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. Find more in the How To Cancel section of the NFIP Flood Insurance Manual.