February 2017 Bad Faith Cases: Insurer Can Unilaterally Rescind Policy on Basis of Material Misrepresentation in Application (Philadelphia Federal)

This case involved an alleged material misrepresentation in a health insurance policy application. The court found that the insurer did not have to seek rescission via bringing suit in court, but could “unilaterally rescind” the policy, and take the risk that the insured would bring future claims against the insurer for breach or bad faith. Thus, in the court’s reading of Pennsylvania law, “unilateral rescission of a contract remains an optional remedy for an insurance carrier. The fact that carriers often choose to proceed conservatively by bringing suit does not limit the array of remedies permitted by common law….”

Date of Decision: December 19, 2016

King v. Golden Rule Ins. Co., No. 16-3614, 2016 U.S. Dist. LEXIS 175157 (E.D. Pa. Dec. 19, 2016) (McHugh, J.)