Lexington Insurance Company v. Cormier

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF LOUISIANA

LAFAYETTE DIVISION

LEXINGTON INSURANCE CO CASE NO. 6:20-CV-00669

VERSUS JUDGE ROBERT R. SUMMERHAYS

JASON L CORMIER ET AL MAGISTRATE JUDGE CAROL □□□

WHITEHURST

MEMORANDUM RULING

Presently before the Court are the (1) Motion for Summary Judgment [ECF No. 37] filed

by defendants Jason L. Cormier, M.D. and Jason L. Cormier, M.D., APMC; and (2) Plaintiff

Lexington Insurance Company’s (“Lexington”) Motion for Partial Summary Judgment [ECF No.

39]. Each motion is opposed.

I.

BACKGROUND

This case arises out of Lexington’s decision not to renew a professional liability policy

issued to Jason L. Cormier, M.D. and Jason L. Cormier, M.D., APMC (collectively “Defendants”).

Lexington alleges that Defendants intentionally misrepresented Dr. Cormier’s malpractice claims

history in the initial application for the insurance policy in order to deceive Lexington into

providing coverage.! Defendants deny those allegations and filed a Counter-claim for breach of

contract, bad faith, and damages.”

Dr. Cormier is a board-certified neurosurgeon.? When he first started practicing medicine

in Lafayette, Dr. Cormier established a professional relationship with a company called Probill of

Lafayette, Inc. (“Probill”) to help him with the “business side” of his medical practice.4 Cynthia

1 ECF No. 1.

2 ECF No. 8.

3 ECF No. 37-19, § 1.

4 ECF No. 37, Exhibit B.

Fernandez (““Ms. Fernandez”) and others at Probill worked with Dr. Cormier to form his business

entities, open bank accounts, secure hospital credentials, set up medical billing procedures, hire

and train employees, manage his payroll and, most important to this motion, procure professional

liability insurance coverage.? In 2010, Ms. Fernandez assisted Defendants in obtaining

professional liability coverage through Practice Protection Fund (“PPF”).° Ms. Fernandez, with

the help of a licensed insurance agent Jon Andonie (“Mr. Andonie”), renewed coverage through

PPF for Defendants each year.’ In the spring of 2018, Mr. Andonie learned that PPF was insolvent,

and he was approached by the insurance agency that wrote Lexington policies, Louisiana Premier

Physicians Program (“LP3”), to bring over medical providers from PPF to Lexington.® Mr.

Andonie and Ms. Fernandez initiated Defendants’ application process for coverage through

Lexington by completing an initial short form application. Mr. Andonie pre-filled the short form

application? and the application was signed by Ms. Fernandez.'® Numerous questions on the short

form application were left blank, including:

Do you or any entity to be insured have active claims awaiting Medical Review

Panels? How many? How many claims have been completed by

Medical Review Panels? Did any result in adverse decisions or settlements?

How many claims are awaiting trial? Completed trial?

Any judgments or settlements paid on your behalf?

Despite the omissions, LP3 decided to continue the application process and request a long

form application.'! On July 19, 2018, Dr. Cormier submitted his completed long form application

for professional liability insurance to LP3.! In the application, the box for “No” was checked for

each of the following questions:

5 ECF No. 37, Exhibit C.

5 ECF No. 37-19, 4 4.

7 Id.

8 ECF No. 37-19, 75.

ECF No. 37, Exhibit I, Andonie Pre-Typed Short Form Application.

10 ECF No. 37, Exhibit L, Short Form Application.

11 ECF No. 39, Exhibit H.

2 ECF No. 37, Exhibit K.

“Have you or any entity to be insured EVER had a claim/suit go beyond Medical

Review Panel Proceeding?”

Do you or any entity to be insured CURRENTLY have a Medical Review Panel

Proceeding pending or have knowledge of an impending complaint?”

“Has any petition, claim or suit for alleged malpractice ever been brought against

y ou?”!3

Each of these answers was inaccurate as Dr. Cormier had eleven malpractice claims asserted

against him according to the summary judgment record. Specifically, Dr. Cormier’s claims history

included (1) five medical review panels that were pending at that time; (2) four medical review

panels.that had previously been completed, two of which were completed during the time that he

was attempting to obtain coverage from Lexington (one on May 31, 2018 and one on June 28,

2018); (3) two prior medical review panel complaints that had been dismissed without reaching an

opinion; and (4) two malpractice lawsuits, one of which was a post-panel lawsuit.!4

Mr. Andonie testified that he pre-filled the long form application and checked the “No”

box for each of the above questions and sent the application to Ms. Fernandez for review.’ Ms.

Fernandez testified that she did not review the questions that had been completed by Mr. Andonie

because she assumed he had answered the questions accurately.!® Ms. Fernandez completed some

additional information and presented the application for Dr. Cormier to sign. Dr. Cormier signed

the application without reading the document.!”

