Contracts/Rescission

Template:Redirect Template:Contract law In contract law, rescission has been defined as the unmaking of a contract between parties.^[1] Rescission is the unwinding of a transaction. This is done to bring the parties, as far as possible, back to the position in which they were before they entered into a contract (the status quo ante).

In court

Rescission is an equitable remedy and is discretionary.^[2] It is used as a synonym for termination at law. A court may decline to rescind a contract if one party has affirmed the contract by his action (see Long v Lloyd [1958] 1 WLR 753) or a third party has acquired some rights or there has been substantial performance in implementing the contract. To improve chances of being granted recission, parties may do well to describe those circumstances are giving rise to an entitlement to terminate, as was done in Italic textKoompahtoo Local Aboriginal Land Council v Sanpine Pty LtdItalic text.Cite error: Closing </ref> missing for <ref> tag

By private companies

In finance, law, and insurance, rescission is the termination of a contract from the beginning (as if it never existed), rendering it void ab initio. In 2008, one judge ruled that borrowers who refinanced into an adjustable-rate mortgage could force a bank to rescind mortgage loans if it acted similarly inappropriately.^[3] Rescission is typically viewed as "an extreme remedy" which is "rarely granted".^[4]

Insurance

Insurers have the right to rescind an insurance policy due to concealment, material misrepresentation, or material breach of warranty. Generally, to rescind, an insurer will send a notice to the insured and tender a check in the amount of the premium paid for the relevant policy period.

In health insurance and specifically the individual and small group insurance markets, rescissions have generally followed the diagnosis of an expensive-to-treat illness in the patient (policyholder), typically because of withheld information about a pre-existing medical condition.^[5] Public awareness of this practice increased during the 2009 US healthcare debate, when it was described colloquially as "cancel coverage when you get sick". The practice of health insurance rescission was partially limited starting September 23, 2010,^[6] following the adoption of the Patient Protection and Affordable Care Act in 2010. A House committee report^[7] found that WellPoint Inc., UnitedHealth Group and Assurant rescinded policies for more than 20,000 people over a five-year period;^[5] the House report also highlighted 13 particular cases.^[7]

In 2010, it was revealed that WellPoint specifically targeted women with breast cancer for aggressive investigation with the intent to cancel (rescind) their policies.^[8] The disclosures followed the discovery that Assurant Health similarly targeted all recently diagnosed HIV-positive (AIDS) policyholders for rescission.^[9] U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius sent a letter to WellPoint urging the insurer to immediately end their practice of dropping health insurance coverage for the women.^[10]

The software technology used by Wellpoint as well as other major American health insurance companies^[11] is provided by MIB Group. The software automatically triggered a fraud investigation on every policyholder recently diagnosed with breast cancer and searched for conditions not disclosed in the application.^[8][12] The MIB Group provides a "Follow-up Service" which allows for a "second chance" to underwrite based on additional, discovered information during the contestable period.^[13] The service is maintained for two years after initial underwriting and may include, among other information credit history, medical conditions, driving records, criminal activity, drug use, participation in hazardous sports, and personal or family genetic history.^[14] Consumers can request a copy of the data in their report from MIB Group.^[15]

The insurer is additionally required to prove an "intent to deceive" in the misrepresentation, this fraud or intent requirement was extended federally for health insurance contracts effective September 23, 2010^[10] by Section 2712 of the Patient Protection and Affordable Care Act. In the long-run the change may have little effect in practice given that the bill eventually will not allow underwriting based on preexisting conditions.^[16] Previously, most states required proving "intent to deceive."^[17]

By government

In US government, rescission authority rests with the President. This authority was granted in the Congressional Budget and Impoundment Control Act of 1974. The President can force Congress to vote on rescinding (or permanently withholding) already appropriated funds.^[18] The average amount that Presidents requested between 1974 and 2005 was about $15 billion.^[19]

In parliamentary procedure, the motion to rescind, repeal or annul is used to cancel or countermand a motion previously adopted.

Notes

References

• O'Sullivan, DominicThe Law of Rescission. Oxford University Press.

External links

Template:Wiktionary

• Health Care Rescission Legislative Hearing, video playlist of testimony by legislators, health care industry officials, as well as people who were denied health care due to up to 2000 points of criteria which could trigger a rescission investigation and deny a person access to essential services emergency health care during that investigation period.