United States District Court, D. Maryland
CLAUDIA M. MORA et al. Plaintiffs,
LANCET INDEMNITY RISK RETENTION GROUP, INC., Defendant.
Xinis, United States District Judge
in this insurance action is a motion for summary judgment
filed by Plaintiffs Claudia Mora, her two children, and Juan
Carlos Castillo and a cross-motion for summary judgment filed
by Defendant Lancet Risk Retention Group, Inc. (ECF Nos. 74,
76). The issues have been fully briefed and a hearing was
held on Friday, February 24, 2017. For the reasons that
follow, both motions are denied.
case arises out of an insurance coverage dispute between
insurer Lancet Risk Retention Group, Inc.
(“Lancet”), its insureds, and several plaintiffs
who have filed suit against the insureds. In 2014, Lancet
issued a claims-made-and-reported policy (the
“Policy”) to two interrelated medical practices,
Union Multi-Care Medical Center, Inc. and Advanced Walk-In
Urgent Care, LLC, both located in Silver Spring, Maryland.
ECF No. 74-3 at 2. Dr. Ishtiaq A. Malik (“Dr.
Malik”) owned and operated both practices. He and his
colleague, Dr. Lendicta Madden (“Dr. Madden”),
were additional named insureds on the Policy. See
Insurance Policy, ECF No. 76-5 at 12. The Court will refer to
the two medical practices and Dr. Malik collectively as the
“Insureds.” Union Multi-Care Medical Center and
Advanced Walk-In Urgent Care are entities solely owned by Dr.
Malik and thus Dr. Malik serves as their representative. The
Policy was in effect from July 1, 2014 through July 31, 2015.
January 15, 2015, Juan G. Castillo visited Dr. Malik at his
Silver Spring offices because Castillo was experiencing chest
pains. See Consultation Note, ECF No. 75-2 at 2.
According to Dr. Malik's consultation note, Mr. Castillo
arrived complaining of atypical chest pain associated with
shortness of breath a few times day. Id. Mr.
Castillo's history was recorded, his vitals were taken,
and a physical exam was performed. Based on his assessment,
Dr. Malik prescribed Mr. Castillo a thirty-day supply of
heart medicine. Id. Eight days later, Mr. Castillo
died from a sudden cardiac event while at work.
15, 2015, Mr. Castillo's widow, Claudia Mora, and two of
their minor children (the “Plaintiffs”) filed a
medical malpractice claim against the Insureds and others
with the State of Maryland Health Claims Alternative Dispute
Resolution Office (“HCADRO”) and elected to waive
arbitration. See Ex. 10, ECF No. 75-3 at 18-43. In
that action, the Plaintiffs alleged that Dr. Malik and the
rest of the Insureds negligently failed to refer Mr. Castillo
to a cardiologist after evaluating him, leaving
Castillo's heart condition undiagnosed and untreated
which resulted in his death. Id. Before filing their
claim with HCADRO on July 2, 2015, Plaintiffs' counsel
put Lancet on notice in writing that Plaintiffs' lawsuit
against its Insureds was forthcoming. ECF No. 22 at 7;
Letter, Ex. 8, ECF No. 75-3 at 14. On July 24, 2015,
Plaintiffs filed the medical malpractice/wrongful death case
in the Circuit Court for Montgomery County, naming as
defendants the Insureds and Richard O. Akoto. See Mora v.
Advanced Walk-In Urgent Care LLC, Case No.
407276-V (Montgomery Cnty. Cir. Ct. filed July 24, 2015)
[hereinafter the “Lawsuit”]. That same day,
Plaintiffs' counsel sent a letter enclosing the complaint
and the related filings to Lancet and Lancet's outside
counsel for this matter. ECF No. 22-4; ECF No. 75-4 at 6.
Plaintiffs' counsel informed Lancet of the impending
Lawsuit, Lancet's counsel immediately reached out to the
Insureds via telephone, e-mail, and other correspondence to
investigate Plaintiffs' claims. ECF No. 76-1 at 11-12.
Specifically, on July 24, 2014, Lancet advised via letter
Union Multi-Care, Advanced Walk-In, and Dr. Malik at Dr.
