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insurance claim, and instead of simply denying your claim, your insurance company informs you that your policy has been rescinded?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If you continue reading this brief discussion of rescinded insurance policies and bad faith insurance practices, these questions will be answered, and you will learn more about your legal rights as an insurance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Why Are Insurance Policies Rescinded?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 a policy can boost an insurance company’s profits. Rescinding policies eliminates policyholders who seek payouts while the company accepts payments from policyholders who are not seeking payouts. This could leave you with no coverage at precisely the time you need it.
By rescinding a policy, the company is claiming that the policy was invalid from the beginning. California 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 DUI convictions 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 When a policy is rescinded, the company must send the policyholder a rescission notice and return the premiums or offer to do so.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, accidental death, or disability insurance policy, you know how much paperwork is involved, including policy applications, supplemental applications, personal history questionnaires, policy notices, and medical documents.
You will answer dozens of questions when you purchase a policy. Take all the time you need to consider the questions thoughtfully, and get the answers right. Presume that anything you tell an insurance company could be used against you to deny a claim.
California insurance law requires all questions on disability, life or accidental death 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 or other question.
What Are Your Rights If Your Life, Accidental Death, or Disability Policy Is Rescinded?
Your insurance policy cannot be rescinded if the purportedly false statement made on the application was trivial or irrelevant, or 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 unlawfully rescinds your policy to avoid making a payout that the company owes you, that insurance company is operating in bad faith, and you should consult a lawyer about taking legal action.
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. Simply by having a lawyer on the case, you will compel some insurance companies to reverse course.
How Will an Life, Accidental Death, or Disability Insurance Claims Attorney Handle Your Case?
If a letter from an insurance claims attorney does not change the insurer’s position, you may be able to take legal action against the insurance company for breach of contract and breach of the implied covenant of good 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 get out of its legal obligation to pay a legitimate insurance claim. When an insurance company does not take its obligation 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 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.
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’ll need, and you’ll be able to make a more informed decision about moving forward with a 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 many bad faith cases, the insurance company will also be ordered by the court to pay your attorney’s fees.
When Should You Contact an Insurance Claims Lawyer?
Particularly if you have lost a loved one or if you are recovering from accidental injuries or from a serious illness, the last thing you need is your insurance company dealing with you in bad faith, complicating your life, and making your days even more difficult.
Some insurance companies in California are operated professionally and provide the services they are supposed to provide, but there are still many insurance companies that place profits above the legitimate claims of their policyholders.
If your insurance policy has been wrongfully rescinded, or if your life, accident, or disability insurance claim has been unreasonably denied, you should fight for the coverage you are owed. Contact an insurance claims lawyer at once to review your options or to begin the legal process.
If you believe you are the victim of an insurer’s bad faith practices, contact McKennon Law Group PC for a free consultation.