Rescission of an insurance policy based on a policyholder’s material misrepresentations during the application process is one of the most potent weapons that an insurance company has to combat insurance fraud. A proper rescission not only results in a denial of a particular claim, but voids the policy.
On a national basis, insurance companies’ interest in the rescission remedy is evident from the plethora of court decisions on the topic. In recent months, in fact, federal and state courts across the country have issued numerous decisions in cases involving requests for rescission of a variety of insurance policies.1 Federal courts in the U.S. Court of Appeals for the Second Circuit have been well represented in these cases. For example, the Second Circuit affirmed a district court decision, applying California law, that granted a life insurance company’s request to rescind a policy after the district court found that the omission of the insured’s hepatitis B diagnosis and treatment was a material misrepresentation.2 The Second Circuit also affirmed a district court decision, applying New York law, that rescinded a disability insurance policy based on the district court’s finding that the insured had made intentional misrepresentations in her application that were intended to mislead the insurer.3
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