Security Mut. Life Ins. Co. of New York v. Rodriguez

In Security Mut. Life Ins. Co. of New York v. Rodriguez (65 A.D.3d 1 [2009]) plaintiff, the insurer brought an action for fraud and to rescind three life insurance policies issued on the life of Lucy Rodriguez, whereby her son, Esmail Mobarak ("Mobarak") was the beneficiary under each policy. The action was commenced in October 2005. However, from October 2005 through June 2006, plaintiff collected nine $ 5,000 premium payments from Mobarak, which were debited monthly from Mobarak's checking account. None of the premiums from Mobarak had been refunded. The First Department rejected plaintiff's argument "that it did not waive the right to rescind the policies because it accepted the premium payments after it commenced the action" as contrary to the case law, i.e., Scalia v. Equitable Life Assur. Soc. of U.S., 251 AD2d 315 [2d Dept 1998] [insurer waived right to rescind policy where it accepted premium payments for several months after it asserted counterclaim to rescind that policy] and Continental Ins. Co., supra [insurer waived right to rescind policy where it accepted premium payments for "several months" following discovery of alleged misrepresentations]). The Court then noted that plaintiff did not retain temporarily a payment (or a couple of payments) from Mobarak before refunding the payment. "Rather . . . plaintiff collected . . . nine $ 5,000 premium payments over a nine-month period and plaintiff has not refunded any of those payments. The collection and retention of those payments compel the conclusion that plaintiff cannot now seek to rescind the policies."