Stein v. Security Mut. Ins. Co

In Stein v. Security Mut. Ins. Co. (38 AD3d 977 [2007]), the Appellate Division, Third Department, concluded that even where a defendant insurer "could have rescinded plaintiffs' policy, rendering it void ab initio," based on material misrepresentations in the application, it was not free to do so once the insurer "elected to cancel plaintiffs' policy rather than rescind it." In Stein, plaintiffs misrepresented certain aspects of their insurance history in their application for homeowners' insurance. As a result, the insurer sent plaintiffs a notice that their policy would be canceled approximately one month later. In the interim, plaintiffs' home was damaged, and they sought coverage under the fraudulently procured policy. Thereupon, the insurer denied coverage, declared the policy void from its inception, and returned plaintiffs' premium. The court, however, required the insurer to pay plaintiffs' claim, holding that its prior cancellation of the insurance contract barred its later attempt to rescind the policy.