Med Mal News

Court to Decide if Med Mal Policy Survives Doctor's Fraud

The New Jersey Supreme Court heard arguments April 27 over whether a medical malpractice carrier must provide the minimum of coverage for a physician being sued, even though he made false statements on his application for a policy.

A lawyer representing one such carrier, the Medical Malpractice Joint Underwriting Association (JUA) of Rhode Island, asked the court to overturn an appeals court ruling that required coverage for podiatrist Sean Stoddard. He owned the Center for Foot & Ankle Care in Toms River and Lakewood, NJ, and told the carrier when he applied that he met the requirement that 51% of his patients were from Rhode Island when, in fact, they were not, according to court documents.

Requiring the carrier to provide at least the minimum of coverage protects the rights of an injured third party who had nothing to do with the doctor's misrepresentations to the carrier, the appeals court ruled in January 2014 in DeMarco v. Stoddard.

The JUA's attorney, Todd Leon, told the Supreme Court during arguments that the appeals court's ruling only encourages doctors to be less than forthcoming on their applications for coverage. “The lie will turn out to be unimportant,” said Leon, of Hill Wallack in Princeton, NJ. “The decision ignored public policy.” The appeals court ruling, Leon continued, could lead to a situation in which a doctor who lied on his application will still have coverage while a doctor who accidentally allowed his premiums to lapse will have nothing. “That, respectively, is not equity,” Leon said.

Chief Justice Stuart Rabner asked whether New Jersey law or Rhode Island law should apply. Leon said that since the policy was written in Rhode Island by a Rhode Island carrier, that state's law should apply and, thus, Stoddard's policy would be declared void. “The law of the place of contract governs, and he failed to meet the 51 percent standard,” he said.

Justice Barry Albin asked what the effect could be if the court decides to affirm the appeals court ruling. Leon said it would affect premiums and that it could cause some carriers to pull out of New Jersey altogether.

Hugh Francis, representing the amicus Property Casualty Insurers Association of America, agreed. There will be consequences to any affirmance, said Francis, of Francis & Berry in Morristown, NJ.

Michael Schottland, representing plaintiff Thomas DeMarco, said it appeared that Stoddard still had coverage. Stoddard, he said, has operating privileges at Newport Hospital in Newport, RI, which requires, before privileges are extended, that doctors have a minimum of $1 million in coverage.

“You can't get credentialed without the $1 million,” said Schottland, of Lomurro Munson Comer Brown & Schottland in Freehold, NJ. “You're supposed to look beyond the fraud and to the overall circumstances,” he said, adding that it would be an inequity to not allow DeMarco, an innocent, injured third party, to receive damages. There was, Schottland said, no criminal act committed here. “This is not that kind of fraud,” he said.

Albin asked how much of Stoddard's practice was in Rhode Island at the time. “I don't have a clue,” Schottland replied.

E. Drew Britcher, representing the amicus New Jersey Association for Justice, urged the court to uphold the appeals court ruling. “The policy of New Jersey is to protect its citizens from malpractice,” said Britcher, of Britcher, Leone & Roth in Glen Rock.

Stoddard had a medical malpractice policy from 2007 until 2011 with the JUA, according to court documents. The JUA provided policies for physicians who could not otherwise get coverage. A doctor who also practiced outside of Rhode Island could be covered if at least 51% of his practice was generated in Rhode Island. 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% of his business was generated in Rhode Island, court documents said.

Stoddard operated on DeMarco's foot in September 2010. Several months later, Stoddard told DeMarco he was closing his New Jersey practice and moving to California, according to court documents. DeMarco's foot condition worsened and he and his wife, Cynthia, filed a malpractice suit against Stoddard in October 2011. The JUA refused to provide any coverage after discovering that Stoddard had not been practicing in Rhode Island, and a court in that state allowed the JUA to rescind its policies, court documents said. DeMarco, after learning that Stoddard was going through a divorce and had no personal assets, amended his complaint to add the JUA as a defendant, demanding that it provide indemnification for Stoddard. Ocean County Superior Court Judge Mark Troncone denied the JUA's motion to dismiss and required the carrier to provide coverage for Stoddard. The JUA appealed.

The appeals court said Troncone ruled correctly. “The DeMarcos are innocent third parties with respect to Stoddard's misrepresentations,” Appellate Division Judge Victor Ashrafi said. Medical malpractice coverage is akin to automobile insurance coverage in New Jersey because both are mandatory, he said. The state requires doctors to have coverage worth at least $1 million per occurrence. If coverage is not available, doctors must have a letter of credit worth at least $500,000. “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,” Ashrafi said. ' Michael Booth, New Jersey Law Journal

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Court to Decide if Med Mal Policy Survives Doctor's Fraud

The New Jersey Supreme Court heard arguments April 27 over whether a medical malpractice carrier must provide the minimum of coverage for a physician being sued, even though he made false statements on his application for a policy.

