recision
With respect to a directors and officers liability insurance policy, a declaration
by an insurer that the policy was never in effect, the result being that coverage
for a claim, when tendered by a corporate organization to an insurer, is not
covered. Recision most often occurs under two circumstances: (1) when the signer
of an application for directors and officers liability coverage had knowledge
of a potential claim and intentionally concealed such knowledge, and (2) when
the application for coverage or an important attachment to it (e.g., a financial
statement) contains information that is materially false, such that if correct
information were provided to the insurer, it would not have entered into the
contract of insurance. In recent years, D&O insurers have increasingly rescinded
coverage on these two bases.
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