The U.S. Eastern District Court for Pennsylvania recently rescinded an insurance policy based on the insured’s fraudulent misrepresentations.

In Pallante v. Those Certain Underwriters At Lloyd’s, a fire occurred at an insured’s property while the insured was away.  After the fire, during an inspection of the property with the insurer’s adjuster, the insured represented that there were also several personal items missing from the property and advised that a theft had also occurred.  Subsequently, the insured sent photographs of the items that were allegedly stolen from the property.  The insurer had the photographs analyzed and it was revealed that the photographs were all taken after the fire and theft were alleged to have occurred.  Consequently, the insurer denied the claim based on concealment and misrepresentation.

The insured subsequently commenced a declaratory judgment action asserting breach of contract and bad faith claims against the insurer.  The insurer moved for summary judgment.  In determining whether to grant the motion, the court reasoned that there was no dispute that the insured made material false misrepresentations regarding her claim.  Thus, looking to the policy language, the court concluded that since the policy did not provide coverage if the insured concealed or misrepresented facts, the insurer was entitled to rescind the policy on that basis.

Accordingly, this case shows that, under certain factual circumstances, Pennsylvania Courts will support a policy’s rescission, and it appears to be viable basis for insurers to contest coverage in Pennsylvania.

Thanks to Colleen Hayes for her contribution to this post.