Med. Assurance Co. v. Weinberger

[973 F.Supp.2d 928]

David C. Jensen, Matthew S. Ver Steeg, Robert J. Feldt, John P. Twohy, Eichhorn & Eichhorn, Hammond, IN, John David Hoover, Michael A. Dorelli, Hoover Hull LLP, Indianapolis, IN, for Plaintiff.

John J. Morse, Morse & Bickel PC, Arend J. Abel, David J. Cutshaw, Kelley J. Johnson, Gabriel A. Hawkins, Cohen & Malad LLP, Indianapolis, IN, Barry D. Rooth, Holly S.C. Wojcik, Theodoros & Rooth PC, Merrillville, IN, for Defendants.

This case arises out of the spate of medical malpractice committed by Dr. Mark S. Weinberger (“Weinberger”), who performed numerous unnecessary surgeries on his patients so as to increase his earnings prior to fleeing the country to escape accountability for his actions. The Medical Assurance Company, Inc. (“Medical Assurance”), Weinberger's malpractice insurance provider, thereafter filed this action seeking declaratory judgment that it had no duty to defend or indemnify Weinberger or his entities (collectively the “Weinberger Defendants”) for that malpractice. The defendants in this matter are Weinberger and several entities he established to conduct his business, in addition to all of the claimants in underlying actions against the Weinberger Defendants for malpractice, grouped into two subsets referred to as the “Verhoeve Defendants” and the “Thomas Defendants,” and the Indiana Patient Compensation Fund (the “Fund”), which is potentially liable to the claimants for any malpractice damages beyond the limits of or not covered by the insurance policies, pursuant to Indiana's medical malpractice legislation. In response to Medical Assurance's complaint, the Fund filed a counterclaim seeking a declaration that Medical Assurance owed coverage for the claims at issue up to its policy limits. The Verhoeve Defendants also filed a counterclaim in which they seek declaration of the amount of total aggregate limits under the applicable policies, and the Fund then filed counter/cross-claims against each of the other defendants seeking declaration that it did not owe them any amounts.

As this case presently stands, the Weinberger Defendants have defaulted, and after appointment of a Special Master to oversee and coordinate settlement discussions, settlements have been reached between some, but not all, of the parties. The parties report that the Fund has reached a settlement with all of the Thomas Defendants and Verhoeve Defendants. The Thomas Defendants have settled their claims with Medical Assurance as well, so the Thomas Defendants' interest in this matter will be concluded upon finalization of those settlements. What currently remains are the claims between the Verhoeve Defendants and Medical Assurance,

[973 F.Supp.2d 929]

and potentially claims the Fund may have against Medical Assurance relating to the resolution of the Verhoeve Defendants' claims against Medical Assurance. Although the ultimate question of whether Medical Assurance owes coverage regarding the underlying malpractice claims remains outstanding, motions for summary judgment as to the Verhoeve Defendants' counterclaim for declaratory judgment as to the aggregate policy limits are currently pending before the Court and are ripe for ruling.

Each of the four non-defaulted parties has briefed or expressed its position as to the total aggregate policy limits applicable to the underlying malpractice claims. For the following reasons, the Court GRANTS the motions for summary judgment as modified herein relative to the amount in question, and holds that the total aggregate policy limits applicable to liability arising out of Weinberger's malpractice are $5,550,000. The parties have also filed various motions relating to the consideration and resolution of the motions for summary judgment, and the Court addresses each of those in turn as well.

Weinberger was an otolaryngologist, an ear, nose, and throat specialist, who practiced in Merrillville, Indiana. [DE 53 ¶ 16]. Weinberger established various legal entities through which he practiced, including Mark Weinberger, M.D., P.C. (“Weinberger, PC”), the Merrillville Center for Advanced Surgery, LLC (the “Merrillville Center”), the Nose and Sinus Center, LLC, and Subspecialty Centers of America, LLC, (collectively, the “Weinberger Entities”). [DE 170–12]. Though Weinberger was apparently a prominent physician, his practice was in fact rife with malpractice. According to a report issued by the Medical Licensing Board of Indiana, Weinberger “submitted insurance claims on numerous occasions in which he grossly over billed for procedures, billed for medically unnecessary surgeries, or billed for services not rendered.” [DE 53–1 ¶ 9]. This was not merely billing fraud, but included performing surgeries on numerous patients for whom there was no medical need, apparently in order to charge the patients and their insurers for these unnecessary procedures. [DE 313 ¶¶ 10–12].

