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7th Circuit: Insurer can challenge its duty to defend

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The 7th Circuit Court of Appeals has lifted a stay imposed by the District Court in Hammond on an insurer’s declaratory judgment action regarding coverage of a physician who skipped town instead of facing criminal charges and civil suits.

The Circuit Court Monday addressed the case Medical Assurance Co., Inc. v. Amy Hellman, et al., No. 08-2887. The U.S. District Court, Northern District of Indiana, Hammond Division, granted a stay request by the commissioner of the Indiana Department of Insurance, administrator of the Indiana Patient’s Compensation Fund, which has an interest in the case.

While on vacation in Greece in 2004, Dr. Mark Weinberger, a Merrillville ear, nose, and throat doctor, “went for a run” and never returned. He was facing $5.7 million in creditor claims and 22 criminal counts of billing fraud once he returned to the United States. The U.S. government issued an international arrest warrant for Weinberger, among other things to locate him. He was arrested in Italy in December 2009 and has been extradited to the U.S.

While only a few medical malpractice cases had been filed before Weinberger’s disappearance, more than 350 medical malpractice claims have been filed since then and are proceeding through Indiana’s medical malpractice process.

Weinberger’s medical malpractice insurance carrier, Medical Assurance Company Inc., has been conducting his defense, but his disappearance prompted this suit. In the contract between the doctor and insurer there was a typical cooperation clause that requires Weinberger to participate in his defense. Because the doctor was not, Medical Assurance brought an action asking the court to declare that Weinberger breached his responsibilities under the contract and that Medical Assurance no longer has a duty to defend or indemnify him.

The District Court was concerned that such an action would “severely” intrude on state medical malpractice actions. So as not to interfere with the state cases, the District Court issued the stay of the federal proceedings. The state cases are proceeding under the familiar framework for medical-malpractice claims.

In Indiana, an insurer must show that the breach of duty resulted in actual prejudice in order to prevail. Emplrs. Mut. Cas. Co. v.Skoutaris, 453 F.3d 915, 924 (7th Cir. 2006); Ky. Nat’l Ins. Co. v. Empire Fire & Marine Ins. Co., 919 N.E.2d 565, 585-87 (Ind. Ct. App. 2010).

“The insured’s absence alone is not enough to establish prejudice in this state; to prove actual prejudice, the insurer must show somehow that the outcome of the underlying case would have been altered by the insured’s cooperation. See Cincinnati Ins. Co. v. Irvin, 19 F. Supp. 2d 906, 916 (S.D. Ind. 1998),” the court wrote.

Medical Assurance noted that the scope of Weinberger’s insurance coverage is not at issue in the state court actions. The insurer contended it is prepared, if it gets its day in the District Court, to meet its burden of showing actual prejudice from the doctor’s actions. Without such, the company noted it will be left without a practical remedy.

The Circuit Court noted the stay was not clear as to whether the District Court meant to allow the insurer to proceed after a small number of test cases or if it meant that Medical Assurance couldn’t proceed in its federal litigation until every state case was disposed.

The Circuit Court agreed with the insurer that it should have been allowed to resolve the merits of the declaratory judgment action focusing on Medical Assurance’s duty-to-defend claim.

“And on remand, a summary judgment motion could test Medical Assurance’s legal theories, based on all the evidence that has been collected thus far. See FED. R. CIV. P. 56. Indeed, summary judgment is a good tool to examine not only whether Medical Assurance can succeed as a matter of law but also whether this case is a suitable candidate for declaratory relief,” wrote Judge Diane Wood.


 

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  1. I like the concept. Seems like a good idea and really inexpensive to manage.

  2. I don't agree that this is an extreme case. There are more of these people than you realize - people that are vindictive and/or with psychological issues have clogged the system with baseless suits that are costly to the defendant and to taxpayers. Restricting repeat offenders from further abusing the system is not akin to restricting their freedon, but to protecting their victims, and the court system, from allowing them unfettered access. From the Supreme Court opinion "he has burdened the opposing party and the courts of this state at every level with massive, confusing, disorganized, defective, repetitive, and often meritless filings."