After a number of claims were made against Dr. Cormier in the months following issuance

of the Lexington policy, Lexington investigated the prior claims and thereafter sought to rescind

the policy based upon the misrepresentations contained in the application.

Td.

4 ECF No. 39, Exhibit I.

5 ECF No. 37, Exhibit A.

16 ECF No. 37, Exhibit B.

Id.

Il.

LAW AND ANALYSIS

A. Summary Judgment Standard.

“A party may move for summary judgment, identifying each claim or defense—or the part

of each claim or defense—on which summary judgment is sought.”!® “The court shall grant

summary judgment if the movant shows that there is no genuine dispute as to any material fact and

the movant is entitled to judgment as a matter of law.”!? “A genuine issue of material fact exists

when the evidence is such that a reasonable jury could return a verdict for the non-moving party.”

As summarized by the Fifth Circuit:

When seeking summary judgment, the movant bears the initial responsibility of

demonstrating the absence of an issue of material fact with respect to those issues

on which the movant bears the burden of proof at trial. However, where the

nonmovant bears the burden of proof at trial, the movant may merely point to an

absence of evidence, thus shifting to the non-movant the burden of demonstrating

by competent summary judgment proof that there is an issue of material fact

warranting trial.!

When reviewing evidence in connection with a motion for summary judgment, “the court must

disregard all evidence favorable to the moving party that the jury is not required to believe, and

should give credence to the evidence favoring the nonmoving party as well as that evidence

supporting the moving party that is uncontradicted and unimpeached.””? “Credibility

determinations are not part of the summary judgment analysis.”? Rule 56 “mandates the entry of

summary judgment. . . against a party who fails to make a showing sufficient to establish the

18 Fed. R. Civ. P. 56(a).

19 Td.

© Quality Infusion Care, Inc. v. Health Care Service Corp., 628 F.3d 725, 728 (5th Cir. 2010).

21 Lindsey v. Sears Roebuck and Co., 16 F.3d 616, 618 (Sth Cir.1994) (internal citations omitted).

22 Roberts v. Cardinal Servs., 266 F.3d 368, 373 (Sth Cir.2001); see also Feist v. Louisiana, Dept. of Justice, Office of

the Atty. Gen., 730 F.3d 450, 452 (Sth Cir. 2013) (court must view all facts and evidence in the light most favorable

to the non-moving party).

23 Quorum Health Resources, L.L.C. v. Maverick County Hosp. Dist., 308 F.3d 451, 458 (5th Cir. 2002).

existence of an element essential to that party’s case, and on which that party will bear the burden

of proof.””4 . .

B. Application of Louisiana Law.

In a diversity case such as this one, the Court applies state substantive law. Moore v. State

Farm Fire & Cas. Co., 556 F.3d 264, 269 (Sth Cir. 2009); Erie R.R. Co. v. Tompkins, 304 US. 64,

78 (1938). The parties do not dispute that Louisiana law applies to this case.

C. Voiding an Insurance Contract.

Under Louisiana law,

Except as provided in Subsection B of this Section, R.S. 22:1314, and 1315, no oral

or written misrepresentation or warranty made in the negotiation of an insurance

contract, by the insured or in his behalf, shall be deemed material or defeat or void

the contract or prevent it attaching, unless the misrepresentation or warranty is

made with the intent to deceive.”

Accordingly, an insurer can void the contract and avoid coverage when (1) the insured made a

false statement in his insurance application; (2) the false statement was material; and (3) the

insured’s false statement was made with an “intent to deceive” the insurer.”° In accordance with

the law, the Lexington master policy provides in Section VI.H.2. for certificates of insurance in

effect 60 days or more: “Fraud or misrepresentation. We can cancel if it is discovered that in

obtaining this policy, or presenting a claim under this policy, an Insured has committed fraud or

made a material misrepresentation with intent to deceive.”?’

Defendants seek summary judgment on the grounds that Lexington cannot establish the

third element required to void their policy, namely that Defendants acted with an intent to deceive.

They also move for summary judgment on their counter-claim that Lexington breached the

Patrick v. Ridge, 394 F.3d 311, 315 (5th Cir. 2004) (alterations in original) (quoting Celotex v. Catlett, 477 US.

317, 322 (1986)).

25 La. RS. § 22:860 (A).

26 Smith v. Liberty Life Ins. Co., 2012 WL 6162757, at *2 (E.D. La. Dec. 11, 2012) (citing State Farm Mut. Auto. Ins.

Co. v. Bridges, 36 S0.3d 1142, 1146 (La. Ct. App. 2d Cir. 2010)).

27 ECF No. 39, Exhibit G, p. 28.

contract by failing to provide sufficient notice of cancellation. Lexington, in turn, seeks summary

judgment on its claims and argues that it is entitled to prevail as a matter of law. Defendants argue

that Lexington cannot prove that Defendants acted with intent to deceive because the evidence in

the record establishes that Dr. Cormier did not complete the application for insurance, nor did he

read the application before signing it.

