Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Rescission

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Failure to Disclose Untimely Filings on Application Voids Lawyer’s Policy

Posted in Rescission
The United States District Court for the District of New Jersey, applying New Jersey law, has held that an insured attorney’s failure to disclose on an insurance application an appeal filed late and a lawsuit filed outside of the statute of limitations constitutes a material misrepresentation warranting a default judgment voiding the policy.  Liberty Ins.… Continue Reading

Insurer Entitled to Rescind Lawyers Professional Liability Policy Where Insured Made Material Misrepresentations in Application

Posted in Rescission, Rescission-Materiality, Rescission-Waiver
The U.S. District Court for the Southern District of Illinois, applying Illinois law, has held that an insurer was entitled to rescission of a policy where the insured made material misrepresentations in its application.  Carolina Cas. Ins. Co. v. Robert S. Forbes PC, 2017 WL 86136 (S.D. Ill. Jan. 10, 2017).  The court also held that… Continue Reading

Subjective Standard Applies to Rescission of E&O Policy Based on Response to Application Question

Posted in Prior Knowledge/Warranty Exclusion, Rescission
The United States District Court for the Southern District of Ohio, applying California law, has held that an errors and omissions insurer is not entitled to rescission of its policy based on an alleged misrepresentation by the insured on the application for the policy.  Maxum Indem. Co. v. Nat’l Condo & Apartment Ins. Grp., 2016… Continue Reading

Insured Lawyers’ Material Misrepresentations Warrant Rescission and Coverage also Barred by Prior Knowledge Exclusion

Posted in Prior Knowledge/Warranty Exclusion, Rescission
The United States District Court for the Northern District of Mississippi, applying Mississippi law, has granted summary judgment in favor of an insurer, holding that the insurer is entitled to rescind a lawyers professional liability policy based on the insured attorneys’ material misrepresentations in the insurance application.  Imperium Ins. Co. v. Shelton & Assocs. P.A.,… Continue Reading

Lawyer’s Material Misrepresentations in Policy Renewal Applications Justify Rescission

Posted in Notice of Potential Claim (Timeliness), Rescission
A federal district court in Illinois has granted an insurer’s motion for summary judgment rescinding three consecutive professional liability policies.  This comes after the court determined under Illinois law that the insured attorney made material misrepresentations in each of the renewal applications.  Minn. Lawyers Mut. Ins. Co. v. Schulman, 2016 WL 4988006 (N.D. Ill. Sept.… Continue Reading

Rescission Voids All Policy Provisions, Including Innocent Insured Provision

Posted in Rescission
Applying Georgia law, a federal district court has held that rescission of an insurance policy based on a material misrepresentation in the application voids all provisions of the policy, including the “innocent insured” provision, such that the insureds who had no knowledge of the fraud cannot rely on that provision to preserve coverage for themselves. ProAssurance… Continue Reading

Rescission Warranted When Policyholder Failed to Disclose Past Department of Insurance Investigations in Application

Posted in Rescission
Applying Arizona law, a federal district court has held that an insurance brokerage firm’s failure to disclose past investigations by the Department of Insurance in response to a specific question on its professional liability insurance application warranted rescission of its policy. Admiral Ins. Co. v. AZ Air Time, LLC, No. CV-15-00245-PHX-SRB (D. Ariz. Aug. 10,… Continue Reading

No Rescission Based on Application Signer’s Fraud; Fraudster’s Knowledge Cannot Be Imputed to Bank

Posted in Rescission
Applying Louisiana law, the United States District Court for the Western District of Louisiana has held that an insurer cannot rescind a fidelity bond issued to a bank because it could not prove as a matter of law that the bank intended to deceive the insurer. Everest Nat’l Ins. Co. v. Tri-State Bancshares, Inc., No.… Continue Reading

Insurer Entitled to Rescind Policy Based on Insured’s Failure to Disclose Claim Made After Application Submitted but Before Coverage Bound

Posted in Rescission
Applying Iowa law, the United States Court of Appeals for the Eighth Circuit has held that an insurer can rescind an E&O policy because the insured failed to disclose the existence of a claim made after the submission of the application but before the insured agreed to purchase coverage. Capson Physicians Ins. Co. v. MMIC… Continue Reading

Claimant Without a Judgment Has No Standing to Bring Declaratory Judgment Action Against Alleged Tortfeasor’s Insurer

Posted in Rescission
A Kentucky federal court has held that a claimant has no standing to bring a declaratory judgment action against her alleged tortfeasor’s insurer where the claimant has yet to obtain a judgment in the underlying action. Summers v. Scottsdale Indem. Co., No. 1:15-cv-0092 (W.D. Ky. March 31, 2016). The court also held that, even if… Continue Reading

