The U.S. Court of Appeals for the Ninth Circuit, affirming a district court's decision, has ruled that an insurance carrier could rescind, based on misrepresentations on the application, a life insurance policy it had issued to a doctor.
The case
United Services Automobile Association Life Insurance Company (USAA) sought a court order that it could rescind a life insurance policy it had issued to Dr. Marshall Salkin. The insurer argued he had made misrepresentations in his application by stating he had never consulted with a health care provider regarding a mental disorder, had not undergone diagnostic tests within the last five years other than an EKG, and had no medical records. USAA further argued that these misrepresentations were material and that USAA would not have issued the policy in the first place, based on its underwriting guidelines, if Dr. Salkin had answered its questions accurately.
The district court granted summary judgment in favor of USAA, and Dr. Salkin appealed.
The circuit court's decision
The circuit court affirmed, finding that USAA was within its contractual rights to rescind the policy.
In its decision, the circuit court explained that under the California Insurance Code, even an unintentional misrepresentation could be the basis for rescission. Cal. Ins.Code § 331. Moreover, it continued, when an insurance applicant was asked specific questions about the applicant's medical history, "the failure to refer to temporary or minor indispositions" would not be excused as immaterial. It then observed that during his application interview, Dr. Salkin was asked specific questions about his mental health, diagnostic tests that he had undergone, and whether he had any medical records and he responded with misrepresentations that USAA considered to be material.
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The circuit court stated that given that Dr. Salkin was a physician himself, there was "no concern about Dr. Salkin's ability to comprehend questions containing basic medical terminology, let alone those questions that require no particular expertise to understand." Finally, the circuit court rejected Dr. Salkin's contention that USAA was precluded from rescinding its policy based on a prohibition against "postclaims underwriting," explaining that, in California, postclaims underwriting was a defined statutory phrase applicable only to health and disability insurance policies. It refused "to expand California law based on public policy considerations."
