A doctor purchased a medical malpractice policy from a non-profit member-owned risk-sharing insurance exchange. As part of her initial membership, the doctor was required to make a one-time contribution to the exchange's surplus equal to the first year premium. The doctor was offered and accepted the opportunity to make this surplus payment in ten annual installments. The doctor's obligation to make the full surplus contribution remained even if she withdrew from the exchange prior to completing the ten annual installments. About nineteen months after purchasing the policy, the doctor notified the exchange and its administrator that she was cancelling her policy as of that month. The doctor wanted to purchase an extended reporting period commonly referred to as tail coverage from the exchange. The doctor was advised by letter that she could only purchase tail coverage if she paid all her remaining surplus contributions in full instead of the remaining installments to which the parties previously agreed.
The doctor sued the non-profit member-owned risk-sharing insurance exchange and its administrator. The complaint alleged violations of the New Jersey Consumer Fraud Act (CFA) with respect to her purchase of the medical malpractice insurance policy. Specifically, the complaint posited that the exchange’s attempt to accelerate payment of the surplus contribution was in violation of the parties' written agreement and was in violation of the CFA. Additionally, the exchange and the administrator improperly debited the doctor’s business account without her permission for premium and surplus payments when due, which also violated the CFA.
The Middlesex County Superior Court of New Jersey, Law Division, Civil Part, dismissed the claim with prejudice. The court held that the medical malpractice insurance policy was not merchandise that was offered, directly or indirectly to the public for sale, as required for a CFA claim.
The medical malpractice insurance policy was not merchandise that was offered, directly or indirectly to the public for sale, as required for a CFA claim. The court explained that while insurance products offered to the public at large were subject to the CFA, insurance products that were not offered to the general public were not covered by the CFA. The court reasoned that medical malpractice insurance was not offered to the general public because in order to purchase medical malpractice insurance one must complete a lengthy education and training process spanning many years and then obtain licensure from the state as a physician, a highly regulated profession. The court noted that physicians represented only about .27% of New Jersey's general population.
The Middlesex County Superior Court of New Jersey, Law Division, Civil Part, dismissed with prejudice the doctor’s suit against the non-profit member-owned risk-sharing insurance exchange and its administrator, alleging violations of the State Consumer Fraud Act with respect to her purchase of a medical malpractice insurance policy.
See: Khan v. Conventus Inter-Ins. Exchange, 2015 WL 1955375 (N.J.Super.L., April 29, 2015) (not designated for publication).