Key Takeaway
New York court rejects insurance rescission under Florida law when insurer failed to provide proper notice and return premiums within reasonable time after discovering fraud.
When Insurance Companies Fail to Properly Execute Rescission
Insurance rescission cases often hinge on procedural requirements that insurers must follow to void policies retroactively. This becomes particularly complex when choice of law issues determine which state’s standards apply. In jurisdictions that recognize “void ab initio” rescission — where a policy can be treated as if it never existed — insurers face strict procedural hurdles.
The case of Daily Med. Equip. Distrib. Ctr., Inc. v Allstate Ins. Co. illustrates how insurers can lose their rescission rights by failing to meet fundamental procedural requirements under applicable state law. When Florida law governed the rescission attempt, the insurer discovered that proper notice and premium return obligations are not merely formalities but essential elements of a valid rescission.
Jason Tenenbaum’s Analysis:
Daily Med. Equip. Distrib. Ctr., Inc. v Allstate Ins. Co., 2017 NY Slip Op 50029(U)(App. Term 2d Dept. 2017)
“Inasmuch as defendant’s cross motion papers failed to demonstrate that a rescission notice was sent to the insured, or that defendant had returned, or tendered, all premiums paid to the insured within a reasonable period of time after defendant’s discovery of the grounds for rescinding the policy, defendant failed to show, prima facie, that it had voided the policy ab initio pursuant to Florida law (see W.H.O. Acupuncture, P.C. v Infinity Prop. & Cas. Co., 36 Misc 3d 4, 6-7 , citing Leonardo v State Farm Fire [*2]and Cas. Co., 675 So 2d 176, 179 ). Consequently, defendant’s cross motion for summary judgment dismissing the complaint was properly denied.”
This is the interesting issue we find in these void ab initio jurisdictions. Was the premium returned within a reasonable time after the discovery of the fraud?
Key Takeaway
Under Florida’s void ab initio rescission doctrine, insurers must satisfy two critical procedural requirements: providing proper notice to the insured and returning all premiums within a reasonable time after discovering grounds for rescission. Failure to meet either requirement can invalidate the rescission attempt, leaving the policy in force despite alleged fraud or misrepresentation.
