In Karl W. McIntosh v. Allied World Ins. Co., No. 1:22-cv-00522-CFC (D. Del.), a psychiatrist submitted a renewal questionnaire for psychiatric professional liability coverage. In the questionnaire, the psychiatrist answered “no” to the question as to whether he had been convicted of any crimes or been subject to a disciplinary proceeding since his prior renewal. This answer was false, as the psychiatrist had been convicted of two misdemeanors and was subject to a licensing board sanction. The insurer learned about these matters when it received a notice of intent to investigate a malpractice claim against the psychiatrist, which referenced his criminal convictions. After investigating the matter, the insurer rescinded the policy based on the insured’s material misrepresentations. The insured challenged the rescission by filing an action in Delaware state court. 

The insurer removed the case to Delaware federal court. After the parties conducted discovery, the parties moved for summary judgment. Chief Judge Colm Connelly denied both parties’ summary judgment motions. He found that a question of fact existed as to whether the renewal questionnaire constituted an “application” for purposes of rescission under the Delaware statute. He then set the matter for a jury trial.    

BatesCarey counsel, David F. Cutter, Craig M. Leff and Emily R. Tripicchio took the matter to trial on behalf to the insurer.

At trial, the insurer presented evidence to the jury that the renewal questionnaire was part of the renewal process and supplemented prior applications; that the information that the insured submitted was false; and that the insurer would not have issued the policy had it known about these particular types of convictions, which related to the manner in which the psychiatrist conducted his business and were an indicator of increased risks. The insured argued that the renewal questionnaire, which did not have any warnings advising the insured that the responses were material and deemed to be a part of the policy, should not have the same effect as an application; that the questionnaire responses were not false because they only required that the insured disclose matters he had not previously disclosed to the insurer (and he claimed he had called the insurer to tell it about his legal problems); and that the criminal and disciplinary matters involved an insurer billing dispute that was not material to the risks associated with his practice as a psychiatrist treating patients. 

The matter was submitted to the jury, which was asked to consider six special verdict questions addressing the elements of rescission under both the Delaware statutory scheme and Delaware common law. The jury answered all six questions in favor of the insurer, finding that the insured submitted an application for insurance; that the insured submitted false information; and that the false information was material in that the insurer would not have issued the policy had it known the true facts. Based upon the special verdict, Judge Connelly entered a final declaratory judgment in favor of the insurer.