## Facts

- Jean M. Simes applied for and purchased a single-premium immediate annuity, paying $321,131 in exchange for $3,000 monthly payments for “life only,” payable as long as she lived.
- The policy included a 30-day “free-look” provision allowing Simes to return the policy for a full refund and cancellation as of the issue date.
- Simes received three monthly payments, was diagnosed with ovarian cancer on January 25, 2002, and died on January 30, 2002.
- United continued making monthly payments until it learned of Simes’s death, then stopped payments in April 2003.
- The estate asserted Simes did not know she was terminally ill when she purchased the annuity and claimed this mistake entitled it to rescind and recover the premium minus amounts paid.

## Issues

1. Whether an annuitant’s lack of knowledge of a terminal illness at purchase is a mistake of fact supporting rescission of a “life-only” annuity under California Civil Code section 1689.
2. Whether rescission is unavailable because the annuitant bore the risk of any mistake regarding her health and life expectancy.

## Decision

- The Court of Appeal affirmed summary judgment for United.
- The court held the estate failed to establish an essential element of rescission for mistake because Simes bore the risk of any mistake about her health and life expectancy.
- A life-only annuity allocates to the purchaser the risk of early death and provides no guaranteed minimum payout or premium refund absent contractual terms to that effect.
- The 30-day free-look clause supported the conclusion that Simes had a defined opportunity to cancel for a refund but did not do so.

## Legal Principles

- Rescission for unilateral mistake requires showing both a qualifying mistake and that the mistaken party did not bear the risk of the mistake.
- A party bears the risk of mistake when the contract allocates the risk to that party, when the party proceeds with limited knowledge as sufficient, or when a court reasonably assigns the risk to that party.
- In a life-only annuity, the uncertainty of life expectancy is an assumed and allocated risk; early death, even from an unknown illness, does not justify rewriting the bargain into a refund or guaranteed-benefit contract.
- Courts may consider contractual cancellation rights (such as a free-look period) in assessing risk allocation and the availability of rescission.

## Conclusion

The court held that an estate cannot rescind a life-only annuity based on the annuitant’s undisclosed terminal illness at purchase because the annuitant assumed the contract’s inherent risk of early death and did not contract for a refund or minimum payout after death.


Grenall v. United of Omaha Life Ins. Co., 165 Cal. App. 4th 188 (Cal. Ct. App. 2008)