Key Takeaway
Pennsylvania insurance law case shows that policy rescission may not affect innocent third parties, highlighting complex choice of law issues in no-fault insurance disputes.
When Insurance Companies Try to Rescind Policies: The Innocent Third Party Protection
Insurance companies sometimes attempt to void policies after accidents occur, claiming the insured made misrepresentations on their application. However, as this Pennsylvania law case demonstrates, such rescission attempts face significant hurdles when innocent third parties are involved. This decision illustrates the complex interplay between state insurance laws and the protection of parties who had no role in any alleged policy violations.
The case of Healthway Med. Care, P.C. v Infinity Group highlights a critical principle: even when an insurance company successfully proves misrepresentation and rescinds a policy under Pennsylvania law, that rescission may not extend to claims involving innocent passengers or other third parties who were not part of the alleged deception.
Jason Tenenbaum’s Analysis:
Healthway Med. Care, P.C. v Infinity Group, 2016 NY Slip Op 51780(U)(App. Term 2d Dept. 2016)
“Although defendant’s cross motion papers set forth facts demonstrating that its insured had made misrepresentations on his insurance application and, based on these facts, defendant had rescinded the insurance policy, ab initio, in accordance with Pennsylvania law, defendant’s submissions did not conclusively establish that plaintiff’s assignor (a passenger in the vehicle) was anything other than an innocent third party. Consequently, defendant’s cross motion failed to establish, prima facie, that the insurance policy was retroactively rescinded as to plaintiff’s assignor and, thus, that defendant was entitled to summary judgment dismissing the complaint as a matter of law.”
I have to say this. For a Court that seems to want to attack Rybak’s appellate practice, he has obtained quite a few reversals on these choice of law, policy violation and additional verification cases. I do not necessarily agree with the verification decisions but the amount of reversals is astonishing.
Key Takeaway
Insurance companies cannot simply void coverage for innocent third parties, even when they successfully rescind a policy due to the insured’s misrepresentations. Courts require clear proof that the third party was not innocent, making retroactive rescission a challenging defense when passengers or other uninvolved parties seek coverage.
This decision underscores the importance of understanding how different states approach policy rescission and the special protections afforded to innocent parties under various choice of law frameworks.
