NJ Supreme Court Upholds Insurer’s Right To Rescind When Professional Liability Coverage Is Procured By Fraud

On December 1, 2015, in DeMarco v. Stoddard, the New Jersey Supreme Court, in a 5–2 decision, reversed an Appellate Division decision, DeMarco v. Stoddard, 434 N.J. Super. 352 (App Div. 2014), and held in favor of the insurance company in upholding an insurer’s right to rescind when professional liability insurance is procured by fraud. DeMarco involved a podiatrist who practiced in New Jersey and Rhode Island. To get favorable malpractice insurance rates, the podiatrist applied to the Rhode Island Joint Underwriting Association (RIJUA) and lied on his application, purporting that his practice was predominantly in Rhode Island. This coverage of $1 million from the RIJUA allowed the podiatrist to comply with a New Jersey statute mandating medical malpractice coverage for New Jersey physicians and podiatrists of $1–$3 million.