We have shown recently that damage to the right hemisphere impairs the ability to update mental models when evidence suggests an old model is no longer appropriate. We argue that this deficit is generic in the sense that it crosses multiple cognitive and perceptual domains. Here, we examined the nature of this updating impairment to determine more precisely the underlying mechanisms. We had right (RBD, N = 12) and left brain damaged (LBD, N = 10) patients perform versions of our picture-morphing task in which pictures gradually morph from one object (e.g., shark) to another (e.g., plane). Performance was contrasted against two groups of healthy older controls, one matched on age (HCO-age-matched, N = 9) and another matched on general level of cognitive ability (HCO-cognitively-matched, N = 9). We replicated our earlier findings showing that RBD patients took longer than LBD patients and HCOs to report seeing the second object in a sequence of morphing images. The groups did not differ when exposed to a morphing sequence a second time, or when responding to ambiguous images outside the morphing context. This indicates that RBD patients have little difficulty alternating between known representations or labeling ambiguous images. Instead, the difficulty lies in generating alternate hypotheses for ambiguous information. Lesion overlay analyses, although speculative given the sample size, are consistent with our fMRI work in healthy individuals in implicating the anterior insular cortex as critical for updating mental models.