Not all Lawyers are Liars but When they Lie they Lose Coverage

When a Lawyer Applicant Treats Insurer in Bad Faith by Lying on an Application Policy is Rescinded

The covenant of good faith and fair dealing applies equally to the person insured as it does to the insurer. The person applying for malpractice insurance is required by the covenant  to honestly and thoroughly respond to all questions posed by the insurer in the application for insurance. By lying on an application the applicant deprives the insurer of the benefits of the agreement by causing the insurance to be issued based upon a deception.

In Berkley Assurance Company v. Law Offices of David M. Wiseblood et al., A155070,
Court of Appeal of the State of California First Appellate District Division Four (September 30, 2019) Berkley Assurance Company (Berkley), a legal malpractice insurer, sought declaratory relief rescinding a malpractice policy (the policy) issued to David Wiseblood and his law firm, the Law Offices of David M. Wiseblood (collectively, Wiseblood) on grounds of material misrepresentation by omission for failure to disclose, in one situation, circumstances that could reasonably be expected to result in a malpractice lawsuit by a group of clients (Levinson/Taylor) and, in a second situation, a case in which he had been sued for malpractice by a client (the RAF Enterprises action).

When the Levinson/Taylor matter eventually did ripen into a lawsuit against Wiseblood (the Migdal malpractice action), Berkley provided a defense under several reservations of rights as new facts were discovered and sued for declaratory relief  to test its obligations under the policy. The trial court granted summary adjudication in favor of Berkley, declaring the policy rescinded, and granted Berkley an order requiring Wiseblood to reimburse attorney’s fees and costs advanced for Wiseblood’s defense.


Wiseblood represented Levinson/Taylor in a case called Migdal v. Levinson, CGC-12-517687 (Migdal v. Levinson). Over the course of about a year or more of litigation, Wiseblood repeatedly failed to provide adequate discovery responses, thousands of dollars in monetary sanctions were imposed against Wiseblood and Levinson/Taylor (in one instance against Wiseblood alone) and, ultimately, the court issued terminating sanctions against Levinson/Taylor in late 2014.

Six months later, Wiseblood applied for malpractice coverage with Berkley. He did not disclose the Levinson/Taylor fiasco. Based on the false application statements, Berkley issued its Lawyers Professional Liability Policy to the Law Offices of David Wiseblood.

Initially, when the RAF Enterprises action was filed in 2010. The plaintiffs in the RAF Enterprises action requested dismissal of the case in September 2011. In the course of investigating the accuracy of Wiseblood’s June 2015 application for insurance, Berkley discovered that, in addition to failing to disclose the potential for a claim by Levinson/Taylor, Wiseblood also failed to disclose the RAF Enterprises action.

The Coverage Dispute

Berkley learned of the possibility of a malpractice claim against Wiseblood, not from Wiseblood, but from correspondence sent by counsel for Levinson/Taylor demanding settlement of a previously undisclosed “claim” related to Wiseblood’s alleged professional negligence in handling Migdal v. Levinson.  Wiseblood does not deny being aware of the circumstances that led to the filing of the Migdal malpractice action when he signed his insurance application in June 2015 or that he was served with the RAF Enterprises action.

The Filing of the Declaratory Relief Action

Berkley sued seeking declaratory relief and rescission of the policy. Eventually Berkley moved for summary judgment. In opposition, Wiseblood argued that the motion should be denied because the issue of materiality is generally a question of fact for the jury and presents a triable issue here. The court granted summary adjudication on the fourth cause of action, and hence declared the policy rescinded. The trial court also awarded Berkley $57,459.12 in fees and costs incurred by Berkley in the defense of a malpractice suit brought against Wiseblood by his clients in the Migdal matter, but limited the reimbursement to fees and costs incurred prior to the filing of the summary judgment motion.


The rule in insurance cases is that a material misrepresentation or concealment in an insurance application, whether intentional or unintentional, entitles the insurer to rescind the insurance policy ab initio. Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance.

