Insurance company wasn’t required to cover late claim

An insurance company was not required to defend an Indiana doctor in a medical malpractice case because the applicable insurance policy had expired before the insurer received notice of the claim.

In 2008, Admiral Insurance Co. issued a professional liability policy to Dr. Habib T. Zadeh with an initial period from Sept. 21, 2008 to Sept. 21, 2009 and a retroactive date of Sept. 21, 2005. Zadeh elected to cancel the policy in July 2009 and that same day purchased an Extended Claim Reporting Period from July 2009 to July 2010.

Meanwhile, Jennifer Muehlman filed a complaint against John Doe, M.D., in October 2008, alleging that she sustained severe and permanent injuries as a result of the defendant’s negligence while she was treated for a fracture in her leg. Zadeh was served with a summons and complaint in Muehlman’s case, and he received a letter from the Indiana Patients’ Compensation Fund informing him that his insurance had lapsed.

The court entered default judgment against Zadeh in October 2010, and one year later, Admiral was informed that Muehlman was making a medical malpractice claim against Zadeh. Scott Mansfield, Admiral’s claims superintendent, informed Zadeh’s counsel in November 2011 that the insurer was denying the claim, noting although Muehlman’s complaint was first made in October 2008, Admiral was not informed of it until the policy was cancelled in July 2009.

In response, another attorney representing Zadeh, Joseph Stalmack, wrote to Mansfield that under Indiana Code 34-18-13-4, the policy was still in effect because no notice of cancellation had been received by the insurance commissioner.  Stalmack cited the affidavit of Nancy Wilkins with the Department of Insurance, who said it was the department’s policy to forward copies of all letters to health care providers’ insurance company. Thus, Stalmack said it could be presumed that the letter Zadeh received about Muehlman’s claim was also sent to Admiral in October 2008.

In April 2014, Zadeh’s attorney, now acting as personal representative of the Zadeh’s estate, filed for declaratory judgment, listing Muehlman as a defendant and requesting a declaration that Admiral was required to defend and indemnify Zadeh against Muehlman’s claims. Admiral moved for summary judgment, but the trial court denied that motion and instead granted declaratory judgment, finding “Admiral did not notify the DOI, and thus the public, that a termination had been effectuated.”

The Indiana Court of Appeals reversed Thursday, with Judge Elaine Brown writing that because the first notification of Muehlman’s claim was made to Admiral in October 2011, more than a year after the policy expired, the notification was late under the claims made policy.

Further, Brown wrote I.C. 34-18-13-4 did not apply to Zadeh’s situation “given that the Policy was still in effect at the time of the filing of Muehlman’s complaint and the Policy had not yet been terminated by cancellation.”

“Thus, at the point at which Muehlman filed her complaint against Dr. Zadeh on October 6, 2008, the Policy was in effect,” Brown wrote. “We also note that the Policy terminated/expired by its own terms prior to Admiral receiving notice of Muehlman’s claims.”

The case is Admiral Insurance Company v. Joseph Banasiak, as Personal Representative of the Estate of Habib Tagizadieh a/k/a Habib Zadeh, deceased and Jennifer Muehlman, 45A05-1604-PL-859.

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