Unexpected Death Not a Ground for Annuity Policy Rescission
Insurance Law Update
In Grenall v. United of Omaha Life Ins. Co., __Cal.App.4th __ , 2008 WL 2854515 (July 25, 2008), a case of first impression in California, the state Court of Appeal held that an annuity policy could not be rescinded based on a mistake about an annuitant’s health at the time of the contract.
Jean M. Simes died of cancer less than four months after purchasing an annuity policy from United of Omaha Life Insurance Company, which provided for monthly benefit payments as long as she lived. Simes paid a single premium of $321,131 for her policy. However, after receiving three monthly benefit payments of $3,000, she was diagnosed with ovarian cancer and died a week later. After learning of Simes’ death, United stopped making annuity payments.
Simes’ estate filed suit against United seeking to rescind the annuity and recoup the premium on the ground that Simes made a unilateral mistake in agreeing to the life annuity because she did not know that she had a terminal illness and did not have a reasonable life expectancy when she entered into the contract. The trial court granted United’s motion for summary judgment, which was affirmed on appeal. The Court of Appeal held that Simes bore the risk of the alleged mistake regarding her health and life expectancy at the time of her annuity contract as a matter of law, and therefore rescission was not supported.