Malik's last-known personal residence and his last-known
email address, that it: (i) received the July 2, 2015 letter
from Plaintiffs; (ii) appointed defense counsel on the
Insureds' behalf; (iii) defense counsel required the
Insureds' and Dr. Malik's assistance and cooperation
in discussing the allegations in the July 2, 2105 letter; and
(iv) its investigation remained ongoing and its defense under
the Policy was being provided under a strict reservation of
rights. See Letter, ECF No. 76-14. Lancet received
August 6, 2015, Lancet sent another letter to Dr. Malik again
requesting that he cooperate with the pending litigation and
referencing Lancet's prior attempts to contact him.
See Letter, ECF No. 76-17. No one responded. Lancet
then contacted Dr. Malik's former counsel in a False
Claims Act action who informed Lancet that Dr. Malik had
moved to Pakistan and did not intend on returning to the
United States. See Letter, ECF No. 76-18.
sent several more letters to Dr. Malik at his last known
address in Silver Spring and a coverage denial letter of
October 16, 2015 explaining that Lancet would not provide Dr.
Malik or the other Insureds a defense in the Lawsuit for Dr.
Malik's failure to cooperate in violation of the Policy.
ECF Nos. 75-1 at 42-47, 76-19, 76-20.
February 1, 2016, Plaintiffs' counsel informed Lancet in
writing that he had learned of Dr. Malik's whereabouts in
Pakistan and provided Lancet with two possible addresses. ECF
No. 76-22. Lancet then sent packages to these two addresses
dated February 26, 2016, referencing Lancet's prior
attempts to communicate with him. Lancet told Dr. Malik that
because Lancet was unable to reach him in an effort to
investigate and defend against the claims in the Lawsuit,
Lancet disclaimed coverage. See February 26, 2016
Letter, ECF No. 76-23.
from responding to a subpoena request from Plaintiffs, Lancet
did not participate in the Lawsuit. Lancet asserts it did not
participate because without the Insureds' cooperation,
Lancet could not meaningfully defend against Plaintiffs'
allegations. ECF No. 75-4 at 7. No attorney entered an
appearance for the Insureds and none of the Insureds
participated in the trial proceedings.
March 11, 2016, the circuit court entered an Order of Default
against the Insureds. See Order, ECF No. 75-4 at
19-20. The Insureds never moved to vacate the Order. On
August 8, 2016, Lancet moved to intervene for a limited
purpose of damages. The Montgomery County circuit court
granted this motion over the objection of Plaintiffs'
counsel. See Order, ECF No. 75-4 at 26. On August
11, 2016, the circuit court entered a judgment against the
Insureds, jointly and severally, for $2.56 million.
See Entry of Judgment, ECF No. 75-4 at 30.
March 2, 2016 Claudia Mora, her two children, Juan Carlos
Castillo, Advanced Walk-In Urgent Care, LLC, Union Multi-Care
Medical Center, Inc., and Dr. Richard Akoto filed this
declaratory judgment action against Lancet in the Circuit
Court for Montgomery County seeking a judgment declaring that
the Insureds are covered by the Policy for claims asserted
against them in the Lawsuit. See Amended Complaint,
ECF No. 6. Lancet removed the case to this Court and filed a
counterclaim. ECF Nos. 1 and 22. The counterclaim seeks a
declaration that the Policy is void because of the
Insureds' failure to comply with the Policy's notice
and cooperation provisions. ECF No. 22 at 15-16. Plaintiffs
moved for summary judgment and Lancet filed a cross-motion
for summary judgment. For the reasons that follow, both
motions are denied.
STANDARD OF REVIEW
court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986) (citing predecessor to current Rule
56(a)). The burden is on the moving party to demonstrate the
absence of any genuine dispute of material fact. Adickes
v. S.H. Kress & Co., 398 U.S. 144 (1970). If
sufficient evidence exists for a reasonable jury to render a
verdict in favor of the party opposing the motion, then a
genuine dispute of material fact is presented and summary
judgment should be denied. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). However, the “mere
existence of a scintilla of evidence in support of the
[opposing party's] position” is insufficient to
defeat a motion for summary judgment. Id. at 252.
