Lancet Indemnity’s $1 M med mal policy had a standard clause requiring the insured, Dr. Ishtiaq Malik, to cooperate and assist Lancet and appointed counsel in investigating and defending claims. But when the family of decedent Juan Castillo sued him for malpractice, Malik could not have been less cooperative or provided less assistance. He moved to Pakistan and never acknowledged any correspondence about the case.

Citing his lack of cooperation, Lancet disclaimed coverage. No appearance was entered for Malik or Lancet, and plaintiffs were granted a default judgment on the issue of liability. When the court scheduled a hearing to determine damages, Lancet’s motion to intervene was granted. Damages were determined to be $2.56 M.

Plaintiffs sought declaratory judgment that Lancet was liable under the policy despite its position that Malik’s failure to cooperate voided coverage. On Oct. 16 the court issued its opinion in favor of plaintiffs, holding Lancet liable under the policy.

The court noted that the applicable clause did not state that failure to cooperate voids the policy. Rather, only failure to cooperate “that prejudices our [i.e., Lancet’s] ability to defend” voids the policy. Under Maryland law prejudice means actual prejudice.

Therefore, Lancet had the burden of proving actual prejudice. Lancet had failed to carry the burden, offering no more than speculation that it couldn’t have defended the case adequately with medical records and experts. As the court saw it, Lancet merely chose not to participate in the liability phase of the case just as it chose to participate in the damages phase.

The court declared that Lancet is liable to plaintiffs pursuant to the policy’s terms.

The case is Mora v. Lancet Indemnity, No. 8:16-cv-00960 (D. Md.).