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Rescinded policy affords no coverage for the plaintiff in pending suit.

January 15, 2016
DeMarco v. Stoddard, A-104 September Term 2013, 073949; 2015 N.J. LEXIS 1237 (N.J. December 1, 2015) (en banc)

The defendant, a medical professional, made material misrepresentations on his annual renewal form for his malpractice insurance policy. He was later sued for professional negligence and referred the claim to his insurance carrier. The carrier determined that the defendant did not meet the coverage requirements, despite his false contrary representations, and rescinded the policy. The carrier put both the defendant and the plaintiff on notice of this situation, and the plaintiff amended the complaint to add the carrier, seeking a declaration that coverage for the suit existed. The Superior Court and Appellate Division held that the rescission could not leave the innocent plaintiff unprotected and so concluded that coverage for this action existed, despite the otherwise proper rescission of the policy. The Supreme Court reversed, holding that the rescission of the policy was correct, leaving the defendant without insurance coverage for the case. The court rejected arguments to reform the policy to provide coverage for the benefit of the injured, innocent plaintiff.

Case Law Alerts, 1st Quarter, January 2016

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