Applicant for Insurance is Obligated to Advise Insurer in Material Changes After Application Was Signed
Post number 5371
Read the full article at https://www.linkedin.com/pulse/physicians-malpractice-insurance-available-when-zalma-esq-cfe-fmpxc and https://zalma.com/blog.
Doctor Criminally Charged and License Suspended After Application Signed had Policy Rescinded for Failure to Advise Insurer of Change
In Xiang (Sean) Yuan, M.D. v. Positive Physicians Insurance Company, No. 1821 EDA 2025, No. J-A08033-26, Superior Court of Pennsylvania (May 29, 2026) Dr. Xiang (Sean) Yuan, a physician, sought renewal of his professional liability insurance policy with Positive Physicians Insurance Company (PPIC) in June 2020 and again in May 2021.
In the June 2020 renewal application, he answered “no” to questions asking whether he knew of any circumstances that might lead to a professional liability claim.
Two days after signing the 2020 renewal application, Dr. Yuan was charged with 36 criminal offenses, and shortly thereafter his medical license was suspended for about three months. He did not notify PPIC of either development.
LAW
Under Pennsylvania law, an insurer may rescind an insurance policy if the insured obtained or maintained it through fraudulent material misrepresentations.
DISCUSSION / ANALYSIS
The court found that the criminal charges and medical license suspension were plainly material. By remaining silent after those developments, Dr. Yuan concealed material facts from PPIC.
The appellate court concluded that even the most unsophisticated person must know that, in answering the questionnaire and submitting it to the insurer, he is furnishing data on the basis of which the company will decide whether, by issuing a policy, it wishes to insure him.
The Superior Court of Pennsylvania held that Dr. Yuan had a continuing duty to disclose material changes to his insurance applications. As the United States Supreme Court aptly declared in Stipcich v. Metropolitan Life Ins. Co., 277 U.S. 311, 316-17 (1928). His failure to do so amounted to material misrepresentations, allowing PPIC to rescind the malpractice insurance policy and avoid any duty to defend him in the underlying malpractice suit.
ZALMA OPINION
As Lord Mansfield said in Carter v. Boehm in 1766 the covenant of good faith and fair dealing applies equally to the insured and the insurer to do nothing to deprive the other of the benefits of the contract. He did not do so and his insurer properly rescinded the policy.
(c) 2026 Barry Zalma & ClaimSchool, Inc.
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LAW:
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Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
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LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.
DISCUSSION/ANALYSIS:
As a result, the...
