Marco applied to Commercial Insurance Co. for a policy to cover Hooligan’s, Marco’s nightclub. The application indicated that the premises had a sprinkler system.

Commercial issued a policy that required such a system.

One year later, when Hooligan’s sustained more than $250,000 in fire damage, Marco filed a claim for payment under the policy. Before paying the claim, Commercial learned that there was no sprinkler system.

Could Commercial refuse to pay Marco’s claim and cancel the policy? Yes. Commercial can refuse to pay the claim and can cancel the policy. An insurance company can raise any of the defenses that would be valid in an ordinary action on a contract, as well as others. If an insurance company can show that a policy was procured through ______________ or ______________, it may have a valid defense for not paying. In the application for insurance, Marco ______________ that Hooligan’s had a sprinkler system.