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Court allows insurer to rescind auto policy ab initio over misrepresentations
A New York appeals court said the injured motorist could still claim uninsured motorist benefits under her own policy, after the other driver’s coverage was undone within a 60-day window.
A New York appeals court ruled that an auto insurer may wipe out a policy from the start, ab initio, when the policyholder made misrepresentations during the application. Insurance Business reports the court tied the outcome to timing under Pennsylvania law, including a limit that can protect innocent third parties once more than 60 days have passed since issuance.
The case arose after a collision involving an injured motorist who sought uninsured motorist benefits because the other driver’s coverage was not valid. The insurer for the other driver, administered by Embark General Insurance Adjusters, said it rescinded the policy due to material misrepresentations and treated the cancellation as if the policy never existed.
Insurance Business says the appeals court held that a rescission carried out within the 60-day window can bind even an injured third party who did not commit wrongdoing. It reversed a lower-court decision, denied requests to permanently stay arbitration and to add Embark and the other driver as respondents, and sent the matter back to decide whether arbitration should pause temporarily while discovery proceeds.
The court also found the injured motorist was cut off from pursuing benefits under the rescinded other driver policy, but could still seek benefits under her own Metropolitan Group Property and Casualty Insurance Company policy, referred to as Metlife in the ruling. Embark was awarded one bill of costs, and the decision was described as uncorrected and subject to revision before official publication.