Insurer Keeps on Smiling: Court Rules No Need to Defend Lying Dentist
Dr. Anne Fabricius purchased the dentistry practice of retiring dentist Dr. Lawrence Smith. Fabricius soon discovered that Smith had used procedure codes to make his dental practice appear more high-end, which misrepresented the value of the practice.
Fabricius wanted to rescind the agreement. Her lawsuit stated she overpaid for Smith’s practice due to inflated revenues stemming from unnecessary dental procedures conducted on patients.
Smith held a professional liability insurance policy through The Medical Protective Company (MedPro) while at his practice. Fabricius contacted MedPro to inform the insurer of the suit she filed against Smith in late 2014. In August 2015, nine months later, Smith’s insurance broker reported the lawsuit to MedPro.
MedPro denied coverage due to late notice, disclaiming any duty to defend or indemnify Smith. Smith’s former patients also began an investigation of his practice. MedPro was informed of the investigation and potential suit, but still denied coverage.
The court was tasked with examining both suits. Smith argued that the two were related, and under the policy, that would mean the insurer had a duty to defend. He claimed MedPro’s Dental Malpractice 101 document outlined that it would cover certain acts of malpractice because the necessity of a procedure “is a matter of professional judgment of a dentist.”
Because Fabricius’s suit mentioned the alleged malpractice, Smith further argued, MedPro was on the hook for both legal actions. Upon review, the court decided Fabricius’ case was not solely about malpractice.
“Fabricius’ claims are not dependent on showing that damages resulted from unnecessary dental procedures. The alleged injury and damages arise from Fabricius’ overpayment for the practice. Accordingly, this Court finds that MedPro has no duty to defend Smith against the Fabricius lawsuit,” the court opinion read.
Scorecard: MedPro will not need to cover defense or indemnify Lawrence Smith for fraudulently selling his dentistry business. Malpractice coverage has yet to be determined.
Takeaway: Insureds are wise to file any claims with their insurer as they happen and not months after the fact. Further, if multiple allegations come to light, an insured’s best practice would be to notify the insurer immediately.