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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. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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