Rescission is an equitable remedy as ancient as the common law of Britain. When the United States was conceived in 1776 the founders were concerned with protecting their rights under British common law. They adopted it as the law of the new United States of America. British common law was only modified by the limitations placed on the central government by the U.S. Constitution when it was approved in 1789.The viability and ability to enforce contracts was recognized as essential to commerce. Courts of law were charged with enforcing legitimate contracts.

Courts of equity were charged with protecting contracting parties from mistake, fraud, misrepresentation and concealment where no damages were involved. It was the obligation of the courts of equity to reach a result that was fair to all of the parties to the contract. The founders of the United States, and the British common law, concluded that equity required that enforcing a contract based on mistake, fraud, misrepresentation or concealment would not be fair.The common law developed rules that courts could follow to refuse to enforce the terms of a contract that was entered into because of mutual mistake of material fact, a unilateral mistake of material fact, the breach of warranty (a presumptively material promise to do or not do something), a material concealment, or a material misrepresentation. The remedy - called rescission - created a method to apply fairness to the parties to an insurance contract and allow an insurer or a policyholder to void a contract. The remedy of rescission allowed courts to refuse to enforce a contract entered into by fraud, mutual mistake, misrepresentation or concealment of material facts. Insurance contracts, unlike common run-of-the-mill commercial contracts, are considered to be contracts of utmost good faith. Each party to the contract of insurance is expected to treat the other fairly in the acquisition and performance of the contract.

For example, the prospective insured is required to answer all questions about the risk he, she or it are asking the insurer to take and about the person the insurer is asked to insure. Rescission, since before the U. S. Constitution, became an important remedy for insurers. As a contract of utmost good faith insurers and the courts recognized that the parties to a contract of insurance were more vulnerable than other contracting parties to misrepresentation or concealment of material fact. The remedy is available to either party to the contract and when one determines it was deceived into entering into the contract it may declare the contract void from its inception, return the consideration and treat it as if it never existed.