Steven J. Svabek, D.O. v. Lancet Indemnity Risk Retention Group, Inc. (mem. dec.), 41A05-1610-PL-2271

Background

Dr. Steven Svabek (orthopedic surgeon) applied for and obtained a Lancet malpractice "tail" policy effective Dec. 7, 2012 (retroactive date Dec. 7, 2010) after paying $68,040. Policy only covered claims first reported to Lancet during Dec. 7, 2012–Dec. 7, 2013 and contained exclusions for claims known or reported prior to the policy’s inception.
On Aug. 15, 2012 and Nov. 30, 2012 proposed complaints (Sykes/Williams and Pettigrew) were filed with the Indiana Department of Insurance alleging care between 2009–2011; an additional lawsuit (Nardini) was filed Feb. 5, 2013.
Svabek’s Dec. 7, 2012 Lancet application included a signed statement that he had no known or pending claims and that no prior carrier had declined coverage.
Evanston (Svabek’s prior carrier) sent a denial of coverage for the Sykes/Williams proposed complaint by certified mail and by email on Dec. 4, 2012 (delivered to Svabek’s known email). Svabek submitted his Lancet application three days later and did not disclose the denial or the prior complaints.
Lancet sued seeking declaratory relief and rescission; the trial court granted summary judgment rescinding the policy based on material misrepresentations in Svabek’s application. Svabek appealed; the Court of Appeals affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Lancet is entitled to rescind the policy for material misrepresentations in the application	Lancet: Svabek falsely represented no known/pending claims and no prior denial of coverage; Lancet relied on those statements and would have declined or changed terms — rescission is warranted	Svabek: genuine issues exist about his knowledge of the claims at signing and whether Lancet promptly sought rescission; contests factual basis for rescission	Court: Affirmed rescission. Svabek’s denial-of-coverage misrepresentation was false, material, relied upon by Lancet, and supports summary judgment rescinding the policy
Whether Svabek had knowledge of the Sykes/Williams claim when he signed	Lancet: notices (IDOI and Evanston/Markel letters, including Dec. 4 denial email) put Svabek on notice prior to his Dec. 7 application	Svabek: contests knowledge (argues factual dispute)	Court: Found multiple notices and presumption of delivery; Svabek did not rebut; he had knowledge
Whether rescission was timely and prompt	Lancet: pursued rescission after learning of misrepresentation; equitable remedy restores parties to pre-contract positions	Svabek: argues Lancet did not act promptly; raises waiver/untimeliness	Court: Svabek failed to show Lancet delayed or that delay caused prejudice; he did not preserve or develop this argument on appeal
Whether any policy exclusions or deductible defaults bar coverage (alternative grounds)	Lancet: policy exclusions and deductible nonpayment also preclude coverage for the three claims	Svabek: challenges trial court’s alternative rulings	Court: Did not need to decide because rescission dispositive; noted exclusions and deductible issue were alternate bases for judgment

Key Cases Cited

Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664 (Ind. 1997) (material misrepresentation in insurance application permits rescission)
Roe v. Sewell, 128 F.3d 1098 (7th Cir. 1996) (insurer reasonably relies on application information in issuing coverage)
Conrad v. Universal Fire & Cas. Ins. Co., 686 N.E.2d 840 (Ind. 1997) (presumption of delivery for mailed correspondence)
Hughley v. State, 15 N.E.3d 1000 (Ind. 2014) (standard of review for summary judgment)
McSwane v. Bloomington Hosp. & Healthcare Sys., 916 N.E.2d 906 (Ind. 2009) (appellant bears burden to show summary judgment error; appellate review of trial court’s denial of opportunity to be heard)
A.J.’s Automotive Sales, Inc. v. Freet, 725 N.E.2d 955 (Ind. Ct. App. 2000) (rescission requires prompt action after discovery of fraud; delay may constitute waiver if prejudicial)