A broker submits an application for home owner’s insurance to an insurance company on behalf of a client. The broker is unaware that although his client is the registered owner of the property to be insured, the insured has neglected to report that the home is being used to house a catering business. This means that the client has failed to disclose information on the insurance application. If you are the underwriter on this risk and it comes to your attention that the insured is operating a catering business from the home, what issues should you consider when you discover the actual facts about the use of the insured home?
A kitchen fire occurs, before the insurer discovers the commercial use of the home. The damage is significant. You are the adjuster assigned to this claim. When you become aware that the insured had not disclosed the information to the insurer about the use of the home, what should you do to protect the insurer’s interest? What are the consequences of not taking the proper steps to protect the insurer’s interest? Explain fully.​