Berry et al. v. Javitch, Block & Rathbone, L.L.P., 182 Ohio App.3d 795 (2009).
Student Contributor: Shiv Vydyula
Facts: The Berrys commenced suit for negligent concealment and alleged that defendants committed fraud when they failed to disclose that they were insured for malpractice by Clarendon National Insurance Co. Defendant(s) only disclosed a policy from Legion Insurance, which did not cover the time period of the Berrys’ claim.
This failure to disclose prevented the plaintiffs from asserting a claim against the appropriate carrier– Clarendon. Defendants agreed to settle the matter for $195,000, $65,000 of which was to be paid up front by Defendants. Defendants would then have 90 days to get Legion to satisfy the balance of the claim. If payment was not made in 90 days, the Berrys could proceed directly against Legion. This, despite the fact that the parties’ agreement provided that Legion had disclaimed coverage. Legion never paid the remaining $135,000.
Eventually, the Berrys filed suit for fraudulent inducement against defendants. The trial court granted summary judgment in favor of the defendants without opinion. The Berry appealed the trial court’s decision and argued that they had valid claims for fraud against defendants.
Issue: Does failure to disclose a malpractice policy amount to fraud?
Ruling: Yes, if the following prerequisites are met:
(a) a representation or, where there is a duty to disclose, the concealment of a fact (b) that is material to the transaction at hand, (c) was made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, (d) with the intent of misleading another into relying upon it, and (e) justifiable reliance upon the representation or concealment, (f) with a resulting injury proximately caused by the reliance.
The appellate court remanded on the issue of whether the failure to disclose was purposeful in light of the fact that Defendants had notified Clarendon of the suit, yet answered Plaintiffs’ interrogatory requesting information regarding any policy which "may" provide coverage with only Legion.
Lesson: Under Ohio law, Intentional concealment of an applicable malpractice insurance policy could amount to fraud.