Seventh Circuit Holds Insured’s Material Misrepresentations in Application Warrant Rescission of Policy

Posted in Rescission
Applying Illinois law, the United States Court of Appeals for the Seventh Circuit has held that a medical service provider’s material misrepresentations regarding its use of non-traditional and experimental weight loss drugs and procedures warranted rescission of its professional liability coverage. Essex Ins. Co. v. Galilee Med. Cntr.¸ 2016 WL 851688 (7th Cir. Feb. 10,… Continue Reading

Fourth Circuit Holds that Rescission is Not Available to Innocent Co-Insureds

Posted in Rescission
The United States Court of Appeals for the Fourth Circuit, applying South Carolina law, has affirmed a trial court’s determination that a professional liability insurance policy afforded coverage to innocent co-insureds despite fraudulent misrepresentations in the application submitted by an individual applicant posing as a doctor. Evanston Ins. Co. v. Agape Senior Primary Care, Inc.,… Continue Reading

Policy Rescinded And Voided Ab Initio For Failure to Disclose Professional Responsibility Grievance Investigation of Insured Officer

Posted in Rescission
Applying Connecticut law, a Connecticut federal court held that an insured’s E&O policy must be rescinded and voided ab initio after finding that the insured knowingly made misrepresentations regarding an investigation of one of its officers, which were material to the insurer’s decision to insure the applicant. Zurich Am. Ins. Co. v. Expedient Title, Inc.,… Continue Reading

New Jersey High Court Retroactively Applies Rescission of Medical Malpractice Policy

Posted in Rescission
The Supreme Court of New Jersey has held that a rescinded medical malpractice liability policy should not be reformed to require the insurer to defend and indemnify up to the state mandatory minimum amount of coverage in order to protect innocent third-party claimants whose claims arose prior to rescission. DeMarco v. Stoddard, 2015 WL 7722997… Continue Reading

Action by Tennessee Attorney General Deemed to Pre-Date Claims-Made Policy Period Because Related to Earlier-Filed Customer Complaints

Posted in Prior Knowledge/Warranty Exclusion, Related Claims and associated exclusions, Rescission
A Tennessee federal court has held that a claims-made D&O policy does not afford coverage for a lawsuit brought by the Tennessee Attorney General because the suit involved wrongful acts that were related to customer complaints filed against the insured prior to the policy period. Hale v. Travelers Cas. & Sur. Co. of Am., 2015… Continue Reading

Coverage Barred by Prior Litigation Exclusion, Regardless of Insured’s Actual or Reasonable Belief About Pre-Policy Demand Letter

Posted in Rescission
A federal court in Florida has held that a prior or pending litigation exclusion in a claims-made policy applied where, prior to the inception of the policy, a member of the insured limited liability company sent a letter to another member demanding distributions and threatening to file a lawsuit. U.S. Liab. Ins. Co. v. Kelley… Continue Reading

Material Misrepresentations in Application Preclude Coverage for More Than $2 Million Embezzlement

Posted in Rescission
The United States Court of Appeals for the Eleventh Circuit, applying Alabama law, has held that a policy providing crime coverage does not afford coverage to an insured for its employee’s embezzlement of more than $2 million because of material misrepresentations in the policy’s application. Scottsdale Indem. Co. v. Martinez, Inc., 2015 WL 38223728 (11th… Continue Reading

Insurer Waived Right to Rescind Where Its Agents Knew of Facts that ‘Distinctly Implied’ Information on Policy Application Was Incorrect

Posted in Bad faith/duty to settle, Rescission
A federal district court has held that an insurer waived its right to rescind a policy based on material misrepresentations because at the time of the application for coverage, the insurer’s agents knew of facts that “distinctly implied” that the information provided by the insured was false or inaccurate.  Star Ins. Co. v. Sunwest Metals,… Continue Reading

Illinois Supreme Court Holds “Innocent Insured Doctrine” Inapplicable In Rescission Context

Posted in Rescission
The Supreme Court of Illinois has held that an insurer properly rescinded a legal malpractice insurance policy in its entirety based on a material misrepresentation contained in the policy application.  Ill. State Bar Ass’n Mut. Ins. Co. v. Law Office of Tuzzolino and Terpinas, 2015 IL 117096, (Ill. Feb. 20, 2015).  In so holding, the… Continue Reading

No Rescission of Renewal Policy Where Original Application Not Incorporated into Application for Renewed Policy

Posted in “Claim”, Rescission
Applying Illinois law, a state appellate court has reversed the rescission of a renewed insurance policy, holding that a misrepresentation in an original application does not justify rescission of a renewal of the policy where neither the renewal application nor the resulting policy incorporated the initial application.  Illinois State Bar Ass’n Mut. Ins. Co. v.… Continue Reading