SW Legal Educational Publishing

Misrepresentation, Not Misstatement, Grounds for Policy Rescission
Description Policy holder placed in nursing care for Alzheimerís six months after she received a policy. Policy holder was due trial to determine if her misstatement that she had not been hospitalized or diagnosed for anything other than high blood pressure were misrepresentations or were innocent so that the policy could not be rescinded.
Topic Insurance
Key Words Misstatement, Misrepresentation, Rescission
C A S E   S U M M A R Y
Facts When Esma Seymour applied for long-term care insurance, she said on the application that she was under physicianís care for high blood pressure but that she has not been in the hospital during the last five years and did not have any other disease or disorder. The policy was approved. Six months later, a claim for care in a nursing facility was filed due to Alzheimerís disease. MPIC then discovered that Seymour had been hospitalized during the past five years and was diagnosed as having memory problems. MPIC voided the policy and returned the premium. Seymour sued, contending that any misstatements in the application were innocent and not grounds for rescission. Trial court granted summary judgment for insurer. Seymour appealed.
Decision Reversed. An "insurer may rescind a policy if any one of these three provisions is met (1) the insurer relies on a material misrepresentation made by the applicant; (2) the insurer relies on a misrepresentation that was made by the applicant with the intent to deceive; or (3) the applicantís misrepresentation contributes to the loss." Whether Seymourís statement was a misstatement, which would not be grounds for rescission, or was misrepresentation, which would be, is for a jury to decide. The statute "contemplates at least some level of knowledge or awareness of a misstatement to make it a misrepresentation."
Citation Derbidge v. Mutual Protective Insurance Co., 1998 WL 426533 (Slip Copy, Ct. App., Ut.)
963 P.2d 788 (Ct. App., Ut., 1998)

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