Insurance Coverage Wargames: Avoiding The Landmine Of Policy Rescission

Claim disputes with insurers often turn on events occurring long before the loss itself. Insurers frequently deny coverage where they suspect that an insured may have had prior knowledge of events giving rise to a claim. Claims are also refused when an insurer believes that a claim is related to an earlier claim. However, as illustrated by a recent decision in the U.S. District Court for the District of New Jersey, insurers also sometimes take the nuclear approach to avoiding coverage: suing for policy rescission. Rescission is a drastic equitable remedy that, in essence, asks a court to find that the policy be deemed void – as if it never existed.

In Harford Mutual Insurance v. Z&D Realty, an insured obtained general liability insurance for several of its related businesses located on an interconnected property. The insured owned a restaurant and banquet hall that were connected by interior doorways and shared the use of a liquor license. However, when the insured