Legal Question in Insurance Law in Michigan

insurance company disclaimer and refund

I can speculate a little bit; if you're in Pennsylvania, feel free to call or email me about a consultation.

"Rescission" defeats the purpose of insurance. The insurance company is betting that you'll live long enough that the premiums (and its earnings from investing the premiums) will exceed what it pays out. Sometimes, when an insurance company loses the bet, it tries to welch by refunding the premiums. If a bookie did this on a numbers game, refunding the price of the bet after your number came up, HIS life expectancy might suffer .

Most states, through statutes, regulations, and court decisions, put very strict limits on an insurance company's ability to do this, and I strongly suggest that you consult an attorney to determine whether the company had a legal basis to do this, and to fight for your rights.

Rescission might be legitimate, if the insured made a MATERIAL MISREPRESENTATION in applying for the policy. Example: insured knows he has cancer; he answers "NO" to the questions on the application for the policy about whether he's ever had cancer; the company wouldn't issue the policy if it knew the truth.

Rescission is basically designed to put the parties back where they were, as if the contract was never made. Thus, since the company has refunded the premiums, it should also pay interest for the use of the money. So the payment of interest seems to be consistent with the disclaimer.

The real issue is that you should take aggressive action to challenge the company's action if it was not proper under the law of your state.

The above does not constitute legal opinion and is offered for the purposes of discussion only. The law differs in every jurisdiction, and you should not rely on any opinion except that of an attorney you have retained, who has a professional duty to advise you after being fully informed of all the pertinent facts and who is familiar with the applicable law.