In Post Loss Underwriting is an Oxymoron, attorney and insurance expert witness Barry Zalma, Esq., CFE, discusses “post loss underwriting.” His firm’s practice emphasizes the representation of insurers and those in the business of insurance.
In California there is much publicity for what the plaintiffs’ bar calls “post loss underwriting” as a pejorative way of speaking of the equitable remedy of rescission. Post loss underwriting does not exist. Underwriting is a decision making process. It is made before insurance is issued. Rescission is an equitable remedy when an insurer is deceived regarding a material fact. If the rescission is improper the insured is not without a remedy.
As the Court of Appeal stated in Imperial Casualty & Indemnity Company v. Levon Sogomonian, 198 Cal. App. 3d 169 (1988), “Our conclusion here should not result in an assumption by insurers that policy liability can, with impunity, be avoided or delayed by assertion of a claim for rescission. That is a tactic which is fraught with peril. Where no valid ground for rescission exists, the threat or attempt to seek such relief may itself constitute (1) a breach of the covenant of good faith and fair dealing which is implied in the policy (citations omitted) and/or (2) the commission of one or more of the unfair claims settlement practices proscribed by Insurance Code section 790.03, subdivision (h).”
More to follow from Mr. Zalma.