A lawyer representing one such carrier, the Medical Malpractice Joint Underwriting Association (JUA) of Rhode Island, asked the court to overturn an appeals court ruling that required coverage for podiatrist Sean Stoddard. He owned the Center for Foot & Ankle Care in Toms River and Lakewood, NJ, and told the carrier when he applied that he met the requirement that 51% of his patients were from Rhode Island when, in fact, they were not, according to court documents.

Requiring the carrier to provide at least the minimum of coverage protects the rights of an injured third party who had nothing to do with the doctor's misrepresentations to the carrier, the appeals court ruled in January 2014 in DeMarco v. Stoddard.

The JUA's attorney, Todd Leon, told the Supreme Court during arguments that the appeals court's ruling only encourages doctors to be less than forthcoming on their applications for coverage. “The lie will turn out to be unimportant,” said Leon, of Hill Wallack in Princeton, NJ. “The decision ignored public policy.” The appeals court ruling, Leon continued, could lead to a situation in which a doctor who lied on his application will still have coverage while a doctor who accidentally allowed his premiums to lapse will have nothing. “That, respectively, is not equity,” Leon said.

Chief Justice Stuart Rabner asked whether New Jersey law or Rhode Island law should apply. Leon said that since the policy was written in Rhode Island by a Rhode Island carrier, that state's law should apply and, thus, Stoddard's policy would be declared void. “The law of the place of contract governs, and he failed to meet the 51 percent standard,” he said.

Justice Barry Albin asked what the effect could be if the court decides to affirm the appeals court ruling. Leon said it would affect premiums and that it could cause some carriers to pull out of New Jersey altogether.

Hugh Francis, representing the amicus Property Casualty Insurers Association of America, agreed. There will be consequences to any affirmance, said Francis, of Francis & Berry in Morristown, NJ.

Michael Schottland, representing plaintiff Thomas DeMarco, said it appeared that Stoddard still had coverage. Stoddard, he said, has operating privileges at Newport Hospital in Newport, RI, which requires, before privileges are extended, that doctors have a minimum of $1 million in coverage.

“You can't get credentialed without the $1 million,” said Schottland, of Lomurro Munson Comer Brown & Schottland in Freehold, NJ. “You're supposed to look beyond the fraud and to the overall circumstances,” he said, adding that it would be an inequity to not allow DeMarco, an innocent, injured third party, to receive damages. There was, Schottland said, no criminal act committed here. “This is not that kind of fraud,” he said.

Albin asked how much of Stoddard's practice was in Rhode Island at the time. “I don't have a clue,” Schottland replied.

E. Drew Britcher, representing the amicus New Jersey Association for Justice, urged the court to uphold the appeals court ruling. “The policy of New Jersey is to protect its citizens from malpractice,” said Britcher, of Britcher, Leone & Roth in Glen Rock.

Stoddard had a medical malpractice policy from 2007 until 2011 with the JUA, according to court documents. The JUA provided policies for physicians who could not otherwise get coverage. A doctor who also practiced outside of Rhode Island could be covered if at least 51% of his practice was generated in Rhode Island. 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% of his business was generated in Rhode Island, court documents said.

Stoddard operated on DeMarco's foot in September 2010. Several months later, Stoddard told DeMarco he was closing his New Jersey practice and moving to California, according to court documents. DeMarco's foot condition worsened and he and his wife, Cynthia, filed a malpractice suit against Stoddard in October 2011. The JUA refused to provide any coverage after discovering that Stoddard had not been practicing in Rhode Island, and a court in that state allowed the JUA to rescind its policies, court documents said. DeMarco, after learning that Stoddard was going through a divorce and had no personal assets, amended his complaint to add the JUA as a defendant, demanding that it provide indemnification for Stoddard. Ocean County Superior Court Judge Mark Troncone denied the JUA's motion to dismiss and required the carrier to provide coverage for Stoddard. The JUA appealed.

The appeals court said Troncone ruled correctly. “The DeMarcos are innocent third parties with respect to Stoddard's misrepresentations,” Appellate Division Judge Victor Ashrafi said. Medical malpractice coverage is akin to automobile insurance coverage in New Jersey because both are mandatory, he said. The state requires doctors to have coverage worth at least $1 million per occurrence. If coverage is not available, doctors must have a letter of credit worth at least $500,000. “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,” Ashrafi said. ' Michael Booth, New Jersey Law Journal

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