Policyholders purchase insurance policies as a safety net, promising financial protection in times of need. However, that safety net can disappear when an insurer rescinds a policy—a devastating consequence for potentially innocent policyholders. We recently published a post following a Fourth Circuit decision addressing this issue. The Ninth Circuit has also addressed this issue, most recently in the decision discussed below.

Policy rescission generally occurs when an insurer retroactively cancels a policy, usually citing a material misrepresentation or omission by a policyholder in its insurance application. California law allows rescission even when the misrepresentations or omissions are purportedly innocent. This means that even unintentional errors or omissions on an insurance application can lead to the cancellation of coverage, leaving policyholders without the protection they thought they had. One may think they can rely on their broker to handle the application for them, but doing so might not excuse the policyholder from issues in their application.

Reprinted courtesy of Yosef Itkin, Hunton Andrews Kurth and Patrick M. McDermott, Hunton Andrews Kurth

Mr. Itkin may be contacted at yitkin@HuntonAK.com
Mr. McDermott may be contacted at pmcdermott@HuntonAK.com