If an insured acquires an automobile policy by fraud, the policy as it relates to the insured can be voided; however, the insurer remains liable to innocent third parties for the contracted coverage amount.

The defendant applied for a basic coverage automobile insurance policy with an optional $10,000 coverage limit for third-party bodily injury liability. The insurer required the defendant to list all household residents of driving age, but the defendant failed to disclose the name of the co-defendant, who was the father of her two children. Had the co-defendant’s name been disclosed, the insurer would not have issued the policy because the co-defendant had a poor driving record. The New Jersey Supreme Court found that, where an insured elects to add the basic policy’s optional $10,000 coverage for third-party bodily injury in their original contract, the insurer is liable to innocent third parties for the contracted $10,000 amount as the minimal amount available under our compulsory system of automobile insurance coverage, even when that basic policy is later voided. However, when an insured does not elect to add the basic policy’s optional $10,000 coverage in their original contract, the insurer is not liable to any innocent third-party claimants under that contract.

_{Case Law Alerts, 1st Quarter, January 2016}

_{Case Law Alerts is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2016 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}