With most insurance companies, your expectations will be met. They will deal with you in good faith. Once your policy is in force and you file a claim, they will process your claim and pay it in accordance with the policy provisions. In most states, during the first two years that your policy is in force, the insurance company does have the right to consider a rescission, or cancellation, of your policy if, during routine claim processing it learns something about your medical history which, had they known it at the time of initial underwriting, would have caused them to not issue your policy or issue it differently, possibly with a higher premium or an exclusionary rider. Good insurance companies do not make health history investigation a routine part of their claim processing, but if, during their claim processing they find new health history information, they may investigate further.

Some companies, however, make it a practice to look into your health history when you file your first claim to see if they can find a way to rescind your policy and avoid paying your claim. Why would the insurance company incur this extra expense hoping to find a reason not to pay your claim? The answer is simple. It did not thoroughly investigate your health history at the time of application, but chose to issue you, and many others like you, a policy, take all your premiums, and then, after the fact, when you file claim, look for any medical history prior to the date of application that could form the basis of canceling your policy and avoiding the payment of your claim. For those who don’t file a claim, they just keep taking the premium.

This latter approach raises a serious question as to whether the insurance company is violating its implied contractual promise to you of good faith and fair dealing when it waits until after you have filed a claim to consider your prior health history. Additionally, an insurance company must meet four requirements to cancel your policy. The insurance company must demonstrate: (1) the existence of a misrepresentation by you in the application; (2) that the misrepresentation is either fraudulent or material; (3) that it induced the insurance company to offer you an insurance contract; and (4) that the insurance company’s reliance on your misrepresentation was justified. With regard to the fourth requirement, if the insurance company has a pattern and practice of deliberately not investigating the health history of applicants at the time of application, but consistently engages in post claim underwriting, this may make its reliance unjustified. In other words, it is difficult for the insurance company to say that it relied on the statements in your application to issue your policy when it really doesn’t pay any attention to them until after you file a claim.

If you have had your policy cancelled by your insurance company, you should contact attorney who is experienced in this area. The attorney may be able to get your policy reinstated and your claim(s) paid.