Insurance — Professional Liability – Medical Malpractice – Imposter Doctor

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Evanston Insurance Co. v. Watts (Lawyers Weekly No. 002-200-14, 26 pp.) (Joseph Anderson Jr., J.) 3:13-cv-00655; D.S.C.

Holding: Although plaintiff’s professional liability policy does not provide coverage to a man who assumed the identity of a doctor and practiced medicine without a license, the policy does provide coverage to the company he worked for and to his co-workers.

The parties’ cross-motions for summary judgment are granted in part and denied in part.

Earnest Addo assumed the identity of Dr. Arthur Kennedy, obtained employment with defendant Agape Senior Primary Care, Inc. (ASPC), and sought insurance coverage with plaintiff under ASPC’s professional liability insurance policy, issued by plaintiff. Plaintiff added Addo/“Kennedy” to ASPC’s policy.

Addo’s true identity was discovered, and he was indicted on federal charges of identity theft. Several lawsuits were filed against Agape and others who were “Named Insureds” under the policy.

Addo made false representations in his application for coverage under the policy; accordingly, the policy is void as to him. The question is whether the policy is also void as to his co-insureds.

In policies involving co-insureds, South Carolina has held that where an insurance policy creates several individual obligations among co-insureds, criminal acts by one co-insured do not bar the innocent co-insureds from recovering under the policy.

Plaintiff has not presented any evidence that the Agape defendants knew of Addo’s misrepresentations. Each physician was required to apply individually, and policy endorsements list specific insureds (physicians and nurse practitioners); consequently, it appears that the parties intended to make each Named Insured listed on the policy a co-insured.

In McCracken v. Government Employees Insurance Co., 284 S.C. 66, 325 S.E.2d 62 (1985), when a husband burned down a marital residence, the innocent spouse/co-insured was nevertheless entitled to recover her share of the insurance proceeds. South Carolina courts do not appear to have addressed the innocent co-insured doctrine beyond the arson context.

However, other jurisdictions have found that an innocent co-insured may recover despite fraudulent conduct by the other co-insured.

In the unpublished case of State Farm Fire & Casualty Co. v. Kelly, 345 S.C. 232 (2001), the South Carolina Court of Appeals held that “an innocent co-insured was barred from recovery under the insurance policy because that policy had specific language denying recovery if that insured or any other insured caused or procured the loss for the purpose of obtaining insurance benefits.”

Here, the policy contains no explicit language barring coverage for all insureds based on the fraud or misrepresentation of a co-insured.

Addo’s fraud does not bar the other named co-insureds from obtaining coverage under the policy.

The policy’s Endorsement 5 and Endorsement 7 may be read two ways: (1) to directly contradict each other as to who the Named Insureds are or (2) to mean that any coverage afforded to ASPC under Coverage B (corporate entities and nurse practitioners) will only apply to acts/services performed within the scope of the duties of the Coverage A Named Insureds (physicians). Resolving the ambiguity in favor of coverage, the court adopts the latter interpretation.

Defendants contend there is also an ambiguity within Endorsement 5. The clause provides coverage “solely to Claims arising from professional services rendered or that should have been rendered by Coverage A Named Insured Physicians.” Defendants interpret the clause to mean any acts that should have been performed by a Coverage A Named Insured, but were performed by someone else, would be covered under the policy. Such a tortured interpretation would undermine the very purpose of the policy and expand plaintiff’s obligations. The clause clearly refers to coverage for any acts or omissions of the Named Insureds.

Motions granted in part and denied in part.