A Missouri state appeals court has reversed a $680,000 judgment against an insurer in a medical malpractice case on the basis the insurance policy had been rescinded.

Dr. Wallace Berkowitz, an ear, nose and throat physician, had obtained a medical malpractice insurance policy from Eureka, Missouri-based Keystone Mutual Insurance Co. in 2010, which was renewed in 2011, according to Tuesday’s ruling by the Missouri Court of Appeals in St. Louis in Helen Y. Smith v. Keystone Mutual Insurance Co.

A dispute later arose between the parties, which resulted in them entering into a March 2011 agreement that mutually rescinded the insurance policy and waived all of Dr. Berkowitz’s and his practice’s claims against Keystone, according to the ruling.

Helen Smith, widow of Johnnie Ray Smith, a deceased patient of Dr. Berkowitz, filed a wrongful death lawsuit against Dr. Berkowitz in 2010.  It resulted in a February 2013 jury verdict in Ms. Smith’s favor of $1 million plus interest, which was later reduced to $680,000 with interest and costs, according to the ruling.

Dr. Berkowitz filed for bankruptcy and received a discharge in August 2016, which freed him from the obligation to pay the wrongful death judgment. While he was still in bankruptcy, in 2014 Ms. Smith filed a petition against Keystone.

In May 2016, Dr. Berkowitz purported to assign all claims he had against Keystone to Ms. Smith, and in return received the right to 10% of Ms. Smith’s recovery. 

Litigation on the issue ensued. During a January 2018 trial, the court refused to enter a directed verdict in Keystone’s favor and a jury awarded Ms. Smith $870,625 plus 9% post-judgment interest. 

The jury verdict was reversed in Tuesday’s ruling by a unanimous three-judge St. Louis appeals court panel.

The ruling pointed to the insurance policy’s rescission. “Smith argues that Keystone did not have the legal right to rescind Dr. Berkowitz’s insurance contract, but we find that both Keystone and Dr. Berkowitz, together, contracted to rescind the insurance contract,” the ruling said.

“Accordingly, Dr. Berkowitz had no insurance coverage for the Smith v. Berkowitz lawsuit, and had waived all claims against Keystone,” the ruling said.

“Next, we find that Smith, the assignee of Dr. Berkowitz, is bound by the settlement,” the ruling said. “Whereas Dr. Berkowitz had no right to Keystone’s coverage and waived any breach of contract claim against Keystone, he could not pass coverage or claims onto Smith.

“Thus, the trial court erred in refusing to enter a directed verdict in favor of Keystone in Smith’s lawsuit,” said the ruling, in reversing the trial court’s judgment and remanding the case with instructions to the trial court to enter a directed verdict for Keystone.

Attorneys in the case could not immediately be reached for comment.

In April, a federal appeals court upheld a lower court ruling in favor of a medical malpractice insurer for not settling a case that led to a $5.17 million verdict against a surgery center in litigation filed by a woman who was left a quadriplegic.