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Dispute Over Rescinding a Clinic’s Medical Malpractice Coverage Must Go to Court

By Jack H. FarnbauchSeptember 7, 2017

Birmingham, Alabama-based ProAssurance Indemnity Co. Inc. had provided medical malpractice coverage to Kokomo, Indiana-based Wagoner Medical Center L.L.C. and many of its employees between 2001 and 2013. In seeking to rescind its policies, ProAsusrance alleged several defendants in the case made material misrepresentations and omissions related to the illegal prescription of controlled substances.

According to a news report, Kokomo police and U.S. Drug Enforcement Agency officers raided the two Wagoner clinics in Kokomo and Burlington, Indiana, in March 2013 and arrested several clinic doctors and employees a month later. Prosecutors filed 95 charges in April 2013, stating more than two dozen people died as a result of illegal prescribing practices.

The issue of whether an insurer can rescind the medical malpractice policies of medical clinics, several of whose employees were charged with writing illegal prescriptions, will have to be decided at trial, says a federal court in Indianapolis. “In order to ascertain whether ProAssurance was required to tender premiums back to the insureds before seeking rescission of the policies, the court must determine whether ProAssurance paid claims under the policies that were greater in amount than the premiums it received,” said the ruling.

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