Rescission action requires reasonable promptness by insurer
In reaching that conclusion, the district court reviewed key points concerning an action for rescission of an insurance policy.
Because rescission is a "radical remedy", courts have long recognized that a party requesting it must move quickly. Courts have deemed the promptness requirement so important that they place the onus on the plaintiff insurer to show it.
The relevant trigger for rescission is when a plaintiff learns of "the facts that would justify rescission", not merely "facts that raise the mere potentiality for rescission." Also, when an insurer suspects that its policyholder may have made misrepresentations, it is entitled to a "reasonable time" within which to investigate the matter before it must rescind.
Even assuming that the insurer has not sought rescission with reasonable promptness, the policyholder would need to show actual prejudice because of the delay. Prejudice cannot be presumed from the mere fact of the delay. See North American Specialty Ins. Co. v. Savage, 977 F.Supp. 725 (D. Md. 1997).