Court to insurer: You lose

What actually happens when a malpractice carrier tries to cut corners on defense costs, as discussed in the preceding article? One doctor found out the hard way when his insurer assigned the same attorney to defend him and a co-defendant whose interests conflicted with his. The result was a $2.5 million verdict against him. Last March, however, a federal judge in Pennsylvania upheld a nearly $8 million "bad faith" judgment against the insurer. The judgment-including $6 million in punitive damages-may be the largest bad faith insurance award ever made in Pennsylvania.

The case began in 1993 when Stephen Jurinko, the plaintiff in the underlying malpractice case, came to Paul Marcincin, a dermatologist in Bethlehem, PA, with a dark lesion on his nose. Marcincin did a biopsy, and sent the tissue sample to SmithKline Beecham Clinical Laboratories where it was analyzed by pathologist Andrew Edelman. Edelman's report said the tissue "appeared to be benign," but noted that the sample was "inadequate." Marcincin treated the lesion with liquid nitrogen and phenolic acid, but didn't do a second biopsy then or order additional tests at subsequent visits.

Unfortunately, the lesion turned out to be malignant, and by 2000, the cancer had spread to a lymph node in Jurinko's neck. He underwent a radical neck dissection and a year of interferon therapy, and is still being followed. Jurinko and his wife filed a malpractice suit against Marcincin, Edelman, and SmithKline Beecham.

A refusal to settle results in a big malpractice verdict

Marcincin testified that he repeatedly told the assigned attorney that he wanted to settle instead of going to trial. A trial, he feared, would mean lost time from his practice, damage to his reputation, and the risk of a big verdict by jurors likely to feel sympathy for a patient with metastatic cancer.

The lawyer assured Marcincin that the case would probably be settled before trial, but Medical Protective refused to offer more than $50,000 of his $200,000 primary coverage. The carrier's claims adjuster later admitted that his refusal to budge was part of a "negotiating tactic" designed to save the company money on the settlement.

In theory, Marcincin also had $1 million in excess insurance from the state's Catastrophic Loss Fund, but under state law, that coverage kicked in only if the carrier first offered his full policy limit. The CAT Fund sent a written request to Medical Protective, urging the company to tender Marcincin's policy limit. The letter warned that a refusal to do so would undermine efforts to settle the case, and constitute bad faith. The insurer still refused to offer more than $50,000, even though the company later admitted that it knew the case was likely to result in damages against Marcincin of more than his total coverage.

After Marcincin's deposition in 2001, the assigned attorney wrote to Medical Protective expressing concern about Marcincin's exposure, and warning: "In my view, this is a case which will have to be settled." After the carrier finally assigned a different lawyer to represent Edelman, that attorney wrote: "I do not believe that Dr. Marcincin can be defended . . . I hope that Dr. Marcincin resolves this case prior to trial." In his notes, the company's claims adjuster commented: "He will be difficult to defend." Nevertheless, the carrier still refused to settle.

At a pre-trial conference in January 2002, a judge estimated a settlement value of $1.5 to $2 million for the case, and recommended that each of the co-defendants pay one-third. The trial judge also recommended that the co-defendants settle for a total of $1.6 million. SmithKline Beecham eventually did settle for $525,000, but Medical Protective still wouldn't budge. When the malpractice case finally went to trial in April 2002, the jury exonerated Edelman and found Marcincin liable for $2.5 million in damages-$1.3 million more than his total coverage.