Verdicts

Podiatrist Dr. Sean Robert Stoddard, whose practice was located in Toms River, NJ, was insured by JUA from 2007 to 2011. He obtained the insurance through an underwriter located in Rhode Island. There was some dispute as to whether the underwriter provided the information on the application and renewals or if it was provided by Dr. Stoddard, but these documents do falsely state that at least 51% of Dr. Stoddard's practice was being generated in Rhode Island. The application and the first two renewals gave a Newport, RI, address for the doctor, but a New Jersey telephone number. The renewal document for the 2010-2011 period relevant to the malpractice claim in issue in DeMarco gave the doctor's New Jersey address and telephone number. At no time during the time he was insured by JUA did the doctor practice in Rhode Island.

In 2010, the plaintiff underwent surgery that he claimed was negligently performed. He brought suit for medical malpractice. Dr. Stoddard received the summons and complaint in California after he moved there to start a new practice. He soon informed the plaintiffs that the JUA had disclaimed responsibility for covering the plaintiff's claims because the doctor had not conducted at least 51% of his practice in Rhode Island during the period when the alleged injury occurred.

The JUA sought and obtained a declaratory judgment from a Rhode Island court to the effect that it did not have to cover claims brought against Dr. Stoddard. The DeMarco plaintiffs then sought and obtained a contrary declaration from the New Jersey trial court: The JUA indeed must indemnify Dr. Stoddard in this medical malpractice case. The JUA appealed, and the trial court stayed the underlying medical malpractice case pending the appeal's outcome.

First, the appeals court determined that the Rhode Island declaratory judgment was not binding on the medical malpractice plaintiffs, as the Rhode Island court did not exercise jurisdiction over them; the declaration was therefore binding only on Dr. Stoddard and the JUA.

Next, the court determined that New Jersey had a greater interest in the case than did Rhode Island, in part because the JUA had had some notice of Dr. Stoddard's stronger ties to New Jersey because of the New Jersey phone number on all of the application and renewal documents, and his New Jersey address on the renewal document for the period in which the alleged malpractice occurred. Thus, New Jersey law should apply.

New Jersey's courts have consistently (in auto insurance and legal-malractice insurance situations) protected the rights of innocent third parties when an insured has procured liability coverage through fraud. The appeals court wrote, “Like auto insurance, medical malpractice insurance is mandatory in New Jersey. N.J.S.A. 45:9-19.17(a); N.J.S.A. 45:5-5.3(a).' In the same way as the general public that uses our roadways ' medical patients can reasonably assume New Jersey doctors are complying with the law and carrying compulsory malpractice insurance. Insurance coverage in at least the minimum compulsory amount should remain available for the benefit of innocent patients who suffered injuries when the policy was in effect.” And although an insurance carrier has the right to rescind a policy when the insured has provided it materially false information, such policy cannot be voided from its inception when an innocent person seeks coverage, said the court. In that case, the insurer must provide at least the statutory minimum coverages required under state law.

'

'

'

Insurance Obtained Through Fraud Must Still Cover Innocent Parties

The Superior Court of New Jersey, Appellate Division, has affirmed a summary judgment order requiring a Rhode Island medical malpractice insurance provider to cover any medical malpractice damages awarded to a New Jersey patient, despite the fact that the insured doctor and his medical practice obtained the insurance coverage through a falsehood, and that they were not eligible to obtain that coverage under the terms of the contract. DeMarco v. Stoddard, 2014 N.J. Super. LEXIS 13 (N.J. App. Div. 1/22/14).

Through legislation (R.I. Gen. Laws ' 42-14.1-1), the Rhode Island legislature created the Medical Malpractice Joint Underwriting Association of Rhode Island (JUA) so that doctors who might not be able to obtain medical malpractice insurance elsewhere could do so through the state program. The JUA is made up of a pool of private insurance carriers and it is required to cover qualified Rhode Island doctors. In order to qualify, a doctor must be licensed in the state and conduct at least 51% of his or her medical practice in Rhode Island.

Podiatrist Dr. Sean Robert Stoddard, whose practice was located in Toms River, NJ, was insured by JUA from 2007 to 2011. He obtained the insurance through an underwriter located in Rhode Island. There was some dispute as to whether the underwriter provided the information on the application and renewals or if it was provided by Dr. Stoddard, but these documents do falsely state that at least 51% of Dr. Stoddard's practice was being generated in Rhode Island. The application and the first two renewals gave a Newport, RI, address for the doctor, but a New Jersey telephone number. The renewal document for the 2010-2011 period relevant to the malpractice claim in issue in DeMarco gave the doctor's New Jersey address and telephone number. At no time during the time he was insured by JUA did the doctor practice in Rhode Island.

In 2010, the plaintiff underwent surgery that he claimed was negligently performed. He brought suit for medical malpractice. Dr. Stoddard received the summons and complaint in California after he moved there to start a new practice. He soon informed the plaintiffs that the JUA had disclaimed responsibility for covering the plaintiff's claims because the doctor had not conducted at least 51% of his practice in Rhode Island during the period when the alleged injury occurred.

The JUA sought and obtained a declaratory judgment from a Rhode Island court to the effect that it did not have to cover claims brought against Dr. Stoddard. The DeMarco plaintiffs then sought and obtained a contrary declaration from the New Jersey trial court: The JUA indeed must indemnify Dr. Stoddard in this medical malpractice case. The JUA appealed, and the trial court stayed the underlying medical malpractice case pending the appeal's outcome.

First, the appeals court determined that the Rhode Island declaratory judgment was not binding on the medical malpractice plaintiffs, as the Rhode Island court did not exercise jurisdiction over them; the declaration was therefore binding only on Dr. Stoddard and the JUA.

Next, the court determined that New Jersey had a greater interest in the case than did Rhode Island, in part because the JUA had had some notice of Dr. Stoddard's stronger ties to New Jersey because of the New Jersey phone number on all of the application and renewal documents, and his New Jersey address on the renewal document for the period in which the alleged malpractice occurred. Thus, New Jersey law should apply.

New Jersey's courts have consistently (in auto insurance and legal-malractice insurance situations) protected the rights of innocent third parties when an insured has procured liability coverage through fraud. The appeals court wrote, “Like auto insurance, medical malpractice insurance is mandatory in New Jersey. N.J.S.A. 45:9-19.17(a); N.J.S.A. 45:5-5.3(a).' In the same way as the general public that uses our roadways ' medical patients can reasonably assume New Jersey doctors are complying with the law and carrying compulsory malpractice insurance. Insurance coverage in at least the minimum compulsory amount should remain available for the benefit of innocent patients who suffered injuries when the policy was in effect.” And although an insurance carrier has the right to rescind a policy when the insured has provided it materially false information, such policy cannot be voided from its inception when an innocent person seeks coverage, said the court. In that case, the insurer must provide at least the statutory minimum coverages required under state law.

'

'

'