Rescission

Glossary

If you rent an apartment, then you probably know the importance of having renter’s insurance.

However, did you know that even if you are diligent in paying your insurance payments every month, your insurer could cancel your policy just for submitting a claim?

This practice is known as rescission.

According to the insurance industry, insurance companies will rescind a policy and deny coverage of any claims if it is believed that the policyholder misrepresented the even or concealed any facts when submitting the claim.

Technically, rescission is intended to protect insurance companies from insurance fraud. However, in today’s poor economy, many insurance companies might act hastily in rescinding a policy without careful and deliberate review of the claim. In fact, some insurance companies recently have been accused of rescinding policies simply because the policyholder called the insurance company to inquire about a claim.

Demonstrate Care When Submitting Claims

For this reason, it is very important for policyholders to ensure that all information in their claims is completely accurate and to make sure that all necessary information has been provided. Some insurance companies have been known to rescind a policy in cases of accidental misrepresentation or the inadvertent exclusion of facts, which is legal in some states, such as California.

With the practice of flagrant rescissions becoming more and more rampant as the economy continues its downward spiral, the number of lawsuits against insurance companies also has increased. For this reason, some insurance companies are working to reign in their rescission practices, taking more care in deciding when to rescind a policy.

An Example of a Rescinded Insurance Policy

An example of an unjustified rescission is a 2001 case in which an insurer rescinded a policy following a major fire loss. The insurer alleged material misrepresentation and concealment on the part of the insured. The primary bone of contention for the insurance company was a difference in the reported square footage of the dwelling. However, a pre-trial discovery hearing found that this reason was not enough to conclude that the insurer’s statement was false. As a result, the insurance company had to pay the policyholder for the damages noted in the claim.

If you find yourself in a similar situation in which your insurance policy has been rescinded after filing a claim, and you believe that the rescission was not justified, it is recommended that you seek legal representation. You’ve paid for the insurance – it is the duty of the insurance company to deliver what it owes you.