Monday, March 10, 2014

Court holds failure to disclose on insurance application potential malpractice claim voids malpractice policy

Joyce Hurley injured her Achilles tendon in 1998 when she tripped on a grate.  Attorney Elizabeth Comproni filed a personal injury action for her in 2001. That case was dismissed for lack of service on July 17, 2001.  By that time the statute of limitations on the claim had run.

Comproni waited more than ten months to file a motion to vacate the dismissal.  The motion was granted on June 11, 2002, and the court gave Hurley 60 days to complete service.  Service was not made.  On March 30, 2004 the court dismissed the case sua sponte.  Comproni filed another motion to vacate, which was denied on October 21, 2004.

A week after denial of the second motion to vacate, Comproni notified her insurer of Hurley's potential malpractice claim.  The malpractice claim was filed almost three years later. 

The policy at issue applied to claims "made and reported" between January 3, 2004 and January 3, 2005.  The policy had a prior acts exclusion endorsement that excluded coverage for claims based on acts and omissions that predated January 3, 2003, the effective date of the initial policy.  When Comproni applied for the initial policy she was required to notify the insurer of any incidents which may give rise to a claim.  The policy stated that it would be void if there were any false or misleading statements in the application. Comproni did not at that time inform the insurer of Hurley's potential claim.

In Hurley v. Comproni, 85 Mass. App. Ct. 1101, 2014 WL 683731  (unpublished), the Massachusetts Appeals Court held that the insurer owes no malpractice coverage for claims based on Comproni's acts or omissions that predated January 3, 2003.  It was undisputed that Comproni had by that date allowed the second service of process deadline to expire. 

Hurley argued that Comproni's inattention to the case continued after January 3, 2003, and that the malpractice claim was based in part on that conduct.  Hurley argued that until the court dismissed the case a second time, there was a possibility that a judge would have allowed a further extension of the service deadline. 

The court held there was no coverage.  An extension of a service deadline is granted for good cause.  No grounds appeared on the record showing that there was good cause to grant a second extension. 

The court also ruled that Comproni's failure to disclose in the application Hurley's potential malpractice voided the policy.

Although it is a slightly different analysis than that done by the court, it is always worthwhile to remember that notice requirements are different in claims-made policies, like Comproni's and most malpractice policies, and occurrence policies, like most general liability policies.  Although occurrence policies generally require notice of a claim "as soon as practicable," under the law of Massachusetts (but not every state) coverage for the claim will not be voided unless the late notice was prejudicial to the insurer.  Not so with claims-made policies, under which late notice will void coverage whether or not there is prejudice. 

No comments: