Material Misrepresentation in Life Insurance: Understanding Rescission and Your Rights
Throughout the United States, life insurance providers generally have the right to rescind a policy if material misrepresentations are made during the application process. However, whether this action is legally justified can depend on various factors, including jurisdiction-specific laws and the circumstances surrounding the misrepresentation. If your life insurance claim has been denied based on a material misrepresentation, it’s essential to have an experienced life insurance attorney by your side to navigate these complex cases.
Choice of Law in Life Insurance Rescission Cases
One of the first steps insurers take when considering rescission is determining which state's law governs the policy. This can significantly impact the insurer's right to rescind, as the law varies from state to state. For example, a rescission that’s permitted under one state’s laws might result in bad faith liability in another state. It is crucial to handle this analysis carefully, as it can greatly affect the outcome.
Two key cases illustrate the complexity of this decision:
Gomez-Silva v. Jackson National Life Insurance Co., No. CV09-2120, 2011 WL 1656507 (D. Ariz. May 3, 2011), showed that even if the life insurance policy specifies California law, the court may rule otherwise. The court decided that Arizona law applied because the insured was domiciled there when they submitted their application, and California had no more significant relationship to the transaction than Arizona.
American General Life Insurance Co. v. Billard, No. C10-1012, 2011 WL 797675 (N.D. Iowa March 1, 2011), demonstrated how courts use the insured’s domicile at the time of application to determine the appropriate law. The court concluded that Florida law governed because neither Texas nor Iowa had a more significant connection to the policy than Florida.
Additionally, federal law can apply in certain situations, especially in cases involving ERISA policies. For example, in Garcia v. American United Life Insurance Co., No. 10-40388, 2011 WL 1409222 (5th Cir. Tex. April 13, 2011), the court ruled that federal law governed the rescission of the policy, as the plaintiff brought the suit under ERISA.
Ambiguity in Enrollment Forms: Can a Misrepresentation Be Made?
If your life insurance policy is rescinded due to an alleged misrepresentation, one of the first arguments you may encounter is that the insured's response to the application question was not a misrepresentation. In many cases, insurers try to deny claims based on subjective or ambiguous questions on the application.
For example, in Loza v. American Heritage Life Insurance Co., No. 10-15651, 2011 WL 2066549 (9th Cir. May 26, 2011), the question on the application asked about a specific test for cancer. The plaintiff argued that the PSA test didn’t qualify as a "diagnostic test for cancer" since it couldn’t definitively detect cancer. The court ruled that the term was ambiguous and that the insurer could not rescind the policy based on this answer.
Similarly, in Brondon v. Prudential Insurance Co., No. 09-CV-6166T, 2010 WL 4486333 (W.D.N.Y. Nov. 9, 2010), the court found that the term "heart trouble" in the application was ambiguous, meaning that the insurer could not use an alleged misrepresentation of the insured's health condition to rescind the policy.
In Barry v. United States Life, No. 2:09-cv-1790, 2011 WL 1832995 (D.N.J. May 12, 2011), the court considered whether the insured intentionally failed to disclose a liver disorder on the application. The court concluded that the question was subjective, not objective, meaning the insurer had to prove an intentional misrepresentation. Since there was no clear evidence that the insured knew about the full details of their condition, the court ruled in favor of the beneficiary.
If Your Life Insurance Claim Is Denied Due to Material Misrepresentation, Contact Us Today
Navigating the complexities of life insurance rescission can be daunting, especially when the denial is based on a misrepresentation in the application. Understanding the legal intricacies of your case—whether related to choice of law, ambiguity in the policy, or the specific circumstances surrounding the alleged misrepresentation—is crucial.
If your claim has been denied, don’t face the insurance company alone. Our experienced life insurance lawyers specialize in contesting denials based on material misrepresentation. We will fight to ensure you get the benefits you’re entitled to under the law. Contact us now to schedule a consultation.