Fourth Circuit Amazingly Concludes Insurer Must Defend Malpractice Action Even When Insured Leaves Country Never to Return

Doctor Provides No Notice, Runs Away, Fails to Cooperate in Defense, Yet Insurer Must Pay Default Judgment

Liability insurance policies, like medical malpractice policies, contain a condition precedent requiring the insured to cooperate in the defense of any suit brought against the insured, assist counsel in presenting a defense, and testify at trial. In a case where the insured doctor provided no notice, fled the country with a stated decision never to return, and who was unavailable to assist in the defense of the suit, had a default judgment entered against him when the insurer believed it was unable to have a lawyer enter an appearance for a client who does not consent.

In Claudia M. Mora, individually and as a parent, natural guardian and next friend of A.C., a minor and S.C., a minor; Juan Carlos Castillo; Advance Walk-in Urgent Care, LLC; and Union Multi-care Medical Center, Inc., and Richard Osei Akoto, M.D., P.C., LLC; and Richard Osei Akoto, M.D., v. Lancet Indemnity Risk Retention Group, Inc., No. 18-1566, United States Court of Appeals for the Fourth Circuit (May 7, 2019) the Fourth Circuit amazingly, held the insurer responsible to pay the judgment up to its limits.


In January 2015, Dr. Ishtiaq Malik treated Juan Castillo for his complaints of chest pains and shortness of breath. After administering a treadmill stress test and an EKG, Dr. Malik prescribed a beta blocker but did not refer Castillo to a cardiologist or instruct him to seek any other immediate medical attention. Eight days later, Castillo died from a cardiac event.

On July 2, 2015, counsel for Castillo’s wife, Claudia Mora, and children notified Dr. Malik’s malpractice insurer, Lancet Indemnity Risk Retention Group, Inc. (“Lancet”), that they were preparing to file a medical malpractice action against Dr. Malik. Plaintiffs indeed filed that action on July 24, 2015 in Montgomery County, Maryland state cour. Plaintiffs alleged that Dr. Malik negligently failed to refer Castillo to a cardiologist, leaving his condition undiagnosed and untreated, resulting in Castillo’s death. That same day, Plaintiffs mailed a copy of the complaint to Lancet and Lancet’s outside counsel.

Lancet retained attorney Brad Kelly to defend Dr. Malik. Dr. Malik Lancet eventually learned Dr. Malik had moved to Pakistan and had no plans to return to the United States.

Kelly advised Lancet that because he had not obtained Dr. Malik’s consent to representation, the Maryland Rules of Professional Conduct barred him from appearing in the malpractice action for Dr. Malik. After Kelly advised Lancet that he believed he was ethically barred from appearing on Dr. Malik’s behalf, Lancet elected not to participate in the malpractice action — it did not investigate the malpractice claim, it did not obtain Castillo’s medical records, and it did not answer Plaintiffs’ complaint.

Lancet unsuccessfully moved to delay the damages hearing on Malik’s default yet the state court entered judgment in the Plaintiffs’ favor in the amount of $2.56 million.

Mora, her two minor children, and her adult son, Juan Carlos Castillo, sued the insurer in Maryland state court, seeking a declaration that Lancet owed coverage under the Policy for the judgment in the malpractice action. Lancet removed the case to federal court and filed a counterclaim seeking a declaration that the Policy was void because of Dr. Malik’s failure to comply with notice and cooperation provisions in the Policy.

Following a two-day bench trial on the issue of prejudice, the district court entered judgment in favor of Plaintiffs, declaring that Lancet was “liable for the money damages of its Insureds pursuant to the Policy’s terms.” Specifically, the district court found that neither ethical rules, nor Maryland law, nor the terms of the Policy prevented counsel for Lancet from entering an appearance and defending the malpractice action. In addition, the district court concluded that Lancet had failed to meet its burden to establish that it had been actually prejudiced by Dr. Malik’s refusal to participate because, even in Dr. Malik’s absence, Lancet had several viable paths to defending the malpractice action, which it elected not to pursue. The district court awarded Plaintiffs damages in the amount of $996,840.50 as well as post-judgment interest.


Under Maryland law—which the parties agree controls this diversity case—courts should interpret the language of an insurance policy with the same principles and rules of construction that are used to interpret other contracts. Courts must construe insurance policies as a whole to determine the intention of parties. In interpreting an insurance policy, courts must look first to the contract language employed by the parties to determine the scope and limitations of the insurance coverage.

An attorney would not have violated ethical rules if the attorney appeared in the malpractice proceedings on behalf of Lancet (not named as a defendant) and the Insureds because Section 2 of the Policy conferred on Lancet the right and duty to defend any Claim covered by the Policy. That provision also afforded Lancet the “right” to investigate any covered claims against the Insureds and the “right” to choose counsel to defend any claims asserted against the Insureds.

