Insurance Company to Pay for Legal Defense of California Doctor

We recently featured two posts in our Emergency Business Litigation blog discussing an insurance case here in Illinois. In that case, the courts ruled that the insurance company was not responsible for the legal defense of the health organization on the grounds that criminal activity took place.

In a recent California case, however, it was decided that the insurance company is responsible for paying over $1 Million in legal fees that accumulated in the time before the doctor, Richard Lopez, was acquitted.

Some background on the case:

Richard Lopez, a medical director at a liver transplant center in a California hospital, was accused of reassigning a liver transplant from the second patient on the list to the 52nd person. After supposedly performing the transplant, Lopez allegedly attempted to cover everything up.

Lopez was later acquitted by the federal jury due to misidentification of the individual responsible for the cover-up.

As a medical director at St. Vincent’s Liver Disease program, Dr. Lopez was covered by the directors and officers liability insurance offered by Mt. Hawley.

Prior to being acquitted, Lopez requested that his legal costs, which were over $1 million, be covered by Mt. Hawley. In response to the request, Mt. Hawley sued Mr. Lopez requesting a declaration denying responsibility on the part of Mt. Hawley.

While the policy included coverage in criminal proceedings, Mt. Hawley argued that California law prohibited coverage for particular criminal actions. In June of 2011 the Los Angeles County Superior Court ruled that Mt. Hawley was not obliged to pay for Lopez’s defense because of a California insurance statute barring coverage for all criminal actions.

However, according to Lopez’s appeal, the law only applies to certain state and local actions, whereas he was involved in a federal prosecution.

The California court of appeals reversed the lower court’s action and required Mt. Hawley to cover the criminal defense costs incurred.

Many non-profits have difficulty recruiting directors due to fear of lawsuits and prosecution. Insurance policies should be obtained to cover the actual risks directors face. An insurance company’s denial of coverage should be reviewed by a competent coverage lawyer to see if it has correctly done so. Better yet, insurance policies should be received by competent professionals to ensure that foreseeable risks that can be covered are in fact covered, without ambiguity.

The Patterson Law Firm has successfully tried many cases related to insurance coverage and contractual indemnity. To read about some of our notable cases in this area or learn about other services we offer, please visit pattersonlawfirm.com or call (312) 223-1699 to speak with one of our experienced attorneys.


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