Under Louisiana law, “only a finding of intent to deceive will defeat coverage.””® The

insured’s intent to deceive is “determined from circumstances indicating the insured’s knowledge

of the falsity of the representations made in the application and his recognition of the materiality

of his misrepresentations, or from circumstances which create a reasonable assumption that the

insured recognized the materiality.””? Although the requirement of intent makes it more difficult

for a defendant to prevail, the case must be evaluated like any other and “the allegation of intent

not spontaneously shield a case from summary judgment.”2° Lexington argues that the □□□□

case is dispositive here.*! In Matt, the insurer refused to pay out under a life insurance policy after

the insured committed suicide, claiming that the insured made material misrepresentations of fact

as to his prior medical history. Discovery showed that the insured checked “yes” on his medical

questionnaire regarding prior mental health treatment but only disclosed his diagnosis for

ADHD.*? The insured did not disclose that he had actually been treated for mental health disorders

by numerous physicians over the course of several years, including treatment addressing an

attempted suicide.*? The court in Matt analyzed the issue of intent as follows:

28 Cousin v. Page, 372 So.2d 1231, 1233 (La. 1979), citing DiGerolamo y. Liberty Mutual Ins. Co., 364 So.2d 939

tBshire » Desmoreaux, 970 So.2d 1188, 1195 (La. App. 3d Cir. 11/7/07), writ denied, 978 So.2d 326 (La. 4/4/08).

30 Matt v. Northwestern Mutual Life Ins. Co., 580 F.Supp.3d 375 (W.D. La. 2022), citing Trahan v. Transam. Life Ins.

Co., 2020 WL 3196725, at *11 (M.D. La. Jun. 15, 2020) (quoting Guillory v. Domtar Indus., Inc., 95 F.3d 1320, 1326

(Sth Cir, 1996)).

Matt was decided by another judge in the Western District of Louisiana.

33 [d., at pp. 378-380.

In this matter the decedent obscured a significant and recent mental health history—

one that any reasonable person knows would cause him to face difficulties

obtaining life insurance. He did this by failing to disclose prior hospitalizations,

diagnoses, medications, and treatment providers even though the MHQ clearly

called for such information. He also answered falsely about his tobacco usage. He

gave these responses knowing that Northwestern would use them to determine if

and at what rate he could obtain life insurance. The loss of benefits to the decedent's

children is unfortunate, particularly after the tragedy they have already suffered.

However, the decedent obtained his coverage based on material false statements

about his health history that could only have been made with the intent of deceiving

Northwestern.**

Lexington argues that the facts of the present case require the same conclusion—namely

that any reasonable person would have known that the inaccurate answers would impact his or her

ability to obtain liability insurance and thus, the statements could have only been made with the

intent to deceive. While the Court agrees that intent could be inferred from the totality of the

circumstances, Matt is distinguishable. In Matt, there was no dispute that the decedent had

personally completed the application containing false representations and omissions about the

decedent’s medical history. The evidence currently in the record in this case suggests that Dr.

Cormier neither completed the claims history on the application form nor did he read those answers

before he signed the document. Based upon the evidence submitted by the parties, the Court

concurs that there are genuine issues of material fact as to whether Defendants had the intent to

deceive Lexington when he completed the application for insurance. Accordingly, both motions

for summary judgment regarding Lexington’s claims must be DENIED.

D. Defendants’ Counterclaims.

Defendants argue that Lexington failed to give proper notice of the cancellation of the

policy and therefore violated the insurance contract. Under the Lexington contract, if Lexington

cancelled the policy based upon misrepresentation, it was required to give thirty days’ notice of

34 Td., at p. 382.

cancellation.*> However, if Lexington simply decided not to renew the contract, it was required to

give sixty days’ notice.*° In the present case, Lexington mailed a letter on April 15, 2020 notifying

Defendants of its decision not to renew the policy effective on May 31, 2020. If Lexington meets

its burden at trial of voiding the policy based upon misrepresentation, the notice given would be

sufficient under the policy. If, however, the only ground for terminating the policy was non-

renewal, the notice was insufficient. As the Court has found that there is a genuine issue of material

fact regarding whether Lexington has established grounds for voiding the contract, this issue

regarding sufficiency of notice cannot be determined at this time.

UI.

CONCLUSION

Based upon the foregoing reasons, the Court finds that genuine issues of material exist

which preclude summary judgment. Accordingly, the (1) Motion for Summary Judgment [ECF

No. 37] filed by Jason L. Cormier, M.D. and Jason L. Cormier, M.D., APMC; and (2) Lexington

Insurance Company’s Motion for Partial Summary Judgment [ECF No. 39] are both DENIED.

THUS DONE in Chambers on this 9th day of January, 2023.

ROBERT R. SUMMERHAYS

UNITED STATES DISTRICT JUDGE

35 ECF No. 37, Exhibit R.

36 Td.