Opinion ID: 779780
Heading Depth: 2
Heading Rank: 3

Heading: Provident's Counterclaim for Rescission

Text: 39 Provident contends that the district court erred in dismissing its counterclaim for rescission of the insurance contract. Provident asserts that Harris withheld material information from it, specifically, the results of her tests by Johns Hopkins and the Mayo Clinic. Harris does not dispute that she failed to disclose these reports. However, Provident is not entitled to rescission as a result of Harris' failure to disclose, for several reasons. 40 First, as Harris correctly asserts in her brief, Provident had already made its decision to deny benefits to Harris before Harris had access to the reports from either Johns Hopkins or the Mayo Clinic, and therefore any nondisclosure of these reports by Harris could not possibly have affected Provident's decision. Provident made its decision to deny Harris benefits in October 1998. Harris was initially evaluated at Johns Hopkins on October 15, 1998; she received the report of this evaluation in January 1999. Harris returned to Johns Hopkins for additional testing in May 1999. Harris visited the Mayo Clinic only once, in June 1999. 41 Second, on October 15, 1998, Dr. Adkinson of Johns Hopkins orally advised Harris that he believed it would be safe for her to return to work. Harris received notice on October 24, 1998 that Provident had decided to deny benefits to her. The record shows that Provident employees met on October 13, 1998 to discuss and possibly make a decision on Harris' claim. Thus, it is likely that Provident made its decision before Harris even visited Johns Hopkins. 42 Third, the reports from Johns Hopkins and the Mayo Clinic support Provident's decision to deny benefits. Provident does not contend that it would have made a different decision had it been aware of the results of these evaluations. Therefore, any nondisclosure by Harris was immaterial because it did not affect the outcome of Provident's decision. 43 Provident contends that Harris had a continuing obligation to disclose information relevant to her condition, even after her claim for benefits had been denied. In support of its position, Provident cites a series of cases stating that nondisclosure is grounds for rescission of an insurance contract. The cases relied on by Provident (and by Harris) involve misrepresentations made in applications for insurance coverage, as opposed to demands for benefits under an existing policy, but the rationale applied in those cases applies equally here: if the misrepresentation does not affect the outcome of the insurer's decision, it is not material. See Jackson v. Travelers Ins. Co., 113 F.3d 367, 371 (2d Cir.1997) (upholding summary judgment in favor of insurer where insured misrepresented material facts related to his medical history on his application for insurance, and holding that [i]f a fact is material to the risk, the insurer may avoid liability under a policy if that fact was misrepresented in an application for that policy); Fine v. Bellefonte Underwriters Ins. Co., 725 F.2d 179, 184 (2d Cir.1984) (False sworn answers are material if they might have affected the attitude and action of the insurer.). Once the decision had been made to deny benefits to Harris, any failure by Harris to disclose new information regarding her condition was immaterial, because it could not possibly affect Provident's decision. Accordingly, the district court did not err in dismissing Provident's counterclaim.