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Certain Underwriters at Lloyd's v. Cohen

United States District Court, D. Maryland

March 6, 2014

Certain Underwriters at Lloyd's, London Subscribing to Certificate Nos. 1149760, 1149761 and 1149763
v.
Max Harry Cohen, M.D., and Max Harry Cohen, M.D., Chtd.

MEMORANDUM OPINION

JILLYN K. SCHULZE, Magistrate Judge.

Presently pending are Plaintiffs' Motion for Summary Judgment, ECF No. 31, Defendants' Cross Motion for Summary Judgment, ECF No. 35, Plaintiffs' Motion to Exclude Opinion Testimony of David Paige, ECF No. 37, and Defendants' Motion to Exclude Opinion Testimony of Thomas R. Petersen, ECF No. 36. The issues have been fully briefed and no hearing is necessary. See Local Rule 105.6. For the reasons set forth below, Plaintiffs' motion for summary judgment will be granted, Defendants' motion for summary judgment will be denied, Plaintiffs' motion to exclude will be denied as moot, and Defendants' motion to exclude will be denied as moot.

I. Background.

The following facts are either undisputed or are taken in the light most favorable to Defendants. Plaintiffs are underwriters at Lloyd's of London subscribing to certificate numbers 1149760, 1149761 and 1149763. Defendants are Dr. Max H. Cohen, a general surgeon, and his company, Max Harry Cohen, M.D., Chtd., the corporate entity established to operate his practice. ECF No. 1 at 2. Plaintiffs allege that Dr. Cohen made material misrepresentations on applications for disability insurance and seek a declaration that their decision to rescind the policies was proper.

On April 1, 2011, Dr. Cohen submitted initial applications for disability insurance coverage to Petersen International Underwriters (PIU). ECF No. 35 at 3; Bernau Aff. ¶ 2, Ex. A at 48:21-49:3. PIU is a Lloyd's coverholder with authority to bind disability insurance coverage for various Lloyd's syndicates. Bernau Aff. ¶ 2, Ex. A at 9:17-10:4. In the applications, Dr. Cohen listed his employment address in Potomac, Md. He answered "Yes" to the question "Are you actively at work?" He stated that his "occupation" was "surgeon" and his "daily duties" were "surgery." Petersen Aff. ¶ 2, Ex. B at UWS 0133, 157, 182. He answered "No" when asked "Are you a party to any legal proceeding at this time?" Id. He responded "No" when asked "Are you aware of any facts that could change your occupation or financial stability?" and gratuitously added "opening D.C. Office." Id. Dr. Cohen signed final applications, with the same answers, on August 8, 2011, and the policies became effective immediately thereafter. Petersen Aff. ¶ 2, Ex. B at UWS 0136; Petersen Aff. ¶ 3, Ex. C at UWS 0160; Peterson Aff. ¶ 4, Ex. D at UWS 0185; Bernau Aff. ¶ 2, Ex. A at 48:6-49:3; Def.'s Answer to Pls.' Complaint ¶¶ 6, 17; Petersen Aff. ¶ 2-4, Exs. B-D; Bernau Aff. ¶ 2, Ex. A at 48:6-49:3.

On April 12, 2011, less than two weeks after submitting the initial applications, Dr. Cohen executed a Consent Order with the Maryland State Board of Physicians (the Board), Bernau Aff. ¶ 3, Ex. B at UWS 0089, the terms of which he had accepted on February 2, 2011. Id. at 0069-70. The Order memorialized the findings of the Board related to a grievance initiated on August 16, 2010, charging Dr. Cohen with multiple violations of the Maryland Medical Practice Act. Id. at UWS 0096. The Order found that, among other things, Dr. Cohen violated the standard of quality care, see MD. CODE ANN., HEALTH OCC. (H.O.) § 14-404(a)(22) (1981, 2009 Repl. Vol.), grossly over-utilized health care services, see H.O. § 14-404(a)(19), and failed to maintain adequate medical records, see H.O. § 14-404(a)(40). Id. at UWS 0085. The agreed sanctions included a three month suspension of Dr. Cohen's license to practice medicine, beginning on August 2, 2011, six days before Dr. Cohen signed the final policy applications. Id. Moreover, during the three-month period prior to the suspension, Dr. Cohen agreed to wind down his practice and refer all patients to other practitioners. Id. Following the wind down and subsequent suspension, Dr. Cohen had to provide the Board with 60 days' notice of his intent to become clinically active; if he returned to practice, he would be on five years' probation, subject to various terms and conditions. Id. at UWS 0086-87. For the first year of active practice, Dr. Cohen would be supervised and required to obtain a second opinion from a "Board-approved supervisor" to confirm the medical necessity of, and technique used for, any surgical/diagnostic procedure that he prescribed for his patients. Id. at UWS 0086. Finally, Dr. Cohen agreed to pay a $5, 000 fine. Id. at UWS 0087.

