Liebling v. Garden State Indemnity

Argued January 24, 2001

Defendant, Garden State Indemnity Company (“Garden State”), issued a claims-made malpractice insurance policy to plaintiff, Scott Liebling, an attorney. When Liebling was sued by a former client for conduct occurring before he applied for the policy, Garden State denied coverage. Liebling filed an action for declaratory judgment. Garden State answered, asserting equitable fraud as an affirmative defense, and demanding rescission of the policy. Its primary allegation was that one of Liebling’s answers to a subjective question posed in the insurance application was a material misrepresentation. Both sides filed motions for summary judgment. Garden State prevailed on the ground that although the question was subjective, the answer was false. Garden State had argued that the answer was false in the sense that no reasonable attorney would have so replied based on the facts known to the applicant. The judge’s ruling was ambiguous: either he agreed with Garden State or he ruled for Garden State on the ground that Liebling had made a knowingly false misrepresentation. Liebling appeals, arguing that summary judgment was inappropriate because his answer could be found to be a truthful representation of the opinion he held. Although we agree that the question was subjective, and that the issue of rescission turns on Liebling’s state of mind and good faith, we are nonetheless satisfied that no reasonable fact-finder could conclude that his answer truly reflected his actual opinion. Therefore, we affirm on that ground and on the additional ground that a related exclusion justified the denial of coverage.