Key Takeaway
New York court upholds insurance company's retroactive policy rescission under Florida law, demonstrating how choice of law principles apply in multi-state insurance disputes.
Understanding Policy Rescission Across State Lines
Insurance disputes often involve complex questions about which state’s laws should govern, particularly when insurance companies attempt to retroactively void policies. The case of Utopia Equipment Inc. v Ocean Harbor Casualty Insurance Co. illustrates how New York courts handle retroactive rescission when the underlying insurance contract is governed by another state’s laws.
This decision highlights a crucial aspect of insurance law: when an insurer seeks to rescind a policy retroactively, they don’t necessarily need to prove the underlying grounds for rescission in the New York proceeding. Instead, they must demonstrate compliance with the procedural requirements of the state whose laws govern the insurance contract.
The interplay between different states’ insurance laws creates additional complexity in these cases, similar to other choice of law analyses we’ve seen in personal injury and insurance contexts.
Jason Tenenbaum’s Analysis:
Utopia Equip. Inc. v Ocean Harbor Cas. Ins. Co., 2018 NY Slip Op 50080(U)(App. Term 1st Dept. 2018)
“Defendant’s submissions included an affidavit of its claims manager and other proof demonstrating that a rescission notice was sent to the assignor-insured and that defendant had tendered a check for premiums paid within a reasonable time after discovery of the grounds for rescinding the policy (see Utopia Equip., Inc. v Infinity Ins. Co., 55 Misc 3d 126, 2017 NY Slip Op 50332 ; Hu-Nam-Nam v Infinity Ins. Co., 51 Misc 3d 130, 2016 NY Slip Op 50391 ). Defendant was not required to establish the basis for the retroactive rescission, but rather had the burden of establishing that it complied with the law of the sister state which permits retroactive rescission (see Utopia Equip., Inc., v Infinity Ins. Co., 2017 NY Slip Op 50332).
In opposition to defendant’s prima facie showing, plaintiff failed to raise a triable issue of fact as to the validity of the retroactive rescission of the policy in accordance with Florida law (see Hu-Nam-Nam v Infinity Ins. Co., 2016 NY Slip Op 50391).”
Key Takeaway
When challenging a retroactive policy rescission in New York courts, insurers must prove they followed the procedural requirements of the governing state’s law rather than justify the underlying reasons for rescission. This procedural burden-shifting approach streamlines the litigation process while respecting the choice of law provisions in insurance contracts.