The District of Columbia Board of Medicine issued an order dated December 19, 2012, placing Dr. Cohen on probation for five years and imposing various other limitations, restrictions, and obligations regarding his practice of medicine in that jurisdiction. Petersen Aff. at ¶ 11; Bernau Aff. at ¶ 4, Ex. C at 1250-55. This D.C. order was based solely on the Maryland Consent Order. Id.

On September 8, 2011, one month after the disability policies became effective, Dr. Cohen sought medical treatment for numbness in his right thumb and pain in his right leg after falling. ECF No. 22, Cohen Answer to Amended Complaint at ¶ 18. On September 30, 2011, Dr. Cohen's agent provided Plaintiffs with notice of a potential claim resulting from the September 8, 2011 fall. Cohen Answer at ¶ 19. Plaintiffs retained Disability Management Services, Inc. (DMS) to investigate and adjust the potential claim, and on October 3, 2011, Dr. Cohen confirmed his intent to file the claim. Id.

During its investigation, DMS learned of the Consent Order and its contents, and, as a result, advised Dr. Cohen of Plaintiffs' intent to rescind the policies. Cohen Answer at ¶ 22; Bernau Aff. at ¶ 5, Ex. D at UWS 0507-11. Enclosed with that letter was a check refunding Dr. Cohen's premium payments with interest. Cohen Answer at ¶ 23; Bernau Aff. at ¶ 5, Ex. D at UWS 0512-22. Dr. Cohen responded with numerous telephone calls and facsimiles to DMS, Cohen Answer at ¶ 24, and initiated the policies' grievance procedures. Id. DMS conducted a review and affirmed the rescission decision. Id.; Bernau Aff. at ¶ 6, Ex. E at UWS 0846-49. Upon Dr. Cohen's request for an informal review, Plaintiffs retained outside counsel to reexamine the matter and again upheld the rescission on August 7, 2012. Cohen Answer at ¶ 24; Bernau Aff. at ¶ 7, Ex. F at UWS 0112. Plaintiffs subsequently filed this action seeking a declaration that the policies were properly rescinded.

II. Standard of Review.

A motion for summary judgment will be granted only if there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). When ruling on a motion for summary judgment, the court must construe the facts alleged in the light most favorable to the party opposing the motion. Emmett, 532 F.3d at 297. "A party who bears the burden of proof on a particular claim must factually support each element of his or her claim." Billco Int'l, Inc. v. Charles Prods., 776 F.Supp.2d 105, 110 (D. Md. 2011) (citation omitted). "A complete failure of proof concerning an essential element... necessarily renders all other facts immaterial." Id. "Thus, on those issues on which the nonmoving party will have the burden of proof, it is his or her responsibility to confront the motion for summary judgment with an affidavit or other similar evidence in order to show the existence of a genuine issue for trial." Id. "A mere scintilla of proof, however, will not suffice to prevent summary judgment." Peters v. Jenney, 327 F.3d 307, 314 (4th Cir. 2003). There must be sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Billco, 776 F.Supp.2d at 110 (citation and quotation marks omitted).

III. Discussion.

Plaintiffs assert that they were justified in rescinding the disability insurance policies because of material misrepresentations in Dr. Cohen's applications. A material misrepresentation in an application invalidates an insurance policy issued on the basis of that application. Bryant v. Provident Life & Accident Ins. Co., 22 F.Supp.2d 495, 497 (D. Md. 1998) (citation omitted). This principle is also recited in the Insurance Article of the Maryland Code:

A misrepresentation, omission, concealment of facts, or incorrect statement does not prevent a recovery under ...

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