The facts themselves, and the inferences to be drawn from the
underlying facts, must be viewed in the light most favorable
to the opposing party, Scott v. Harris, 550 U.S.
372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230
(4th Cir. 2008), who may not rest upon the mere allegations
or denials of his pleading but instead must, by affidavit or
other evidentiary showing, set out specific facts showing a
genuine dispute for trial, Fed.R.Civ.P. 56(c)(1).
court is called upon to decide cross-motions for summary
judgment, it must review each motion separately on its own
merits to decide whether either party deserves judgment as a
matter of law. Rossignol v. Voorhaar, 316 F.3d 516,
523 (4th Cir. 2003). Thus, as with any motion for summary
judgment, the court must review the facts and reasonable
inferences therefrom in the light most favorable to the party
opposing that motion. Id.
Lancet's Cross-Motion for Summary
contends that it properly denied coverage because the
Insureds failed to notify Lancet of the Lawsuit before the
Policy expired, and further failed to cooperate in
investigating and defending the claims. As a result, Lancet
need not reimburse the Insureds for the damages and costs it
incurred in the Lawsuit. Plaintiffs respond that before
Lancet can disclaim coverage under either of these
provisions, it must show that the Insureds' failure to
notify or cooperate “actually prejudiced” it
pursuant to Maryland's “notice-prejudice”
rule. See Md. Ins. Code Ann. §
19-110. Lancet, however, notes that § 19-110 is
preempted by the federal Liability Risk Retention Act
(“LRRA”), 15 U.S.C. § 3901 et seq.
it is undisputed that Lancet is a risk retention group
governed by the LRRA. The Court, therefore, first addresses
the LRRA's impact on the substantive law governing this
Federal Preemption Law and the Liability Risk Retention Act
preemption emanates from the Constitution's Supremacy
Clause. See U.S. Const. art. VI, cl. 2. In
addressing a preemption issue, a court's first task is to
determine whether Congress, in enacting a federal law,
intended to preempt state law covering the same subject
matter. See California Fed. Savings & Loan
Ass'n, 479 U.S. 272, 280-81 (1987). Once the court
determines congressional intent with regard to preemption, it
must then turn to the the scope of that preemption. See
Duvall v. Bristol-Myers-Squibb Co., 103 F.3d 324, 328
(4th Cir. 1996).
presumptions guide this inquiry. See Id. First,
“‘the purpose of Congress is the ultimate
touchstone' in every preemption case.”
Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996)
(quoting Retail Clerks v. Schermerhorn, 375 U.S. 96,
103 (1963)). Second, a court applies “the basic
assumption that Congress did not intend to displace state
law.” Maryland v. Louisiana, 451 U.S. 725, 746
(1981). This presumption of non-displacement “is
strongest when Congress legislates ‘in a field which
the States have traditionally occupied.'” S.
Blasting Servs., Inc. v. Wilkes Cnty., N.C. , 288 F.3d
584, 590 (4th Cir. 2002) (quoting Medtronic, Inc.,
518 U.S. at 485). Insurance is one of those traditional
state-occupied areas. See FMC Corp. v. Holliday, 498
U.S. 52, 53 (1990).
1981, Congress enacted the Products Liability Risk Retention
Act (“PLRRA”), allowing “‘product
manufacturers to purchase insurance on a group basis at more
favorable rates or to self-insure through insurance
cooperatives called ‘risk retention groups.'”
Ophthalmic Mut. Ins. Co. v. Musser, 143 F.3d 1062,
1064 (7th Cir. 1998) (quoting H.R. Rep. No. 190 at 4 (1981),
reprinted in 1981 U.S.C.C.A.N. 1432, 1432).
However, risk retention groups faced difficulties in
providing insurance nationwide because they were obligated,
like traditional insurance companies, to obtain licenses and
comply with the regulations of every state in which they seek
to do business. See Vonda Mallicoat Laughlin,
State Laws Restricting the Operation of Risk Retention
Groups-Necessary Protection or Illegal Regulation?, 60
Drake L. Rev. 67, 68 (2011) (citing Baird Webel, Cong.
Research Serv., RL 32176, The Risk Retention ...