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With respect to a directors and officers (D&O) liability insurance policy, rescission is 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.

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Rescission most often occurs under two circumstances: (1) when the signer of an application for D&O 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 In recent years, D&O insurers have increasingly rescinded coverage on these two bases.

Related Terms

A nonrescission provision refers to a provision sometimes included within liability policies...