Insurance policies are of course written documents, dependent upon standard conventions of grammar and usage in order to establish their meaning. A recent unpublished opinion from the Ninth Circuit wrestled with the grammar rules involved when an insurance application’s question and answer created a double negative. Even though a literal reading of the application question using the relevant grammar rules arguably establishes the applicant answered the question truthfully, a majority held that the overall context of the question established that the applicant did not answer the question truthfully, and therefore that the insurer was entitled to rescind the policy based on the application misrepresentation. The dissent disagreed, contending that in light of the application question’s actual wording, the applicant had completed the question truthfully, and therefore that the insurer was not entitled to rescission. The Ninth Circuit’s January 2, 2018 opinion in the case can be found here.
Continue Reading D&O Policy Rescission Upheld Despite Poorly Written Application Question and Arguably Correct Answer

minnesotaMaterial misrepresentations in an insurance application can serve as the basis for rescission of the resulting policy. A recent federal district court decision examined the question of whether or not an insurer could rescind a fidelity bond on the grounds that the credit union manager who signed the credit union’s insurance application failed to disclose that she was embezzling funds from the credit union. In a March 17, 2017 opinion (here), District of Minnesota Judge Donovan Frank, applying Minnesota law, held that because the manager was acting entirely for her own benefit when she failed to disclose her theft, the misrepresentation could not be imputed to the credit union, and therefore the insurer was not entitled to rescind the bond.
Continue Reading Fidelity Bond Rescission Denied Where Application Signatory Was Embezzling Credit Union’s Funds

illinois3Under the applicable Illinois statute, an insurer may seek to rescind a policy if it was procured by an application misrepresentation if the misrepresentation was “made with the actual intent to deceive or materially affects either the acceptance of the risk or the hazard assumed by the company.” But even if rescission is otherwise

The FDIC in its status as receiver of a failed bank may not avoid rescission of a fidelity bond procured by material misrepresentation, notwithstanding the FDIC’s statutory receiver rights, according to a June 7, 2010 Second Circuit decision. This decision represents an important interpretation of the FDIC’s statutory rights as receiver, and could prove to