If Lawyers Lie on Insurance Application Policy Rescinded
Post 4982
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In Schibell, Mennie & Kentos, et al v. Allied World Insurance Company et al, No. A-3144-22, Superior Court of New Jersey, Appellate Division (December 20, 2024) resolved the disputes.
KEY FINDINGS
Material misrepresentations in an insurance application allow the insurer to void the policy ab initio.
1. A fact is material if it would influence the insurer’s judgment in issuing the policy.
2. New Jersey law permits contract rescission based on equitable fraud without needing to prove the defendant’s intent to deceive.
3. The Firm’s application and renewals contained material misrepresentations, leading to the policy being void from inception.
Since the policy was void at inception due to these misrepresentations, Allied is not liable.
FACTS
The state Office of Attorney Ethics (OAE) found Schibell lied.
A special ethics master (SEM) recommended the Court suspend Schibell’s license for six months. The Disciplinary Review Board (DRB) issued a thirty-six-page opinion affirming the SEM’s findings that Schibell’s unethical conduct was established by clear and convincing evidence.
Schibell admitted he omitted the disciplinary action on his policy application. On October 28, 2019, Allied rescinded the malpractice policy to the Firm.
OPINIONS
The Appellate Division concluded that the undisputed facts established plaintiffs’ representation in the malpractice policy application and renewals were material and false and voided the policy ab initio (from its inception).
A fact is material if it naturally and reasonably influenced the judgment of the underwriter.
Equitable fraud does not require insurer to need not establish the defendant’s scienter.
The insurance contract at issue is void at its inception based on the material misrepresentation by the Firm in the initial policy application and continued throughout the renewals. The Appellate Division concluded that the plaintiffs’ misrepresentations voided the policy from its inception.
ZALMA OPINION
Much to the surprise of some litigants and their lawyers the covenant of good faith and fair dealing applies equally to the insured as it applies to the insurer. In this case, the insured lawyer and law firm, misrepresented to its insurer that it had not been disciplined by the state with full knowledge that the statement was false. Rescission was proper because the insurer relied on the statements made by the insured lawyer and law firm.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Post number 5368
Posted on June 9, 2026 by Barry Zalma
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After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because...
Full Faith and Credit Act Controlled
Read the full article at https://lnkd.in/evHXiiFE and at https://zalma.com/blog.
Posted on June 9, 2026 by Barry Zalma
Post number 5368
Posted on June 9, 2026 by Barry Zalma
In Prime Insurance Company, Inc. v. Medicab Transportation, LLC, Jason Rhodes, and Dale Johnson v. Prime Insurance Company, Inc and Prime Property & Casualty Insurance, Inc. No. 2:24-cv-421-SPC-KRH, United States District Court, M.D. Florida, Fort Myers Division (June 3, 2026) Medicab, a paratransit company, bought two policies in 2021: a Business Auto Policy from PPCI and a Commercial Liability Policy from Prime. Both policies, as originally written, appeared to cover injuries arising from loading and unloading patients from Medicab vans.
After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because...
