The Oklahoma Supreme Court has held that a news article was notice of a potential claim sufficient to create coverage under a claims-made policy and that an insurer’s subsequent cancellation of a claims-made policy violated state statute. Chandler v. W. Valentine, MD, 2014 WL 2854703 (Okla. June 24, 2014).
A patient died during surgery. That same month, the Oklahoma State Board of Medical Licensure and Supervision forwarded to the doctor’s insurer a letter and an article detailing license revocation on the basis of operating on a patient while under the influence. The insurer canceled the policy. The patient’s personal representative later filed suit against the doctor, who forwarded the petition and summons to his insurer, which denied coverage on the basis that the claim was not made until after the policy was cancelled and on the basis of an exclusion for acts performed while under the influence of intoxicating substances. In bankruptcy proceedings, the doctor entered into a consent judgment with the personal representative, who then sought to garnish that judgment from the insurer.
Under Oklahoma law, coverage on a claims-made policy is triggered when the insured becomes aware of and notifies the insurer of claims against the insured or occurrences that may give rise to claims. Section 3625 of the Oklahoma Code precludes an insurer from cancelling coverage:
No insurance contract insuring against loss or damage through legal liability for the bodily injury or death by accident of any individual, or for damage to the property of any person, shall be retroactively annulled by any agreement between the insurer and the insured after the occurrence of any such injury, death, or damage for which the insured may be liable, and any such attempted annulment shall be void.
The trial court found that the cancellation violated this provision and the Court of Appeals reversed.
The Oklahoma Supreme Court held that Section 3625 applies to a claims-made policy and that it precluded the insurer from cancelling. Its finding was based on the provision’s focus on protection of injured third parties and not on policy provisions. The Supreme Court found sufficient evidence that the insurer and insured entered an agreement for cancellation of the policy, in direct contravention of the statute, such that the annulment was void. It held that the evidence also indicated that the insurer had knowledge of events which would lead to a malpractice claim at the time coverage was cancelled. The Supreme Court granted summary judgment in favor of the personal representative.