Appeals Court upholds mutual rescission ruling for life insurance carrier

PROVIDENCE (July 22, 2013) – Robert C. Shindell and Angela L. Carr of Barton Gilman, on brief with Laurie Foster and Allyson Ho of Morgan Lewis, recently persuaded a federal appeals court to affirm summary judgment entitling a life insurance carrier to a mutual rescission of a $15 million policy and a declaration that the policy was void.

The U.S. Court of Appeals for the First Circuit found that the trustees for the trust that owned the policy never indicated any intention to contest the rescission initiated by the carrier once the carrier had learned the insured failed to disclose symptoms of memory loss and a diagnosis of potential Alzheimer’s disease in his policy application.

On learning of the misrepresentation of the insured’s health, the insurance company sent to the trust company that held the policy a letter of rescission and a check in the amount of the premiums paid, plus interest. The trust company forwarded the check, rescission letter, and a request for instructions to the agent for the bank that had a security interest in the policy.

The trust company cashed the check following receipt of instructions by the bank agent to do so, which the Court of Appeals found was strong evidence of an agreement to the rescission – contrary to later assertions by the trust company and trustee that they did not intend to agree to the rescission. Ultimately, the Court found that acceptance of the returned premium confirmed the mutual rescission despite the trustees’ allegations of bad faith and lack of intent to effect a rescission.

About Barton Gilman

Barton Gilman is one of New England’s leading civil litigation law firms with offices in Boston and Providence. Its experienced trial attorneys appear regularly in the federal and state courts of Massachusetts, Rhode Island and Connecticut. The Providence Business News named the firm as one of Rhode Island’s Best Places to Work for five consecutive years (2008–2012).