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Published: Oct. 31, 2022, 2:48 p.m.

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Material Misrepresentation About Prior Health Care Supports Rescission  

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An ERISA Policy May be Rescinded  In Provident Life & Accident Insurance Company v. Bradley D. Mckinney, No. 3:19-CV-1325  (SVN), United States District Court, D. Connecticut (September 9, 2022)  the USDC was called upon to determine if an insurer can rescind an  ERISA policy.  

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FACTUAL BACKGROUND  

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Bradley McKinney applied for and obtained a disability insurance policy  with Provident Life Accident & Insurance Company (\\u201cProvident Life\\u201d).  McKinney subsequently filed a claim for disability benefits under the  policy, but Provident Life rejected his claim on the ground that  McKinney made material misrepresentations in his application for the  policy. Provident Life sued seeking rescission of the insurance policy,  and McKinney counterclaimed seeking an order directing Provident Life to  pay him all benefits due under the policy.  

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McKinney\'s employer, Anderson Tax LLC, maintained a Supplemental  Individual Disability Insurance Plan. McKinney applied for supplemental  insurance through the plan. In completing the application, McKinney  answered various questions about his medical history and agreed that his  answers were \\u201ctrue and complete and correctly recorded to the best of  [his] knowledge and belief.\\u201d In September of that year, Provident Life  issued him an insurance policy providing all three available disability  coverages. The policy provided that \\u201c[o]missions and misstatements in  the application could cause an otherwise valid claim to be denied or  [the policy] to be rescinded.\\u201d  In answering questions 6 and 8 of the application McKinney represented  that he had not received diagnosis or treatment from a physician for  memory loss, confusion, or speech disruption in the five years preceding  his application. Second, in answering question 3(a), he represented  that he had not missed one or more days of work or been admitted to a  medical facility due to sickness or injury in the 180 days preceding his  application. Upon reviewing McKinney\'s medical records, Provident Life  concluded that his answers to those questions were untruthful and that  its denial of his claim and rescission of his policy were proper.  ERISA  The parties do not dispute that a plan fiduciary may obtain \\u201cequitable  rescission of an ERISA-governed insurance policy that is procured  through the material misstatements or omissions of the insured.\\u201d  [Shipley v. Ark. Blue Cross & Blue Shield, 333 F.3d 898, 902 (8th  Cir. 2003).] 

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An ERISA plan fiduciary\'s right to obtain equitable  rescission is well grounded in federal common law.  

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Rescission Due to Material Misrepresentation

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Under the federal common law that has developed pursuant to ERISA, an  insurer can rescind a policy where the insured knowingly made a material  misrepresentation in an application for an ERISA-governed insurance  policy. 

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DISCUSSION  

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In denying McKinney\'s appeal of the original denial, Provident Life  explained that McKinney also untruthfully answered question 3(a), which  concerned time off work due to admission to sickness or injury in the  relevant time frame.  The Court concluded that McKinney\'s claims of ignorance of the fact that  he had been treated for confusion and speech disruption during his 2016  hospitalization was not innocent.   The court concluded that McKinney\'s ignorance about the facts of his  2016 hospitalization was not reasonable.   The court also concluded that there is no genuine dispute that  McKinney\'s untrue answers to questions 6 and 8 were material to  Provident Life\'s issuance of the policy.

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