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Representation

Representation

Definition

A statement made in an application for insurance that the prospective insured represents as being correct to the best of his or her knowledge. If the insurer relies on a representation in entering into the insurance contract and if it proves to be false at the time it was made, the insurer may have legal grounds to avoid the contract.

Related Terms

Representations and Warranties Insurance

A form of coverage designed to guarantee the contractual representations made by sellers associated with corporate mergers and acquisitions. For example, the seller of a company may represent that the company's underground storage tanks are in good repair. If a serious leak is discovered following the purchase, the buyer can seek recovery for repair and clean-up costs from the seller's representations and warranties insurance policy. The key benefit of the policies is that they provide a viable alternative to escrow funds, which have traditionally used to satisfy claims associated with representations and warranties contained in merger and acquisition documents.

Warranty

(1) A guarantee of the performance of a product. Product warranties are included within the definition of the named insured's product in general liability policies. (2) A statement of fact given to an insurer by the insured concerning the insured risk which, if untrue, will void the policy.

Misrepresentation

A false or misleading statement that, if intentional and material, can allow the insurer to void the insurance contract. Some insurance policies and state laws that govern insurance contract provisions vary on the exact details of the conditions under which coverage may be voided; these variations are usually denoted in state amendatory endorsements.

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