Insurance companies will refuse to pay claims due to two similar, yet different, reasons:  fraud and lack of cooperation.  This article will discuss an insurance company’s claim that a Wisconsin insured property owner committed fraud.

There is a distinction between criminal fraud proven by a prosecutor and civil fraud pursued by insurance companies in litigation.  Prosecution is handled by county attorneys, and like all criminal law, requires the prosecutor to prove a crime was committed beyond a reasonable doubt.  Civil actions, pursed by insurance companies against their customers, have a much lower burden of proof.  Insurers need only prove it is more likely than not a property owner committed fraud.  The reason for the difference is criminal prosecution results in a criminal penalty, whereas civil fraud results in voiding an insurance policy.

This article discusses civil insurance fraud pursued by insurers.  Insurance fraud under Wisconsin case law requires an insurer to prove four elements:  1) a misrepresentation by an insured property owner, 2) intent to commit the misrepresentations, and 3) reliance by the insurer, and 4) damages.  Insurance Co. of North America v. Universal Mortg. Corp., 82 Wis.2d 170, 175 (Wis. 1978). I would add a fifth:  that the alleged misstatement is material, or important.  Monahan v. Mutual Life Ins. Co., 192 Wis. 102 (1927).  By operation of law, this standard is found in an insurer’s policy.  I encourage all people accused of fraud to look at their policy for the exact language an insurer must prove.


The essence of a misrepresentation is when an insured states a fact that is false.  A misrepresentation is usually based on nouns and verbs, not adjectives and adverbs.  If a property owner says they had a “horrible and traumatic fire”, the search for fraud in this statement would focus on whether there was a fire.  Words like “horrible” and “traumatic” are subjective, more opinion than fact, and thus difficult to attack as false.  Whether there was a fire is a fact.  If there was no fire, the fact is false and a misrepresentation.

This principle is not absolute.  If an insured said she had a “massive fire” and in fact it was a little kitchen fire, the phrase “massive fire” can be the basis for fraud.  Yet the general principle is the focus is on “fire” as it is a provable fact.

Misrepresentations can occur when a property owner makes a false statement a) when applying for insurance, b) whether a loss event occurred, and c) the size – or amount – of their damaged property.  Any of these scenarios can void an insurance claim.


In Wisconsin, only an intent to defraud the insurer voids coverage.  Insurance Co. of North America v. Universal Mortg. Corp., 82 Wis.2d 170, 175 (Wis. 1978). Honest mistakes should not void a policy.

Overstating the value of items lost can be a basis for a fraud claim.  Yet an honest over valuation should not be the basis for finding intent.  In 1924, the Wisconsin Supreme Court held overvaluation in a proof of loss can be fraudulent if the valuation is “so grossly exaggerated as to raise the presumption of fraud.”  Wiesman v. American Ins. Co., 184 Wis. 523 (1924).  The key phrase here is “grossly exaggerated”.  What grossly means is a matter of opinion, but contractors often disagree with insurers about the scope and cost of repair with big deltas.  So long as there are some grounds for the property owner’s position the insurer should have a difficult time establishing intent.


Insurance companies must prove that a misrepresentation is material.  Monahan v. Mutual Life Ins. Co., 192 Wis. 102 (1927).  Material means important, or substantial.  An old Wisconsin case arising from an allegation of fraud when a policy was issued illustrates the principle of law that is applicable to insurance claims.

The Supreme Court held a misstatement is only material if it “increased the risk or contributed to the loss”.  Monahan v. Mutual Life Ins. Co., 192 Wis. 102; 212 N.W. 269 (Wis. 1927).  There has to be some connection to the misstatement and the insurer’s duty to pay under the policy.  A misstatement of minor importance should not be fraud.

To illustrate the point using an extreme example, let’s imagine a house fire.  The insured property owner has $500,000 in coverage of lost contents, and can prove $600,000 is the value of what was lost.  If a property owner intentionally lies about how many socks were in his drawers, the insurer has the burden to prove that lie is material.  The property owner has the argument that another $40 in socks on top of $600,000 in lost value is not material to the insurer’s position.  The insurer is bound to pay $500,000 anyway.

I have heard insurance defense attorneys argue that any instance of an intentional misrepresentation voids all coverage.  The problem with that argument is Wisconsin law requires an insurer to prove it relied on the misstatement to their determine, and the fraud is material.  Of course, it is extremely unwise for a property owner to lie about anything, including $40 on top of a $600,000 loss.  Nothing in the law or common morality endorses lying.  Yet Wisconsin law does recognize that a misrepresentation has to impact the insurer in a material or substantial way.

Contact me if you have been accused of fraud and need legal representation in a civil action (litigation).  E-mail me at