What if you file an insurance claim, and instead of simply denying your claim, your insurance company informs you that your policy has been rescinded? The company may be operating in bad faith. You should arrange to discuss the matter at once with a California insurance claims attorney.
In what circumstances may an insurance company legally rescind your insurance policy? If you believe that your insurance claim was legitimate, do you have any legal recourse against the insurance company? Is there still any way for you to receive the payout the company owes you?
If you continue reading this brief discussion of rescission of insurance policies and bad faith insurance practices, these questions will be answered, and you will learn more about your legal rights as an insurance policyholder in California.
What Is “Rescinding” an Insurance Policy?
When an insurance company “rescinds” a policy, it treats the policy as if it never existed. In practical terms, it means the company is no longer obligated to pay claims for health insurance, life insurance, accidental death insurance, long-term disability insurance, or long-term care insurance.
Insurance companies may rescind an insurance policy in order to deny an insurance claim, but rescinding a policy is different from simply denying a claim. Determining that a policy, in effect, never existed compels the insurance company to refund any premiums that you have already paid.
Why Are Insurance Policies Rescinded?
Rescinding an insurance policy is done to boost an insurance company’s profits. Rescinding policies based on claims made on those policies eliminates policyholders who seek payouts. This could leave you with no coverage at precisely the time you need it – when you have filed a claim and need the benefits due under the disability, life, or other insurance policies.
By rescinding a policy, the company is claiming that the policy was invalid from the beginning. Insurance companies may rescind a policy if a policyholder made a false statement on the initial policy application, meaning that the policy was based on a “material falsehood.”
The company may claim, for example, that you denied being a smoker or that you failed to list other material information when you completed the application. When a policy is rescinded, the company must send the policyholder a rescission notice and return the premiums or offer to do so.
When You Purchase a Policy, Take All the Time You Need
If you have purchased a life, health, accident, or disability policy, you know how much paperwork is involved, including policy applications, supplemental applications, personal history questionnaires/interviews, policy notices, and medical documents. This is because when insurers issue individual policies, they underwrite the risk to make sure they want to accept the risk that an insured policyholder presents.
You will answer dozens of questions when you purchase a typical disability, health, or life insurance policy. Take all the time you need to consider the questions thoughtfully, and get the answers right. There will be many medical questions so you will likely need to consult documents and medical records for accurate responses. Presume that anything you tell an insurance company could be used against you to deny a claim.
In completing the application, you may be working with an independent agent or an agent that works solely for the insurance company that will issue the policy. In some cases, the insurance company will be unable to successfully rescind the policy based on information that you provided to a captive or appointed agent. For example, you may provide information to a captive or appointed agent who tells you that the information does not need to be included in the application. In that case, the insurance company may be legally prevented from claiming that the information was material or false. The insurance company may have waived any right to rescind the policy.
California insurance regulations require all questions on health insurance applications to be clear, specific, and understandable. You can indicate if you are unsure of or cannot remember the answer to a particular health history question.
What Are Your Rights If Your Policy Is Rescinded?
Your insurance policy cannot be rescinded if the purportedly false statement made on the application was trivial or immaterial, if you did not know that you suffered from a latent medical condition, or if you did not understand the significance of your response at the time.
A policy is rarely rescinded unless you have made a claim. If an insurance company unreasonably rescinds your policy to avoid making a payout that the company owes you, that insurance company may be operating in bad faith, and you should consult a rescission insurance lawyer about taking legal action. An experienced California insurance attorney will know how to best approach a situation in which an insurance company has attempted to rescind your policy.
Typically, a California insurance claims lawyer will write a letter on your behalf to the insurance company and demand a detailed explanation for the rescission of your policy. The best disability, life, or health insurance lawyers will investigate the claim denial based on a rescission and will provide a thorough discussion of California (or other state’s) law that persuades the insurer that it cannot rescind the policy. Simply by having a lawyer on the case, you may compel some insurance companies to reverse course.
How Will an Insurance Claims Attorney Handle Your Case?
If a letter from an insurance claims attorney does not change the insurer’s position, you should assess whether to take legal action against the insurance company for breach of contract and breach of the implied covenant of good faith and fair dealing (also known as insurance bad faith) for attempting to rescind your insurance policy.
When you turn to your insurer for a payout that you need – and you have faithfully paid the premiums – a denial of coverage that uses rescinding the policy as an excuse can be catastrophic, particularly if you have lost a loved one, if you are in poor health, or if you need long-term disability coverage.
Insurance bad faith laws provide that an insurance company cannot rescind a policy merely to escape its legal obligation to pay a legitimate insurance claim. When an insurance company does not take its obligations to you seriously, you may have sufficient grounds for legal action.
How Can You Know If You Are an Insurance Bad Faith Victim?
You may submit a complaint about your policy’s rescission to the California Department of Insurance, but frankly, our office has little confidence that the California Department of Insurance (or any other Department of Insurance) will fight for you. Only a California insurance claims attorney will be able to tell you if the insurance company was operating in bad faith and whether you have grounds for taking legal action. And only such an attorney can and will aggressively litigate your denied life, disability, or health insurance claim.
A California insurance claims lawyer will provide you with a free, no-obligation initial case evaluation. You will be able to receive the detailed, personalized legal advice that you need, and you will be able to make a more informed decision about moving forward with legal action.
Most insurance claims attorneys in California work on a contingency fee basis, which means that you pay no attorney’s fees until and unless the matter is resolved in your favor. In a bad faith case, the insurance company may be ordered by the court or a jury to pay not only your attorney’s fees, but also all consequential damages you suffer, in addition to punitive damages where the insurer’s actions are fraudulent or malicious.
When Should You Contact a Life, Disability or Health Insurance Claims Lawyer?
Particularly if you have lost a loved one or if you are recovering from injuries or from a serious illness, the last thing you need is your insurance company dealing with you in bad faith and complicating your life.
If your insurance policy has been wrongfully rescinded, or if your health, life, accident, or disability insurance claim has been unreasonably rescinded and denied, you should fight for the coverage you are owed. Contact McKennon Law Group PC at once to review your options or to begin the legal process.
