A Video Explaining an Oddity of Rescission of Insurance in New Jersey

Rescission and Fraud

Rescission of an insurance policy, by definition, means the policy never existed and the parties are returned to the status quo. The insured gets the premium back and the insurer gets the policy back with no obligation under the policy.

In Citizens United Reciprocal Exchange v. Perez, 432 N.J. Super. 526, 75 A.3d 1233, N.J.Super.A.D., September 13, 2013 a New Jersey Appellate court proved the truth of the prediction made by George Orwell in his classic “Animal Farm” that all litigants in the United States are equal but some are more equal than others.

Insurers, even when victims of fraud, must pay more than they would have been required to pay had they not voided the policy and the fraud perpetrators profit from their fraud by having their obligation to an injured person paid by the defrauded insurer.

The appellate court concluded that protection of innocent third parties is a primary concern of New Jersey’s personal injury no-fault system. In this case there were two innocent third parties.

Mr. Green, injured in the automobile accident, and CURE, forced to pay Mr. Green on a void policy obtained by fraud reformed to add $5,000 in coverage more than they agreed to pay.

This case reaches the ridiculous result that asserting its right to void the policy for fraud cost more than accepting liability and ignoring the fraud. The only person who profits from the fraud are the fraud perpetrators.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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