According to contract law, contracts formed based on fraudulent misrepresentation are voidable by the innocent party, and the party has a legal right to demand compensation of damages suffered as a result of the misrepresentation.

Certainly, insurance agreements are governed by contract law. Based on the above case, the insurance agent promised Shelly that her insurance company will cover every cost incurred as a result of her auto accident, but if she signed the documents that the agent presented to her. The agent made the statement knowing it was wrong compared to what the documents stated. Also, the agent made the statement in order to make Shelly to sign the documents without second thoughts. For these reasons, the statement made by the agent was a fraud misrepresentation. Therefore, Shelly has a legal right to void the contract and claim any compensation in case she suffered any damages based on the contract.