Presumed Innocent: But Rescission Still Available to Void Coverage Due to Misrepresentations

A court rescinded a Georgia attorney’s professional liability coverage after his partner stole more than a million dollars from clients and lied about it on their firm’s insurance application. A federal district court in Georgia granted an insurer’s motion for summary judgment earlier this month, permitting rescission of the professional liability insurance policy issued to the attorney’s law firm. ProAssurance Cas. Co. v. Smith, No. CV415-051, 2016 U.S. Dist. LEXIS 105033 (S.D. Ga. Aug. 9, 2016). From 2013 to 2014, the attorney’s
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Rescission Available to Insurer Whose Insured Lied in Insurance Application About Use of Experimental Weight Loss Techniques

In Essex Insurance Company v. Galilee Medical Center S.C d/b/a MRI Lincoln Imaging Center, the insured, Galilee, represented to its insurer, Essex, that it did not offer any weight loss drugs to its patients. After a former patient brought suit against Galilee based on complications from injections of a weight loss drug, Essex sought to rescind its policy. The Seventh Circuit Court upheld summary judgment granted to Essex, finding that false statements made by Galilee provided a basis for rescission.
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Failure to Answer Question on Application for Insurance Truthfully Held to be Grounds for Rescission

Policyholders have an affirmative duty to read the questions asked on an insurance application carefully and will be bound by the answers provided. So stated the United States District Court of the District of Connecticut when it held that a policyholder’s answer of “no” to a question asking whether any of its officers was the subject of a governmental investigation was knowingly false and material to the insurer’s decisions to issue the liability insurance policy. Zurich Am. Ins. Co. v.
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