Statements in Policy Applications: A Case Study
Rescission is a legal principal where insurers can void a policy if there were any misstatements in a policy application. We typically see rescission claims based on the health questionnaire portion of an application, but rescission is not per se limited to misstatements regarding health status.
One such example is that of Nichols v. Principal. Dr. Nichols, a dentist, purchased a policy from a broker she met while still in dental school. She completed the application in the broker’s office, including a telephone interview with Principal to complete the portion of her application regarding her current and past health history. The policy was issued and delivered to a field office contact, who delivered the policy to the broker. The broker’s office then obtained her signature on Part D of the Application (Agreement/Acknowledgement of Delivery). Part D included a statement verifying that Nichols had read all the questions and answers obtained during the telephone application interview.
Nichols was subsequently injured in a rock-climbing accident and filed a disability claim. Principal rescinded Nichols’s policy, stating that she had made misstatements in her medical history and that there was misinformation on her application. Nichols contested Principal’s claim, and also claimed that she had not received a copy of her application with the policy (as required under Oregon statute).
More specifically, Principal claimed that the policy did contain the application, and the broker claimed that the bound policy received from Principal had been mailed to Nichols. Nichols argued that she should be granted summary judgment, but the court determined there were issues of fact and set the case for trial.
This case highlights the importance of carefully reviewing all answers on your application for disability insurance carefully for accuracy, especially if this information was obtained and recorded via an interview with an insurer.
If your insurer has threatened to rescind your policy, please feel free to reach out to one of our attorneys directly.
 Nichols v. Principal Life Ins. Co., 3:19-cv-01047-BR, 2020 WL 3318000 (D. Or. June 18, 2020).
Every claim is unique and the discussion above is only a limited summary of the court’s ruling in this case. If you are concerned that your insurer is using any of the tactics above to evaluate your claim, an experienced disability insurance attorney can help you assess the situation and determine what options, if any, are available.