It is often said (albeit incorrectly) that insurance fraud is a victimless crime and that fraudulently procuring benefits from an insurance company causes harm to no one. The falsity of this premise was recently exposed in a concurring opinion by Appellate Term Presiding Justice Douglas McKeon in a case regarding alleged fraud in applying for automobile insurance.1
As a general rule, an insurance policy can be rescinded ab initio if the insured fraudulently concealed a material fact in applying for the insurance coverage.2 A different standard applies, however, to automobile insurance policies. New York Vehicle and Traffic Law §313 supplants an insurance carrier’s common law right to cancel an insurance policy retroactively on the grounds of fraud or misrepresentation, and mandates that the cancellation of a contract pursuant to its provisions may only be effected prospectively.3
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