(1) A formal rescission of coverage requires written notice to the insured. It cannot be unilaterally accomplished in secret by the carrier.

(2) The written notification must include the basis for the rescission, specifying what the insured individual allegedly omitted or failed to disclose in applying for the insurance.

(3) The insured individual must be given the opportunity to respond in writing and explain why the information was omitted. It should be noted that most rescissions involve more than one allegation of omitted or non-disclosed information, and often the carrier asserts additional grounds that may simply not be at all accurate. For example, in a recent rescission, Blue Cross alleged that the insured did not disclose a “history of back problems” (which turned out to be nothing more than a one-time visit to a doctor for sore muscles following over-exertion and a minor high school football injury going back some 20 years), and that the insured did not reveal that he had smoked tobacco. In fact, the insured had not smoked cigarettes for close to 14 years. The fact that the application inquired as to whether the applicant had “ever” smoked tobacco was not relevant or material to the underwriting of the health policy, or the risk to be assumed by the insurance company. Remember, a proper and legal rescission requires the misrepresented information to be material or affect the underwriting of the health policy.

(4) The carrier must also refund all premiums paid for the coverage. If it does not return the premiums, there has been no effective rescission of the contract.

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If your insurance policy has been wrongly rescinded, see Blue Cross Lawsuits: Have You Been Victimized by Post-Claims Underwriting? for what actions you should take. For more information about Blue Cross post-claims underwriting lawsuits, see Blue Cross Lawsuits: The Improper Practice of Post-Claims Underwriting.