Rescission of Life Insurance Policy Fails
Post 5039
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USAA Life Insurance Company’s moved the USDC Dismiss Plaintiff’s Third Amended Complaint and Motion to Strike.
In Ronda G. Williams v. USAA Life Insurance Company, No. 1:24-cv-00301-BLW, United States District Court, D. Idaho (April 1, 2025) the USDC eliminated the bad faith cause of action and allowed the breach of contract case.
BACKGROUND
Ronda Williams alleged her husband, Burton Williams, applied for a 20-year term life insurance policy for $750,000.00 from USAA on December 1, 2021. Shortly thereafter, USAA issued a life insurance policy with an effective date of February 15, 2022. As a part of his application, Mr. Williams signed an agreement that he would “.. .notify USAA Life Insurance Company if, after signing the statement but before the delivery of the policy, I seek medical consultation for any reason…”
Mrs. Williams alleged that Mr. Williams received a neurological exam in January 2022 after feeling lightheaded and dizzy at the gym. The exam was benign, he was treated for dehydration and sent home. He then followed up with his primary care physician on February 2, 2022, who did not have any concerns about his medical condition but scheduled an MRI for February 17, 2022. On February 18, 2022, Mr. Williams received the results of the MRI, which indicated he had a brain tumor.
About a year later, in June 2023, Mr. Williams died.
Mrs. Williams, as the beneficiary, notified USAA of his death and made a claim on his insurance policy. On December 26, 2023, USAA sent Mrs. Williams a letter stating that it was rescinding the insurance policy from the date of inception based upon material misrepresentations made in Mr. Williams’ application. Mrs. Williams sued. Mrs. Williams filed her Third Amended Complaint alleging a single claim for breach of contract and insurance bad faith. USAA again moved to dismiss the operative complaint for failure to state a claim.
ANALYSIS
Breach of Contract Claim.
Mrs. Williams alleged USAA breached its contract when it failed to pay her the amount due under the life insurance policy. USAA argued that Mrs. Williams cannot show any breach of contract because it rescinded the life insurance policy within the two-year statutory contestability period.
The rescission fell within the two-year contestability period.
Even considering USAA’s affirmative defense, it does not require dismissal of Mrs. Williams’ complaint at this stage of the litigation. To rescind the policy, USAA would first need to prove Mr. Williams made an incorrect statement on his application. Then the company would have to prove it would not have issued the policy had it known the “true facts.”
USAA contends Mr. Williams’ responses to several questions on his application were incorrect. Mr. Williams answered “no” to each of these questions. While these responses may have been rendered inaccurate in light of his hospital visit and follow up visit with his primary care provider, these inaccuracies do not necessarily mean rescission is appropriate.
To rescind, USAA must show it would not have issued the policy had the statements been accurate. There is nothing on the face of the Third Amended Complaint or in the material incorporated by reference that permits the Court to conclude on a motion to dismiss that the misrepresentations were material.
An insurer may establish materiality as a matter of law by presenting documentation concerning its underwriting practices. Absent similarly conclusive facts in the Third Amended Complaint or incorporated by reference, the Court cannot conclude the misrepresentations, as a matter of law, were material. Accordingly, USAA’s motion to dismiss the breach of contract claim is denied.
Insurance Bad Faith Claim.
To demonstrate bad faith under Idaho law, a plaintiff must show:
1. the insurer intentionally and unreasonably denied or withheld payment;
2. the claim was not fairly debatable;
3. the denial or failure to pay was not the result of a good faith mistake; and
4. the resulting harm is not fully compensable by contract damages.
An insurer does not act in bad faith by challenging the validity of a “fairly debatable” claim, or when delay results from honest mistakes.
Mrs. Williams did not adequately allege an insurance bad faith claim. The denial of an insurance claim and a claimant’s disagreement with the decision does not automatically equate to bad faith. Accordingly, the Court dismissed Mrs. Williams’s bad faith claim.
The Court will dismiss the bad faith insurance claim without leave to amend.
ZALMA OPINION
Rescission is an equitable remedy that requires, rather than a money judgment, fairness. If an insurance contract is acquired by a material misrepresentation or the concealment of a material fact, the court will order the contract rescinded and both parties would be placed in the same position they were in before the contract was issued. USAA failed to include in its motion to dismiss evidence that established that the misrepresentations were material. The court dismissed the bad faith cause of action because the issue was fairly debatable and at trial USAA may bring the underwriters to prove materiality and if they don’t they will pay Mrs. Williams.
