Catch Me If You Can: Fake Doctor's Application Voids Coverage For Himself But Not For Innocent Co-Insureds

This post was written by Kevin B. Dreher and Natalie C. Metropulos.

In life, sometimes even the law imitates art. As if copied straight out of the script of “Catch Me If You Can,” the U.S. District Court in South Carolina issued a ruling on October 21, 2014 in which it held that despite a false application for professional liability insurance submitted by an applicant pretending to be a doctor, the insurance afforded to the company and other doctors and nurses identified as named insureds under the policy remained in force and was not void ab initio as to the innocent co-insureds. Evanston Insurance Company v. Agape Senior Primary Care, et al., 2014 WL 5365679.

As Frank Abagnale Jr. said to Carl Hanratty, “people only know what you tell them.” Earnest Addo took that to heart and posed as Dr. Arthur Kennedy to obtain employment with Agape Senior Primary Care. Once employed, he filled out an application for professional liability insurance with Agape’s professional liability insurer, Evanston, warranting that he was a licensed medical doctor. Turns out Addo’s representations in his application to Evanston were false – he was in fact not a doctor. After discovering the fraud, Evanston sought to void the coverage it issued to Dr. Kennedy (a/k/a Addo) along with the coverage it issued to Agape and to every other doctor, nurse and health care professional employed by Agape.

 

In holding that Addo’s coverage should be voided but coverage for the innocent co-insureds should be upheld, the court relied on South Carolina law which stands for the proposition that where an insurance policy creates several, individual obligations among co-insureds, criminal acts or misrepresentations by one co-insured does not bar the innocent co-insureds from recovering under the policy. McCracken v. Government Employees, Ins. Co., 325 S.E.2d 62 (S.C. 1985).

The court’s ruling in Agape serves as a reminder to policyholders to review professional liability policies as well as directors & officers liability policies to ensure that the insurance coverage provided is properly protected from the wrongful conduct of a single individual insured.

Answers To The Most Common And Perplexing Questions About Professional Liability Coverage

Reed Smith partner Tom Marrinson, resident in the firm’s Chicago office, has been advising policyholders about their insurance coverage, and representing them in coverage litigation, for more than 20 years. While Tom’s experience ranges widely, he has literally written the book on insurance coverage for professionals and companies that employ them

Professional Liability Insurance, published by Law Journal Press, is written to appeal to both the neophyte and those with considerable experience in the area of professional liability insurance. The book begins with some of the basics of professional liability insurance (such as, who is a "professional" and what types of services are considered "professional services") and how a professional liability insurance policy is put together, in an attempt to provide a basic background for the more in-depth look that the book takes at some of the other issues confronting those involved in professional liability insurance disputes.

 

 

Many of the topics covered in depth are similar to those that would be encountered in other types of insurance contexts. For example, the book contains a discussion of notice issues (although with a keener focus on claims-made policies than might be the case in a more general insurance treatise), rescission, the duty-to-defend, and exclusions that are found in both professional liability and other types of policies.

In treating these issues, however, the book attempts to focus on cases involving professional liability insurance and to focus on those aspects of the issues that have not necessarily been detailed in other insurance treatises. For example, in handling the duty-to-defend discussion, Tom has attempted to place the book’s focus less on the well-established and already well-known principles governing the duty to defend and more on the types of "in the trenches" issues faced in attorneys’ day-to-day practice, such as what standards are used to determine reasonableness of defense costs, how courts have handled recoverability of Westlaw charges and travel expenses, etc.

Other topics covered by the book that might be of more general interest but that the book attempts to handle in more practical detail than might be the case with other insurance treatises are allocation of loss between covered and non-covered claims, control of settlement, and insurer recoupment of defense costs or settlements paid with reservation of rights.

The book also contains several sections that are specific to insurance issues that face specific professions (for example, doctors or lawyers) or that involve issues that tend to arise repeatedly and in a very specific way in the context of professional liability insurance. For example, "innocent insured" issues (both with respect to rescission claims and application of conduct-based exclusions) tend to involve recurring fact patterns in the professional liability insurance area, as do issues involving prior knowledge exclusions (i.e., exclusions for claims resulting from acts or omissions which the insured reasonably expected to give rise to a claim prior to policy issuance).