Cancellation Qualifying Reasons/RC 23
Reason Code 23: Fraud or Misrepresentation
This reason code applies when a policy must be canceled due to fraud or material misrepresentation by the policyholder or agent. Fraudulent activity or deliberate misrepresentation of key policy details invalidates coverage.
| Condition | Details |
|---|---|
| Eligibility for Cancellation | A policy must be canceled if fraud or material misrepresentation is identified, affecting the policy’s validity. |
| Effective Date of Cancellation | The date of the fraudulent act or material misrepresentation. |
| Policy Terms Eligible for Refund | N/A (No refund is allowed under this reason code). |
| Type of Refund | No refund of premiums, surcharges, or fees. |
| Required Documentation | Notification from FEMA confirming fraud or material misrepresentation. |
This table can be seen on page 6-11 of the FIM.
Additional Guidance
- Fraudulent actions include, but are not limited to:
- Knowingly providing false information on an application.
- Misrepresenting property characteristics to obtain a lower premium.
- Submitting falsified claims or documentation.
- If fraud or misrepresentation is suspected, insurers must report the case to FEMA for verification before proceeding with cancellation.
- Once FEMA confirms fraud or misrepresentation, the policy is canceled without any refund.
- If a claim has been paid on a fraudulent policy, FEMA may pursue legal action or recovery efforts.
Required Documents
To process this cancellation reason, underwriters must verify the documentation provided.
- FEMA notification confirming fraud or material misrepresentation.
- Supporting documentation, such as claim records or underwriting findings.
Document Gallery
- FEMA Fraud Notification: Official confirmation of fraudulent activity.
- Underwriting Findings: Documentation showing discrepancies in policy details.
Scenarios for Context
Scenario 1:
A policyholder provides false information regarding the flood zone of their property to obtain a lower premium. FEMA investigates and confirms the misrepresentation, leading to cancellation with no refund.
Scenario 2:
An agent submits falsified elevation certificates to secure lower rates for multiple clients. FEMA identifies the issue, and all affected policies are canceled retroactively, with no refunds issued.
 |
This page contains details about NFIP Cancellations. |