‘manifestation’ theory: under which, the policies in effect at the time that the injury or damage becomes manifest provide coverage; Eagle-Picher Industries, Inc v Liberty Mut Ins Co, 682 F2d 12 (1st Cir 1982).
• The ‘continuous trigger’ or ‘triple trigger’ theory: under which, the injury or damage is viewed as a continuous injurious process, so that all policies from initial exposure through manifestation are triggered; Westfield Insurance Company v Sisterville Tank Works, Inc, 895 SE2d 142 (West Virginia 2023).
• The ‘injury in fact’ theory: under which, a policy is triggered if injury, in fact, occurred during the policy period, even if the injury was, in and of itself, not compensable. Don’s Bldg Supply, Inc v OneBeacon Ins Co, 267 SW3d 20 (Tex 2008).

Where multiple years of coverage are involved, courts have split on:

• whether stacking of triggered policies is permitted; Great Lakes Dredge & Dock Co v City of Chicago¸260 F3d 789 (7th Cir 2001) (applying Illinois law);
• whether a triggered policy is responsible up to policy limits for all sums owed to the underlying claimant or merely a pro rata share of the liability; Danaher Corporation v Travelers Indemnity Company, 414 F Supp 3d 436 (SDNY 2019);
• how and when excess coverage in a given year applies when fewer than all of the primary policies in triggered years have been exhausted; Ali v Federal Ins Co, 719 F3d 83 (2d Cir 2013); and
• whether and to what extent an insured must bear responsibility for uninsured periods that would otherwise be triggered had appropriate coverage been obtained. Stonewall Ins Co v Asbestos Claims Management Corp,73 F3d 1178 (2d Cir 1995).

When multiple policies for the same policy period are triggered, most courts look to the language of the respective policies to determine whether one is meant to be primary to the other. When one policy is made excess to another by specific reference, courts generally follow that language. However, it is common for insurance policies to have general ‘other insurance’ provisions that state that any coverage provided is excess to all other valid and collectible insurance. When two policies have duelling other insurance provisions, courts will look to the language of the policies to determine whether the coverage should be split evenly between the two policies, proportionally to their respective limits of liability, or in some other fashion. Admiral Insurance Company v Anderson, 529 F Supp 3d 804 (ND Ill 2021).

Are disgorgement or restitution claims insurable losses?

Courts disagree on whether and to what extent disgorgement or restitution claims are insurable. A decision of the United States Court of Appeals for the Seventh Circuit, which has been followed by several courts, held that a settlement of such claims was uninsurable as a matter of public policy, even though there had been no adjudication of wrongdoing. Level 3 Communications, Inc v Federal Ins Co, 272 F3d 908, 910–11 (7th Cir 2001). Other courts, however, have found that public policy does not bar coverage at least for defence and settlement of restitution or disgorgement claims and that any public policy concerns are satisfactorily addressed by the standard conduct exclusion in insurance policies. JP Morgan Securities Inc v Vigilant Insurance Company, 37 NY3d 552 (2021). Some courts have looked beyond the label of a payment as ‘restitution’ to find such payments insurable if they serve a compensatory goal from a substantive perspective.

Due to the concern that uninsurability of disgorgement or restitution could deprive insureds of coverage for various US securities claims, thereby making D&O policies less marketable, many D&O policies now contain a provision whereby the insurer agrees not to contend that claims under sections 11 and 12 of the Securities Act of 1933 – and sometimes other securities laws provisions as well – are uninsurable.

How do courts determine whether a single event resulting in multiple injuries or claims constitutes more than one occurrence under an insurance policy?

How the policy defines ‘occurrence’ can be determinative of whether a single event resulting in multiple injuries or claims will be considered one or multiple occurrences. Many liability policies contain specific aggregating language (eg, treating 'related acts' as one occurrence, or defining all injuries from continuous exposure to the same conditions as one occurrence). Courts will enforce such clauses. See Evanston Ins. Co. v Mid-Continent Cas. Co., 909 F.3d 143 (5th Cir. 2018). In the absence of explicit policy language addressing the question, some courts have adopted a ‘cause’ test, while others have adopted an ‘unfortunate event’ test (and a minority of courts have applied other tests). Under the cause test, if there is a single cause of the injuries and claims, that cause will generally be viewed as constituting the occurrence. Cincinnati Ins Co v ACE INA Holdings, Inc, 886 NE2d 876 (Ohio App 2007). Under the unfortunate event test, however, which is applied in New York, each of the individual injuries or claims may be considered an unfortunate event that is itself a separate occurrence. Appalachian Insur Co v General Electric Co, 863 NE2d 994 (NY 2007).

Under what circumstances can misstatements in the application be the basis for rescission?

For an insurer to rescind a policy based on misstatements in the application, courts generally require, at a minimum, that there be a material misstatement in the application upon which the insurer relied in issuing the policy. Jackson v Hartford Life and Annuity Ins Co, 201 F Supp 2d 506 (D Md 2002). In some states, an intent to defraud the insurer is also required. Kiss Const NY, Inc v Rutgers Cas Ins Co, 61 AD3d 412 (1st Dept 2009). Ordinarily, a misrepresentation is considered material if the insurer would not, had it received accurate information, have provided the coverage at issue for the premium charged. It is ordinarily not required that the insurer show it would not have issued any policy at all. Some state statutes codify the rescission standard – for example, Illinois law requires misrepresentations to be stated in the policy and be material or made with intent to deceive (215 ILCS 5/154).

Fidelity insurance applications, however, are often treated differently for rescission purposes than other types of coverage. This is because one of the purposes of fidelity insurance is to provide coverage for employee thefts or other losses caused by employee dishonesty that took place before the issuance of the policy but are discovered during the policy period. If the dishonest employee’s knowledge were imputed to the insured, the purpose of the coverage would be defeated. Thus, a failure to disclose in the application thefts known only to the dishonest employee or employees will generally not be considered a misrepresentation in the application. If, however, the dishonest employee is the person who actually signs the application, some courts will permit rescission, although other courts will not. National Credit Union Administration Board v CUMIS Insurance Society, Inc, 241 F Supp 3d 934 (D Minn 2017) (noting the different decisions and ultimately refusing rescission under Minnesota law).