With the holidays rapidly approaching, I am reminded of the winter break I spent interning with a company that shall remain nameless. Like many college students, I was thrilled to gain real-world work experience, even as an unpaid “intern.” The company welcomed my willingness to work long hours to complete research projects and assist overburdened employees with their assignments during one of its busiest seasons. In return, I obtained a valuable few lines for my resume. Arguably, both the company and I benefited from the relationship, so what could go wrong? I now know that despite my brief tenure with the company, the law would likely consider me to have been its “employee,” and thus entitled to minimum wage and overtime.
In order to rescind an insurance policy, the insurance company must establish the presence of three elements: (1) that the insured made a misrepresentation, omission, or concealment; (2) that the misrepresentation, omission, or concealment was material to the risks; and (3) that the insurer relied on the misrepresentation in issuing the policy. See, Steven Plitt and Jordan R. Plitt, Practical Tools for Handling Insurance Cases, § 1:33 (Thomson Reuters 2011). Typically, an insurance company seeking rescission of the insurance policy must return to the insured all premiums within a reasonable time period. See, e.g., Gonzalez v. Eagle Ins. Co., 948 So.2d 1 (Fla. Dist. Ct. App. 3rd Dist. 2006) (stating that where an insurer seeks to rescind a voidable policy, it must both give notice of rescission and return or tender all premiums paid within a reasonable time after discovery of the grounds for avoiding the policy). The issue of timing of return of the premium recently came before the Indiana Supreme Court in Dodd v. American Family Mut. Ins. Co., 983 N.E.2d 568 (2013). In Dodd, the insurer did not return the insured’s premium in a timely manner. Nevertheless, the Indiana Supreme Court affirmed the policy rescission based upon an exception to the tender of premium obligation.
reservation of rights letter is among the most important tasks an insurer and
its coverage counsel perform. The reasons are simple—the insurer risks waiving
coverage defenses if it does not correctly or timely assert them, and a
vigilant policyholders' bar is waiting to pounce on the slightest misstep to
secure coverage beyond that provided by the policy and, in some cases, try to
establish a bad faith claim against the insurer.