Grenall v. United of Omaha Life Ins. Co.

165 Cal. App. 4th 188, 80 Cal. Rptr. 3d 609 (2008)



A contracting party bears the risk of a mistake when the agreement so provides or when the party is aware of having only limited knowledge of the facts relating to the mistake but treats this limited knowledge as sufficient. Additionally, the court may allocate the risk to a party because it is reasonable under the circumstances to do so. 


Jean M. Simes (Simes) died of cancer less than four months after purchasing an annuity that provided for monthly benefit payments as long as she lived. Plaintiffs Carol Grenall and Mike Sutton, the administrators of her estate (the Estate), sought to rescind the annuity based on a mistake of fact, namely, that Simes was unaware at the time of the contract that she was terminally ill. The trial court granted summary judgment in favor of the issuing company, defendant United of Omaha Life Insurance Company (United).


May the Estate seek rescission?




Although no California case directly addresses rescission based on a mistake about an annuitant's health at the time of the contract, other jurisdictions have refused to rescind in this context. For example, in Aldrich v. Travelers Ins. Co.(1944) 317 Mass. 86 [56 N.E.2d 888],  an annuitant who had terminal cancer at the time of the contract died a little over a year later, and her estate sought to rescind based on mutual mistake and unconscionability. The Supreme Court of Massachusetts concluded that both parties had assumed the decedent's health warranted a reasonable expectation of life, but, as reasonable persons, knew this could be wrong and that she might “have within her body a condition that could cause her early death … .” The court found that the parties entered into a contract “with reference to this very risk,” assumed the risks relating to the timing of her death, and were “satisfied to do business on this basis.” (Ibid.) The court refused to allow rescission “merely because the known and assumed risk turned out to be greater than either or both [sides] expected it to be.”

Thus, the court held that Simes bore the risk of the alleged mistake regarding her health and life expectancy at the time of the annuity contract. Because the Estate cannot establish an essential element of its rescission claim, summary judgment is proper. (See Code Civ. Proc., § 437c, subd. (o)(1)Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 849 [defendant may meet its burden to show cause of action  is without merit by demonstrating that plaintiff cannot establish one or more essential elements].) Accordingly, we need not discuss the other elements of this claim or decide the additional grounds for affirmance urged by United in its respondent's brief and its related motion to dismiss.

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