Merriweather Mutual Insurance issued a fire policy on an apartment building on June 10. On June 20, the insurer discovered that the apartment building has more occupants than permitted under the city's fire code. What is the latest date that it can cancel the policy?

The correct answer pertains to the nature of insurance policies and the rights of an insurer to cancel a policy upon discovery of a violation. In this scenario, Merriweather Mutual Insurance can cancel the policy anytime before it officially expires, provided the cancellation follows the terms stipulated in the contract and applicable insurance regulations.

The rationale behind this is that the discovery of more occupants than allowed under the fire code constitutes a material misrepresentation or breach of underwriting guidelines. Since the insurer aims to mitigate its risk exposure, it has the right to terminate the policy once it becomes aware of such significant violations. Therefore, as long as the cancellation is performed within the policy's term and following proper procedure, the insurer retains the right to cancel at any time before the expiration date of the policy.

This understanding is crucial, as it reflects the balance between an insurer's need to manage risk effectively and the protections afforded to policyholders. In this instance, the insurance company is justified in its right to cancel based on new information that significantly impacts its risk assessment.