This conduct began to catch up with Weinberger in June 2004, when patients began filing Proposed Complaints for medical malpractice against him with the Indiana Department of Insurance. [DE 53 ¶ 8]. However, in September 2004, while on vacation with his family in Greece, Weinberger disappeared and went on the lam for several years. [DE 53 ¶ 16]. In the meantime, though, several hundred claims were brought against Weinberger and the Weinberger Entities on account of his malpractice. [DE 53 ¶¶ 10–12]. Medical Assurance, which insured the Weinberger Defendants, undertook the defense of these actions, but it claims to have been prejudiced by the fact that Weinberger had absconded and was not available to assist in the defense, leading to unfavorable results in the underlying malpractice actions. [DE 53 ¶¶ 27–30].

Though Weinberger has since been apprehended and sentenced to prison for his conduct, numerous actions relating to civil liability for Weinberger's conduct, including the present action, remain pending. Medical Assurance initiated this action seeking declaratory judgment that the Weinberger Defendants had breached provisions of the insurance policies requiring them to cooperate with Medical Assurance in the defense of any malpractice actions, and that Medical Assurance owed no coverage

[973 F.Supp.2d 930]

under the policies as a result. [DE 1, 53]. The Fund responded to Medical Assurance's Complaint by filing a counterclaim that seeks a declaratory judgment that Medical Assurance owes coverage to the Weinberger Defendants in the full amount covered by the applicable policies. [DE 59]. The Fund also filed cross- and counter-claims against the other defendants for declaratory judgment alleging that it is not liable to them. [DE 313].

The Verhoeve Defendants have also filed a counterclaim in which they ask “that this Court declare the total aggregate limits, per policy year, of all of the professional liability insurance policies at issue in this litigation providing coverage for all the underlying medical negligence claims identified in the Complaint.” [DE 290]. The present motions for summary judgment relate to this counterclaim, and all remaining parties in this action have sought entry of summary judgment as to this claim, though they have expressed various opinions as to the correct amount of applicable aggregate policy limits. [DE 510, 523, 527, 539].

The malpractice insurance policies in question were all provided by Medical Assurance, which began insuring the Weinberger Defendants in 1996. The first policy, policy number 1010294, listed Weinberger and Weinberger, PC as the insureds. [170–8 p. 20]. It ran from September 23, 1996 to September 23, 1997, and carried limits of liability of $100,000 for each medical incident and an annual aggregate limit of $300,000. [ Id.] This policy was renewed for the periods of September 23, 1997 to September 23, 1998; September 23, 1998 to September 23, 1999; and September 23, 1999 to September 23, 2000. [DE 170–7, –8]. The policy was amended during the third period to increase the limits of liability to $250,000 for each medical incident and $750,000 in the annual aggregate. [DE 170–7 p. 18]. This policy was then cancelled during its fourth period, effective June 1, 2000. [DE 170–7 p. 3].

On June 1, 2000, another policy, policy number MP32800, went into effect. [DE 170–6 p. 4]. This policy again insured Weinberger and Weinberger, PC for $250,000 per incident, with an annual aggregate limit of $750,000, and ran from June 1, 2000 through June 1, 2001. [ Id.] The policy was renewed for the period from June 1, 2001 through June 1, 2002. [DE 170–5 p. 9]. During this period, the policy was amended twice, adding the Nose and Sinus Center, LLC, and the Rejuvenating Laser Spa, LLC as insureds. [DE 170–5 pp. 3, 6]. The MP32800 policy was then renewed for June 1, 2002 through June 1, 2003. [DE 170–4 p. 15]. For this period, the policy began by covering the same four insured, and was amended two more times to add Deirdre A. Durkis, M.D. as an insured physician, and Subspecialty Centers of America, LLC as an insured organization. [DE 170–4 pp. 6, 9, 15]. In addition, the policy was amended effected March 18, 2003 to add $1,000,000 in additional limits of liability for Weinberger. [DE 170–4 p. 3]. This policy was again renewed for the June 1, 2003 to June 1, 2004 period, and carried the same $250,000 per-incident and $750,000 aggregate limits of liability as to each insured, as well as $1,000,000 in additional coverage for Weinberger. [DE 170–3 p. 10].

The parties entered a new policy for the period of June 1, 2004 through June 1, 2005, numbered MP50554. [DE 170–2 p. 4]. This policy again covered Weinberger, Weinberger, PC,...