  3. So, if you cry wolf one too many times courts may "restrict" your ability to pursue legal action? Also, why is document production equated with wealth? Anyone can "produce probably tens of thousands of pages of filings" if they have a public library card. I understand this is an extreme case, but our Supreme Court really got this one wrong.

  4. He called our nation a nation of cowards because we didn't want to talk about race. That was a cheap shot coming from the top cop. The man who decides who gets the federal government indicts. Wow. Not a gentleman if that is the measure. More importantly, this insult delivered as we all understand, to white people-- without him or anybody needing to explain that is precisely what he meant-- but this is an insult to timid white persons who fear the government and don't want to say anything about race for fear of being accused a racist. With all the legal heat that can come down on somebody if they say something which can be construed by a prosecutor like Mr Holder as racist, is it any wonder white people-- that's who he meant obviously-- is there any surprise that white people don't want to talk about race? And as lawyers we have even less freedom lest our remarks be considered violations of the rules. Mr Holder also demonstrated his bias by publically visiting with the family of the young man who was killed by a police offering in the line of duty, which was a very strong indicator of bias agains the offer who is under investigation, and was a failure to lead properly by letting his investigators do their job without him predetermining the proper outcome. He also has potentially biased the jury pool. All in all this worsens race relations by feeding into the perception shared by whites as well as blacks that justice will not be impartial. I will say this much, I do not blame Obama for all of HOlder's missteps. Obama has done a lot of things to stay above the fray and try and be a leader for all Americans. Maybe he should have reigned Holder in some but Obama's got his hands full with other problelms. Oh did I mention HOlder is a bank crony who will probably get a job in a silkstocking law firm working for millions of bucks a year defending bankers whom he didn't have the integrity or courage to hold to account for their acts of fraud on the United States, other financial institutions, and the people. His tenure will be regarded by history as a failure of leadership at one of the most important jobs in our nation. Finally and most importantly besides him insulting the public and letting off the big financial cheats, he has been at the forefront of over-prosecuting the secrecy laws to punish whistleblowers and chill free speech. What has Holder done to vindicate the rights of privacy of the American public against the illegal snooping of the NSA? He could have charged NSA personnel with violations of law for their warrantless wiretapping which has been done millions of times and instead he did not persecute a single soul. That is a defalcation of historical proportions and it signals to the public that the government DOJ under him was not willing to do a damn thing to protect the public against the rapid growth of the illegal surveillance state. Who else could have done this? Nobody. And for that omission Obama deserves the blame too. Here were are sliding into a police state and Eric Holder made it go all the faster.

  5. JOE CLAYPOOL candidate for Superior Court in Harrison County - Indiana This candidate is misleading voters to think he is a Judge by putting Elect Judge Joe Claypool on his campaign literature. paragraphs 2 and 9 below clearly indicate this injustice to voting public to gain employment. What can we do? Indiana Code - Section 35-43-5-3: Deception (a) A person who: (1) being an officer, manager, or other person participating in the direction of a credit institution, knowingly or intentionally receives or permits the receipt of a deposit or other investment, knowing that the institution is insolvent; (2) knowingly or intentionally makes a false or misleading written statement with intent to obtain property, employment, or an educational opportunity; (3) misapplies entrusted property, property of a governmental entity, or property of a credit institution in a manner that the person knows is unlawful or that the person knows involves substantial risk of loss or detriment to either the owner of the property or to a person for whose benefit the property was entrusted; (4) knowingly or intentionally, in the regular course of business, either: (A) uses or possesses for use a false weight or measure or other device for falsely determining or recording the quality or quantity of any commodity; or (B) sells, offers, or displays for sale or delivers less than the represented quality or quantity of any commodity; (5) with intent to defraud another person furnishing electricity, gas, water, telecommunication, or any other utility service, avoids a lawful charge for that service by scheme or device or by tampering with facilities or equipment of the person furnishing the service; (6) with intent to defraud, misrepresents the identity of the person or another person or the identity or quality of property; (7) with intent to defraud an owner of a coin machine, deposits a slug in that machine; (8) with intent to enable the person or another person to deposit a slug in a coin machine, makes, possesses, or disposes of a slug; (9) disseminates to the public an advertisement that the person knows is false, misleading, or deceptive, with intent to promote the purchase or sale of property or the acceptance of employment;

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