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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. Im very happy for you, getting ready to go down that dirt road myself, and im praying for the same outcome, because it IS sometimes in the childs best interest to have visitation with grandparents. Thanks for sharing, needed to hear some positive posts for once.

  2. Been there 4 months with 1 paycheck what can i do

  3. our hoa has not communicated any thing that takes place in their "executive meetings" not executive session. They make decisions in these meetings, do not have an agenda, do not notify association memebers and do not keep general meetings minutes. They do not communicate info of any kind to the member, except annual meeting, nobody attends or votes because they think the board is self serving. They keep a deposit fee from club house rental for inspection after someone uses it, there is no inspection I know becausee I rented it, they did not disclose to members that board memebers would be keeping this money, I know it is only 10 dollars but still it is not their money, they hire from within the board for paid positions, no advertising and no request for bids from anyone else, I atteended last annual meeting, went into executive session to elect officers in that session the president brought up the motion to give the secretary a raise of course they all agreed they hired her in, then the minutes stated that a diffeerent board member motioned to give this raise. This board is very clickish and has done things anyway they pleased for over 5 years, what recourse to members have to make changes in the boards conduct

  4. Where may I find an attorney working Pro Bono? Many issues with divorce, my Disability, distribution of IRA's, property, money's and pressured into agreement by my attorney. Leaving me far less than 5% of all after 15 years of marriage. No money to appeal, disabled living on disability income. Attorney's decision brought forward to judge, no evidence ever to finalize divorce. Just 2 weeks ago. Please help.

  5. For the record no one could answer the equal protection / substantive due process challenge I issued in the first post below. The lawless and accountable only to power bureaucrats never did either. All who interface with the Indiana law examiners or JLAP be warned.

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