A warranty in an insurance policy is a promise by an insured that a material fact is absolutely true. A breach of a warranty at the inception of a policy prevents the policy from attaching to the risk. Even if the court disagrees and finds no breach of warranty a good faith refusal to pay on the basis of breach of warranty will avoid a claim of unfair claims practices or bad faith.
If an insure breaches one or more material warranties and increases the risk covered by the policy, the contract may be voided by the insurer, depending on the jurisdiction. It is, therefore, essential that every claims investigation include efforts to establish compliance with every warranty.
A Florida statute provided that violation by an insured of any warranty, condition, or provision of a policy shall not void the policy unless the violation increases the hazard. This refers to danger to the insured property itself as opposed to possible increased exposure to the insurer. This statute compelled the result and basically emasculated the effect of the warranty by placing a causal relationship test on the issue of warranty. Therefore, a burglar alarm warranty is technically breached if it is not connected but only voids the policy in Florida if a burglary goes undetected as a result a lack of the warranted burglar alarm.
Other states and federal courts void coverage immediately regardless of intent or relationship to the risk or the loss.
An intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind.
Every state seems to treat warranties and their breach differently. Since the issue of rescission for breach of warranty is usually a mixture of fact and law the adjuster should seek the advice and counsel of an attorney experienced in first party property coverage and claims before deciding to deny or pay a claim where a breach of warranty is an issue.