Doctor’s Misrepresentation on Malpractice Insurance Application Leads to Denial of Coverage for Claims Prior to Rescission

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Demarco v. Stoddard, 125 A.3d 367, 223 N.J. 363 (2015). The Supreme Court of New Jersey reversed an appeals court’s decision that required Rhode Island Medical Malpractice Joint Underwriting Association (RIMMJUA) to provide the minimum of coverage to defendant Dr. Sean Stoddard even though it had already retroactively canceled his policy upon discovering that he misrepresented a key detail about his practice on his application. Stoddard had a medical malpractice policy from 2007 until 2011 with the RIMMJUA. Stoddard had virtually no Rhode Island practice at all, but in his application, and in subsequent renewals, Stoddard answered “yes” when asked if at least 51 percent of his business was generated in Rhode Island. The Court held that it is well-established New Jersey law that an insurer can rescind professional liability coverage if it discovers that a professional lied on his or her application. “A professional in that position can also expect that claims that arose prior to discovery of the misrepresentation will be excluded from coverage. In other words, once the policy has been rescinded, the professional responds to any claims from injured third parties without coverage.”