Insurance Fraud In An Application Can Result In Rescission Of The Policy

Posted on July 24, 2009 by Steven V. Buckman

Oklahoma insurance law attorneys agree there are a number of reasons why a policy may be voided by an insurance company.  Fraud by the applicant or policy holder is the most common reason an insurance company would rescind or void an insurance policy.  Rescission is defined as:

1. A party's unilateral unmaking of a contract for a legally sufficient reason, such as the other party's material breach, or a judgment rescinding the contract; voidance.  Rescission is generally available as a remedy or defense for a nondefaulting party and is accompanied by restitution of any partial performance, thus restoring the parties to their precontractual positions. -- Also termed avoidance.  Black's Law Dictionary (8th ed. 2004)

According to Oklahoma statute 15 O.S. § 235, a party seeking to rescind or void a contract (which includes an insurance policy) must:

  • act promptly upon discovering facts which entitled him to do so
  • restore to the other party everything of value

In other words, experienced Oklahoma insurance attorneys advise their insurance company clients wanting to rescind a policy on the grounds of fraud to act quickly and also to return all premiums paid.  Sneed v. State ex rel. Department of Transportation, 1983 OK 69, 683 P.2d 525 and Berlands's Inc., of Tulsa v. Northside Village Shopping Center, 1972 OK 152, 506 P.2d 908.

As a caveat fancy legal wording for caution or warning), accusing a policyholder of fraud needs to be done carefully.  In Oklahoma, an insurer really should consult with competent legal counsel before doing so.

Tags: , , , , , ,

False Statements In The Application For Insurance Can Void Coverage

Posted on July 15, 2009 by Steven V. Buckman

 Fraud perpetrated in any contract can relieve the other party of the duty to perform.  In other words, fraud or making false statements is legally unacceptable.  Fraud includes any statement or act that is intended to deceive someone into entering into the contract.  Fraud consists of:

  • A Suggestion that something is true when in fact it is not
  • A positive statement that something is not true when the person making the statement had no reasonable basis for saying it
  • A person concealing something known to be the truth
  • A promise made without any intention of performing it
  • A person remaining silent when he had a duty to speak
  • Any other statement or action intended to deceive

Oklahoma has statutes defining actual fraud, 15 O.S. § 58-59 that attorneys rely upon in defending against fraudulent insurance claims. 

In Varn v. Maloney, 1973 OK 133, 516 P.2d 1328, the Oklahoma Supreme Court said the elements needed to prove fraud are:

  • A false representation 
  • made with the knowledge of its falsity or recklessly without knowledge as to its truth or falsity
  • as a positive assertion with the intention that it be acted upon by another 
  • actual reliance upon the statement 
  • injury or damage resulting therefrom.

Proving fraud in Oklahoma is not always easy to do and legal advice from an experienced attorney practicing in insurance litigation is usually needed.  The most common approach to dealing with fraud in insurance claims in Oklahoma is recission.

Tags: , , ,