“The customary clause in insurance policies requiring the insured to permit the insurer’s lawyer to defend claims insured against is consent in advance by the insured to such dual representation and obviates an improper relationship, but if, in the course of the dual representation an actual conflict develops between the interests of the insured and those of the insurer, the lawyer must either withdraw entirely from the case or continue to represent one of the clients only.” [Fid. & Cas. Co. v. McConnaughy, 179 A.2d 117, 121 (Md. 1962) (emphasis added)].

To that end, Plaintiffs’ expert explained that insurers include advance consent clauses in their policies because the insurers bear the ultimate financial risk and therefore need the authority to defend the action. The expert further testified that, as a matter of practice, Maryland malpractice defense attorneys routinely receive cases directly from an insurer and begin working on the cases without waiting for additional consent from the insured. He also concluded that defense counsel could represent Lancet’s interests in the suit after withdrawing from the defense of the doctor.

The policy required that the Insured must cooperate and assist the Company and the appointed defense counsel in all aspects of the investigation and defense; and shall, upon request, submit to examination and interrogation by a representative of the Company, under oath if required, attend hearings, depositions and trials, assist in effecting any settlement, securing and giving evidence, and obtaining the attendance of witnesses, all without charge to the Company.

That section further provides that “[a]ny failure of the Insured to cooperate that prejudices our ability to defend any Claim, shall void this Policy.” The insurer has the burden of proof to show prejudice. The district court found that Lancet failed to meet its burden to establish prejudice.  The plain language of the Policy authorized counsel for Lancet to enter an appearance on behalf of its insureds. Lancet was prejudiced by its own choice not to defend the action from the outset. Any prejudice attributable to Dr. Malik’s noncooperation was “hypothetical” and therefore not a sufficient basis to void the policy.

The Fourth Circuit found that the district court also found credible testimony by Plaintiffs’ expert on emergency medicine, Dr. Alec Anders, that “the medical records alone provided sufficient evidence for medical experts to opine on [the] standard of care” because Dr. Malik’s “contemporaneous notes reflect[ed] his diagnostic impressions, course of care, and follow-up plan.”

The Fourth Circuit concluded that the district court reasonably inferred that record evidence was sufficient to render a standard of care opinion — a well-supported finding not subject to reversal as clearly erroneous.

The Policy includes conflicting language as to whether post-judgment interest that brings an award over-and-above the Policy’s $1 million limit is covered.  The district court did not err in awarding Plaintiffs post-judgment interest in excess of the Policy’s limit.


This decision makes no logical sense. The District Court and the Fourth Circuit bought the testimony of two experts that were contrary to common sense. A lawyer retained to defend an  insured by an insurer is not retained to represent the insurer. A lawyer should never file a pleading on behalf of a client who does not know the lawyer. Yet the Fourth Circuit found the lawyers wanting for not doing so. The court wanted the plaintiff to recover money regardless of the meaning of the policy itself and the clear, unambiguous breach of a material condition precedent to recovery. They also misread the policy that allows an insurer to defend to allow the insurer to step into the shoes of its insured as if it were the defendant. Finding notes written by the doctor to be sufficient to mount a defense without the doctor available to testify and explain his notes made sense to the Fourth Circuit and the District Court but would have made no sense to a jury or judge asked to hear evidence at a malpractice trial who would consider the failure to testify to be an admission of wrongdoing.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

“The Compact Book on Adjusting Liability Claims, Second Edition”

A Handbook for the Liability Claims Adjuster

This Compact Book of Adjusting Liability Claims is designed to The Compact Book Of Adjusting Liability Claims Second Edition: A Handbook for the Liability Claims Adjusterprovide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster.

The liability claims adjuster quickly learns that there is little difficulty with a claimant (the person alleging bodily injury or property damage against a person insured) if the claim is paid as demanded. The insured may be unhappy if the claimant’s claim is paid as presented since most do not believe they did anything wrong or fear an increase in premiums charged for subsequent policies.

The adjuster must be prepared to salve the insured’s emotions, explain why in the law and the policy it was appropriate to pay the claimant and that the settlement is in the best interest of both the insured and the insurer the adjuster represents.
The adjuster knows, and must be prepared to explain to an insured, that if a claim is resisted or denied the claimant will be unhappy, will probably file suit. If not promptly settled the claimant’s lawyers will rake the insured over the coals to prove that the insured is liable for the claimant’s injuries. The litigation will take time, effort, and money to establish the extent of the injuries and who is responsible for the injuries. Failure to settle promptly can cost the insured his or her reputation and will certainly cost the insurer much more than the claim could have been resolved for had it been resolved before the claimant retained a lawyer.

Available as a Kindle book

Available as a paperback.

About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
This entry was posted in Zalma on Insurance. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.