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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. Ah yes... Echoes of 1963 as a ghostly George Wallace makes his stand at the Schoolhouse door. We now know about the stand of personal belief over service to all constituents at the Carter County Clerk door. The results are the same, bigotry unable to follow the directions of the courts and the courts win. Interesting to watch the personal belief take a back seat rather than resign from a perception of local power to make the statement.

  2. An oath of office, does it override the conscience? That is the defense of overall soldier who violates higher laws, isnt it? "I was just following orders" and "I swore an oath of loyalty to der Fuhrer" etc. So this is an interesting case of swearing a false oath and then knowing that it was wrong and doing the right thing. Maybe they should chop her head off too like the "king's good servant-- but God's first" like St Thomas More. ...... We wont hold our breath waiting for the aclu or other "civil liberterians" to come to her defense since they are all arrayed on the gay side, to a man or should I say to a man and womyn?

  3. Perhaps we should also convene a panel of independent anthropological experts to study the issues surrounding this little-known branch of human sacrifice?

  4. I'm going to court the beginning of Oct. 2015 to establish visitation and request my daughters visits while she is in jail. I raised my grandchild for the first two and half years. She was born out of wedlock and the father and his adopted mother wantwd her aborted, they went as far as sueing my daughter for abortion money back 5mo. After my grandchild was born. Now because of depression and drug abuse my daughter lost custody 2 and a half years ago. Everyting went wrong in court when i went for custody my lawyer was thrown out and a replacment could only stay 45 min. The judge would not allow a postponement. So the father won. Now he is aleinating me and my daughter. No matter the amount of time spent getting help for my daughter and her doing better he runs her in the ground to the point of suicide because he wants her to be in a relationship with him. It is a sick game of using my grandchild as a pawn to make my daughter suffer for not wanting to be with him. I became the intervener in the case when my daughter first got into trouble. Because of this they gave me her visitation. Im hoping to get it again there is questions of abuse on his part and I want to make sure my grandchild is doing alright. I really dont understand how the parents have rights to walk in and do whatever they want when the refuse to stand up and raise the child at first . Why should it take two and a half years to decide you want to raise your child.The father used me so he could finish college get a job and stop paying support by getting custody. Support he was paying my daughter that I never saw.

  5. Pence said when he ordered the investigation that Indiana residents should be troubled by the allegations after the video went viral. Planned Parenthood has asked the government s top health scientists at the National Institutes of Health to convene a panel of independent experts to study the issues surrounding the little-known branch of medicine.

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