Gordon Rees Scully Mansukhani San Diego partner Matthew Kleiner and senior counsel Andrea Scripps authored an article "Protecting an Insurer's Right to Rescind and Avoiding Waiver" in the December 27, 2018 issue of DRI's Life, Health and Disability News.
In the article, an insurer denies life insurance benefits to a beneficiary based on material misstatements made by the insured in her application for coverage. Specifically, the insured misrepresented her health status and failed to disclose her relevant medical history as required by the application. Upon the insured’s death, the insurer denies payment of the life insurance benefits even though the misstatement was unrelated to the insured’s cause of death. The beneficiary then files suit to recover the benefits based on breach of contract.
The article describes how an insurance company may effectively assert rescission as a defense to the beneficiary’s claim for benefits when the insured’s misstatements or omissions are material to coverage. It is the insurer’s burden to demonstrate that the misstatements or omissions are material such that the truth would have altered the insurer’s decision to issue coverage. Per the California Insurance Code, failure to act in a timely manner may result in a waiver of the insurer’s right to rescind. Additionally, a successful claim for rescission requires prompt repayment of any premiums collected by the insurer to the beneficiary. When properly executed, rescission is an effective tool for an insurer to utilize to avoid liability for a loss it never intended to cover.
To read the full article, please click here.
Gordon & Rees is a national litigation and business transactions firm with more than 850 lawyers in offices across the United States. Our lawyers provide full service representation to public and private companies ranging from the Fortune 500 to start-ups. Founded in 1974, Gordon & Rees is recognized among the fastest growing and largest law firms in the country. Additionally, in 2018 Law360 ranked the firm among the top 40 largest U.S. firms and The American Lawyer ranked the firm among the top 45 on its Diversity Scorecard.