Insurance Companies Cannot Rescind Auto Policies Once They Have Been In Effect for One Policy Term
A husband and wife were policy holders of an automobile insurance coverage policy. When they applied for the policy, they did not mention the two minors who lived in their home full-time. One day before a car wreck occurred in which their son was driving the automobile covered under the policy, the couple had their kids added to the policy. The insurance company paid the claim, and then filed an action for rescission of the contract and to recover what it had paid arguing that they would not have issued the policy but for the couple’s misrepresentations about the members of the household. The two issue before the court was whether section 154 of the Insurance Code acted as a bar to an insurance company rescinding an automobile insurance policy or policy renewal after the policy has been in effect for one year or one policy term, whichever is less, where the applicants for the insurance policy made material misrepresentations to procure coverage or to receive the insurance coverage at a lower premium rate.
The court found that, taking the plain meaning of the statute, Section 154 provides that an insurance company cannot rescind certain kinds of policies or policy renewals once the policy has been in effect for one year or one policy term, whichever is less, regardless of any misrepresentations, including material misrepresentations, made in the written application for the policy. Because the policy at issue had been in effect for more than one year, the insurance company could not rescind the policy.
Standard Mut. Ins. Co. v. Lay, 2012 WL 1377599, —N.E.2d —- (Ill.App. 4 Dist., 2012), No. 4-11-0527
