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Case Study

Nation’s Leading Medical Malpractice Insurer Wins Summary Judgment in Coverage Litigation Over Fraud in Business Acquisition

July 20, 2018

The nation’s leading medical malpractice insurance provider won summary judgment in the U.S. District Court for the Northern District of Illinois in complex coverage litigation over the definition of “damages.” Jonathan L. Schwartz, a partner in the firm’s Chicago office, handled the matter.

The litigation stemmed from the purchase of a dental practice. Goldberg Segalla’s client provided medical malpractice insurance to both the buyer and the seller. In this case, the buyer sued the seller for misrepresentations and fraud in connection with the sale, including that the seller fraudulently changed the coding of certain procedures and performed unnecessary procedures on his patients to make his practice seem more sophisticated and lucrative than it was. The seller sought coverage under his dental malpractice policy, which our client disclaimed.

In the ensuing coverage litigation, the seller argued that the alleged misrepresentations regarding the value of his practice, which stemmed from the seller’s alleged overtreatment of patients, were based on his professional conduct as a dentist. The district court disagreed and entered summary judgment in favor of our client, holding that the buyer’s claim against the seller did not legitimately seek covered damages based upon the seller’s professional services rendered as a dentist. Instead, the buyer sought a refund on the purchase price of the practice, which did not qualify as “damages” covered by the policy. Also, the amounts sought were not based upon the seller’s mistreatment of patients, but rather, his misrepresentations about the value of his practice.  The court concurred that the underlying suit was a business dispute that did not arise from the rendering of the seller’s professional services.