State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
After a claim is filed, an insurer discovers the applicant made a false statement that was material and that the insurer relied upon at application. Under California Insurance Code Section 359, the insurer may:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 359 permits rescission when a false representation was material and the insurer relied on it in issuing the policy. Rescission voids the contract from its inception (ab initio), so the insurer treats the policy as if it never existed and returns premiums rather than paying claims. This remedy applies to material false representations, whether they concern health, occupation, or other facts the insurer relied upon.
Why the other options are wrong
- B) Rescission is retroactive and voids the entire contract; the insurer is not limited to denying one claim.
- C) Criminal penalties are governed by separate fraud statutes; Section 359 is the civil rescission remedy, not a criminal charge.
- D) Premium increases for future terms are not the remedy; rescission eliminates the contract rather than repricing it.
Memory hook
Rescind = rewind the contract to zero. Material lie relied on? The policy is treated as if it never printed.