Under well established New York law, an insurance company is entitled to rescind an insurance policy if it can show that the applicant made a material misrepresentation.1 A misrepresentation in an application for insurance is defined as a false statement “as to past or present fact, made to the insurer by, or by the authority of, the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof.”2 An insurer need not establish that the misrepresentation was willful to rescind a policy; even innocent or unintentional misrepresentations can be sufficient to warrant rescission.3
There are time constraints under New York law on an insurance carrier’s ability to seek to rescind an insurance policy, even on grounds of fraud. For example, as required by Insurance Law § 3203(a)(3), life insurance policies must include a so-called “incontestability clause,” which bars insurers from contesting the validity of a policy after it has been continuously in effect for at least two years.
