GEICO v. Nelson and Martino, N.J. App. Div, Docket No. A-0638-11T1 (2012) [unpublished]

Material misrepresentations made by an insured in an application for insurance will serve to void the PIP claim of the insured's resident boyfriend where a "spouse-like" relationship is found to exist.

New Jersey Appellate Division determination involving an appeal of a Superior Court finding in favor of Nelson. This case stemmed from an automobile accident which occurred in 2006 while Mr. Martino, Ms. Nelson's live-in boyfriend and the father of her child, was involved in an automobile accident where he sustained injuries. Mr. Martino was driving Ms. Nelson's GEICO-insured Lexus at the time of loss. He was not listed as an additional-insured on the subject GEICO policy.

Despite the fact that Mr. Martino resided with her at time of policy inception and throughout the policy period, Ms. Nelson failed to list Mr. Martino as an additional driver or a "[r]esident (15 or older) who will not be listed as [a] driver." GEICO disclaimed based on material misrepresentation.

At a plenary hearing, GEICO presented the testimony of an underwriting specialist who indicated that, had Mr. Martino been listed on the policy, Ms. Nelson's annual premiums would have increased by more than $500. The defendants did not dispute this testimony, but did argue that any misrepresentation was not "material" and, further, that even if the insured misrepresented material information in her application for insurance, such misrepresentation should not affect the coverage status of her boyfriend (an "innocent third party").

The Appellate Division found that the $500 or more underwriting difference was sufficient to establish materiality. Notably, the court also found that Mr. Martino was not an "innocent third party" as to the fraud of the insured and, therefore, denial of his claim was appropriate. In reaching this decision, the court found that the insured and her boyfriend had a "spouse-like" relationship insofar as they resided together for multiple years, had a child together and routinely shared household expenses.

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