Misrepresentation commonly refers to fraudulent representation of an individual or fact. The term misrepresentation is commonly attached to contract law. It refers to a false statement of fact made by one party to another party, which has the effect of inducing that party into the contract. In this sense, if an accountant or lawyer in a firm falsely gets you to enter into a contract, you have grounds to sue the firm for recovery of any losses, financial or otherwise. The firm in question will then claim from their liability insurance in the event you win the lawsuit. Whether or not the company's liability insurance is willing to pay for a misrepresentation claim or not, is not usually the plaintiff's concern except when the company has financial issues and do not have the funds available to cover the claim awarded by the courts. When taking out any form of insurance policy, it is vital that any form of misrepresentation be avoided.