RESCISSION OF LIFE INSURANCE POLICY

An insurance company can rescind (to abrogate or cancel a contract putting the parties in the same position they would have been in had there been no contract) a life insurance policy if it is found that the insured misrepresented in her application that the new policy would replace other life insurance. In this case, the insured checked a box on her written application indicating that the new policy for $2,000,000 was to replace three existing policies insuring her life for a total of $2,000,000. In a follow-up telephone conference with the insurance company, she was asked whether the new policy was to replace existing insurance and she answered that it was. The new policy for $2,000,000 was issued on May 16, 2001. The insured died from lung cancer approximately14 months following the issuance of the new insurance. Her beneficiary received $2,000,000 from the other policies.



The insurance company brought a claim for declaratory judgment and rescission, claiming that it would not have issued the new policy but for the material misrepresentation of the insured and/or the failure of the insured to satisfy a material condition of the insurance contract.



On March 18, 2004, the District Court for the Eastern District of Michigan found for the insurance company and ordered the rescission of the $2,000,000 policy of life insurance. OLD LINE LIFE INSURANCE COMPANY OF AMERICA, Plaintiff/Counter-Defendant, v. DAVID K. GARCIA, Defendant/Counter-Claimant, 309 F. Supp. 2d 966; 2004 U.S. Dist. LEXIS 4409.