In their application for homeowners insurance the Eldridges, defendants in the declaratory judgment action, had answered "no" to the question "are there any animals or exotic pets kept on the premises?" In fact, they were keeping two bull mastiffs on the premises.
The court held that the question on the application was not ambiguous. It overturned the holding of the trial court that the Eldridges could have reasonably concluded that it only asked for the disclosure of pets if they were exotic pets. The Appeals Court held that the failure of the Eldridges to disclose their ownership of the dogs constituted a misrepresentation.
The court then held that the misrepresentation was material and defeated coverage.
Misstatements shall be deemed material and "defeat or avoid the policy" only where such statements were "made with actual intent to deceive, or . . . increased the risk of loss" to the insurer. G.L. c. 175, § 186. "A material fact, measured by an objective standard, is one which would naturally influence the judgment of an underwriter in making the contract at all, or in estimating the degree and character of the risk."
The insurer received notice that the Eldridges owned the dogs before it received notice of the claim that the dogs had caused an injury. Upon receipt of the notice of ownership of the dogs the insurer informed the Eldridges that coverage would not have been forthcoming had the application disclosed the dogs. The insurer proceeded to terminate coverage. The court held that was proof that the nondisclosure was material.