COURT WOULD NOT RESCIND POLICY ON SUMMARY JUDGMENT WHERE DISPUTES OF FACT REMAINED OVER THE INSURED’S BELIEFS AND EXPECTATIONS PRIOR TO APPLYING FOR INSURANCE (Philadelphia Federal)

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The carrier sought rescission of a medical professional liability policy, and brought a motion for summary judgment. The court denied that motion.

In the application process the insureds (a doctor and medical center) were asked about existing incidents, adverse outcomes, or other circumstances that the insureds expected could give rise to future claims against the insured. The insureds answered no. In a supplemental application for prior acts coverage, the insureds were asked if they knew of “’any pending claims, incidents or activities, including any request for patient records that might give rise to any claim in the future?’” They again answered no.

Within two months of the original application and less than one month after the supplemental application, the insured doctors was sued for medical malpractice. Six months later a separate second suit was filed. All of the conduct at issue occurred before the application process.

“Under Pennsylvania law, ‘an insurance policy is void ab initio for misrepresentation when the insurer can establish that (1) the representation was false, (2) the insured knew it to be false when made or acted in bad faith, and (3) the representation was material to the risk being insured.’”

The insurer relied upon the facts that as to the first suit, the plaintiff’s attorney sent four requests for that plaintiff’s medical records between seven and eleven months before the insurance applications. As to the second suit, there was a request for that plaintiff’s medical records five months before the applications. The insurer argued that it had to be clear these requests were in connection with future litigation.

On summary judgment, the court identified the relevant questions as “(i) whether the applicant was ‘aware of any medical incidents, adverse outcomes or other circumstances that you expect to give rise to a claim in the future’; and (ii) whether the applicant knew ‘of any pending claims, incidents or activities, including any request for patient records that might give rise to any claim in the future.’”

The court denied the carrier’s motion for summary judgment.

  1. The court could not determine the insureds’ subjective opinion about the patients’ intentions, i.e., whether the doctor actually expected his patients to bring future suits, and then made knowingly false statements on the applications that he did not hold those expectations. The same was true as to what “might give rise” to future claims. There was evidence in the record that the insured doctor did not or would not have expected or anticipated there would ever be a suit in either of these two cases. Thus, summary judgment was inappropriate.

  2. An adjuster interviewed the doctor and included a statement in her summary memorandum that the doctor fully expected to be sued. However, the doctor disputed the accuracy of the memorandum’s contents, and adduced other facts of record to contradict its accuracy.

  3. Contrary to the insurer’s arguments, the doctor’s deposition testimony in one of the underlying actions did not indisputably establish that the doctor expected to be sued.

  4. The court rejected the argument that the medical outcomes in the two cases were sufficient to establish by themselves that the doctor must have known he would be sued in the future.

For all of these reasons, the insurer could not meet its “burden of establishing the lack of a genuine factual dispute as to whether the [insureds] made a knowingly false representation when completing the relevant insurance application forms.”

Date of Decision: March 31, 2020

MDAdvantage Insurance Co. v. Hasiuk, U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 16-969, 2020 U.S. Dist. LEXIS 55614 (E.D. Pa. Mar. 31, 2020) (Jones, II, J.)

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