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Montana County Attorney Admits to Insurance Fraud & Is Only Suspended from Practice for 60 Days
Post 5251
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A Lawyer Who Commits Insurance Fraud and Pleas to a Lower Charge Only Suspended
In The Matter Of: Naomi R. Leisz, Attorney at Law, No. PR 25-0150, Supreme Court of Montana (December 23, 2025) the Montana Office of Disciplinary Counsel (ODC) filed a formal disciplinary complaint with the Commission on Practice (Commission) against Montana attorney Naomi R. Leisz.
On September 25, 2025, Leisz tendered a conditional admission and affidavit of consent. Leisz acknowledged the material facts of the complaint were true and she had violated the Montana Rules of Professional Conduct as alleged by ODC.
ADMISSIONS
Leisz admitted that in April 2022, her minor son was involved in a car accident in which he hit a power pole. Leisz’s son ...
Montana County Attorney Admits to Insurance Fraud & Is Only Suspended from Practice for 60 Days
Post 5251
Read the full article at https://lnkd.in/gnBaCjmv, see the video at https://lnkd.in/gfpVsyAd and at https://lnkd.in/gC73Nd8z, and at https://zalma.com/blog plus more than 5250 posts.
A Lawyer Who Commits Insurance Fraud and Pleas to a Lower Charge Only Suspended
In The Matter Of: Naomi R. Leisz, Attorney at Law, No. PR 25-0150, Supreme Court of Montana (December 23, 2025) the Montana Office of Disciplinary Counsel (ODC) filed a formal disciplinary complaint with the Commission on Practice (Commission) against Montana attorney Naomi R. Leisz.
On September 25, 2025, Leisz tendered a conditional admission and affidavit of consent. Leisz acknowledged the material facts of the complaint were true and she had violated the Montana Rules of Professional Conduct as alleged by ODC.
ADMISSIONS
Leisz admitted that in April 2022, her minor son was involved in a car accident in which he hit a power pole. Leisz’s son ...
Insurer’s Exclusion for Claims of Assault & Battery is Effective
Post 5250
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Bar Fight With Security is an Excluded Assault & Battery
In The Cincinnati Specialty Underwriters Insurance Company v. Mainline Private Security, LLC, et al., Civil Action No. 24-3871, United States District Court, E.D. Pennsylvania (December 16, 2025) two violent attacks occurred in Philadelphia involving young men, Eric Pope (who died) and Rishabh Abhyankar (who suffered catastrophic injuries). Both incidents involved security guards provided by Mainline Private Security, LLC (“Mainline”) at local bars. The estates of the victims sued the attackers, the bars, and Mainline for negligence and assault/battery. The insurer exhausted a special limit and then denied defense or indemnity to Mainline Private Security.
INSURANCE COVERAGE
Mainline had purchased a commercial ...
Court Must Follow Judicial Precedent
Post 5252
Read the full article at https://www.linkedin.com/pulse/sudden-opposite-gradual-barry-zalma-esq-cfe-h7qmc, see the video at and at and at https://zalma.com/blog plus more than 5250 posts.
Insurance Policy Interpretation Requires Application of the Judicial Construction Doctrine
In Montrose Chemical Corporation Of California v. The Superior Court Of Los Angeles County, Canadian Universal Insurance Company, Inc., et al., B335073, Court of Appeal, 337 Cal.Rptr.3d 222 (9/30/2025) the Court of Appeal refused to allow extrinsic evidence to interpret the word “sudden” in qualified pollution exclusions (QPEs) as including gradual but unexpected pollution. The court held that, under controlling California appellate precedent, the term “sudden” in these standard-form exclusions unambiguously includes a temporal element (abruptness) and cannot reasonably be construed to mean ...
Lack of Jurisdiction Defeats Suit for Defamation
Post 5250
Posted on December 29, 2025 by Barry Zalma
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He Who Represents Himself in a Lawsuit has a Fool for a Client
In Pankaj Merchia v. United Healthcare Services, Inc., Civil Action No. 24-2700 (RC), United States District Court, District of Columbia (December 22, 2025)
FACTUAL BACKGROUND
Parties & Claims:
The plaintiff, Pankaj Merchia, is a physician, scientist, engineer, and entrepreneur, proceeding pro se. Merchia sued United Healthcare Services, Inc., a Minnesota-based medical insurance company, for defamation and related claims. The core allegation is that United Healthcare falsely accused Merchia of healthcare fraud, which led to his indictment and arrest in Massachusetts, causing reputational and business harm in the District of Columbia and nationwide.
Underlying Events:
The alleged defamation occurred when United ...
Zalma’s Insurance Fraud Letter
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ZIFL Volume 29, Issue 24
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
Zalma’s Insurance Fraud Letter
Merry Christmas & Happy Hannukah
Read the following Articles from the December 15, 2025 issue:
Read the full 19 page issue of ZIFL at ...