General Principles of Rescission

Berkley submitted undisputed evidence of two omissions, each of which justifies rescission. There is no dispute that Wiseblood was served with, and can therefore be charged with knowledge of, the RAF Enterprises action. Disclosure was required by Question No. 17 on Wiseblood’s insurance application, which asked how many professional liability claims or suits had been made against the applicant firm or any present lawyers at the applicant firm in the past five years.

Second, Wiseblood failed to disclose material information about a potential professional liability claim arising from his representation in the Migdal matter. Wiseblood affirmatively refused to report the potential suit despite the fact that numerous adverse court order that assessed more than $10,000 in sanctions and terminating sanctions had been granted disposing of the case adversely to Levinson/Taylor.

Wiseblood argues at length that his omissions in response to Question Nos. 17 and 18 were, at worst, inadvertent. But to justify rescission, a misrepresentation or concealment need not be intentional. (LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1269-1270 (LA Sound), quoting Mitchell v. United National Ins. Co. (2005) 127 Cal.App.4th 457, 469.)

The court concluded there can be no real argument about the materiality of the omissions proved up by Berkley. Materiality is determined solely by the probable and reasonable effect which truthful answers would have had upon the insurer. The test is a subjective one; the critical question is the effect truthful answers would have had on the particular insurer.

Berkley submitted undisputed evidence that the disclosure of potential claims or suits is material to it in the underwriting of professional liability policies. According to the declaration of its underwriter, Mr. Diamond, the nature and circumstances giving rise to a potential claim or suit affect whether Berkley will increase the premium charged for the policy, change the policy terms or reject the submission without a quote. Had Wiseblood’s actions in Migdal v. Levinson been disclosed, Mr. Diamond stated, Berkley would never have quoted the policy to Wiseblood and would have rejected the submission.

The question on the application plainly sets up an objective standard, not simply Wiseblood’s subjective assessment of the likelihood of suit. From an objective standpoint, any experienced civil litigator would know that the attitude of a client or former client who has suffered a loss in court can quickly move from acceptance to recrimination, especially after consultation with independent counsel.

According to Mr. Diamond’s declaration, the disclosure of the Agesong suit in Wiseblood’s application caused Berkley to insure at an increase in the premium. From Mr. Diamond’s declaration, a fair inference—indeed the only reasonable inference—is that the existence of and the allegations in the RAF Enterprises action were material information for Berkley that would have affected the price it quoted on the policy, at least, and may have affected whether it submitted a quote at all.

Materiality Is Not Reasonably Subject to Dispute

Although materiality is a question of fact, that does not mean it always presents a triable issue of fact. Where an insurer establishes based on admissible, undisputed evidence that only one reasonable conclusion may be drawn, the issue of materiality may be decided as a matter of law. (Imperial Casualty & Indemnity Co. v. Sogomonian (1988) 198 Cal.App.3d 169, 182 (Imperial Casualty).) The test of materiality is subjective; that Mr. Diamond’s declaration established without contradiction that the omitted RAF Enterprises action and the Migdal malpractice action were material; and that nothing in the underwriting guidelines cited by Wiseblood contradicts the Diamond declaration.

The trial court’s order granting summary adjudication on Berkley’s fourth cause of action was affirmed, except to the extent it limits Berkley’s right of reimbursement to attorney’s fees and costs incurred before the filing of the summary judgment motion. The judgment is reversed and the cause is remanded with directions to reopen the summary judgment proceedings for the limited purpose of allowing Berkley to supplement, and Wiseblood to contest, the amount of reimbursement owed by Wiseblood as a result of the policy’s rescission.


It takes a certain amount of chutzpa – Yiddish for more than unmitigated gall – to argue that in the face of such egregious facts it is amazing that the case went up on appeal. Attorney Wiseblood not only erred, nor was he innocently confused, he lied. He was served with a lawsuit before he signed the application that he did not report. His actions, as described by the court, was conduct that revealed the utmost bad faith in his application for insurance. He will pay Berkley for the money it expended defending him under a reservation of rights less the premium he actually paid.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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