Criteria for Rescission of a Life Insurance Policy Based Upon Material Misrpresentation Explained

The Second Department determined the insurer was entittled to summary judgment rescinding the life insurance policy based upon the insured’s material misrepresentation.  The court explained the operative principles:

“[T]o establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented” (…see Insurance Law § 3105[b]…). Whether a misrepresentation is material is generally a question of fact for the jury … .

“To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application” (…see Insurance Law § 3105[c]…). “[E]ven innocent misrepresentations, if material, are sufficient to allow an insurer to defeat recovery under the insurance contract” … . “[M]aterial misrepresentations . . . if proven, would void the . . . insurance policy ab initio” … .

Here, the defendant demonstrated its prima facie entitlement to judgment as a matter of law on its counterclaim for rescission … . In support of its motion, the defendant established, prima facie, that the plaintiffs’ decedent made material misrepresentations in his application for the subject insurance policies. Moreover, the defendant also established, prima facie, that, had it been properly advised, it would not have issued the subject policies.

In opposition to the defendant’s showing of entitlement to judgment as a matter of law on its counterclaim for rescission of the life insurance policies, the plaintiffs failed to raise a triable issue of fact concerning either the decedent’s misrepresentation or the materiality of that misrepresentation … . Smith v Guardian Life In Co of Am, 2014 NY Slip Op 02923, 2nd Dept 4-30-14