Failure to Defend Absent Insured Negates Coverage Defense of Failure to Cooperate, Mora v. Lancet.

In Mora v. Lancet, PX-16-960, 2017 WL 4618461 (D. Md., October 16, 2017), a federal court determined that an insurance company failed to prove that it was prejudiced by a doctor’s failure to cooperate in the defense of a medical malpractice. The Plaintiff in the underlying action filed a wrongful death claim against a doctor. The doctor moved back to Pakistan and failed to cooperate with his insurer. The insurer did not provide a defense and a default was entered. After the default, the insurer intervened for limited purpose of defending the damage portion of the case. The judge entered a judgment of $2.56 million.

The Plaintiff then filed a declaratory action against the insurance company. Both parties filed cross motions for summary judgment. The judge denied the motions explaining that the question of prejudice is inherently fact-driven. In the summary judgment order, the court signaled that the insurer may have difficulty proving that the prejudice was caused by the doctor’s absence rather than the insurer’s absence.

After a two-day bench trial the judge concluded that the insurer did not meet the burden of proving actual prejudice as a result of the insured’s lack of cooperation. Consistent with the judge’s earlier comments in the MSJ Order, the carrier failed to prove the prejudice was not caused by the carrier’s own failure to defend. The court explained it was left to theorize how the court could have handled the doctor’s absence rather than how the court did handle the absence.

Any insurer faced with defending a lawsuit on behalf of an absent insured should give careful consideration to providing a defense under a reservation of rights and then filing a declaratory action.