Law360.com recently published my article on The Medical Protective Company v. Center for Advanced Spine Technologies in its Expert Analysis section.
This is not the first time I've written on the topic of defendant class actions.
As readers of this blog will know, it is not uncommon for insurers to file declaratory judgment actions in federal court against a policyholder to determine coverage obligations. Courts even explicitly sanction or advise insurers to file declaratory judgment actions when coverage is questionable. These coverage cases often include litigating the question of whether a duty to defend exists and whether there is any obligation to provide indemnity to a policyholder.
Occasionally, questions arise as to who is a necessary party in the coverage action. We blogged about that several weeks ago, as reflected in a recent (and I believe, ongoing) case in North Carolina. http://wombleinsurance.blogspot.com/2015/10/scottsdale-ins-co-v-b-fitness-center.html In Scottsdale Insurance v. B&G Fitness Center, the injured tort plaintiffs from the underlying state court action were found to not be required under Federal Rule of Civil Procedure 19 to be parties in the coverage action.
Contrast that with The Medical Protective Company v. Center for Advanced Spine Technologies, Case No. 1:14-CV-5, United States District Court for the Southern District of Ohio. There, the insurer specifically wanted to include all possible known and future claimants against Dr. Durrani and his practice and have them bound by the judgment. Dr. Durrani — as a result of fleeing to Pakistan and refusing to participate in American civil litigation — was not expected to defend the insurance coverage declaratory judgment and thus the future claimants were necessary parties. A defendant class action under Rule 23(b)(2) was the procedural tool that the insurer used to include those parties.
After the defendant class was certified - containing all known patients of Dr. Durrani's practice - the court also ruled that Dr. Durrani and his practice are waived and are estopped from asserting their consent to settle rights under the policy. This frees the insurer to mediate and settle claims under these policies without Dr. Durrani’s participation and shields the insurer from potential bad faith liability. The Medical Protective Company v. Center for Advanced Spine Technologies, (Sept. 23, 2015, S.D. Ohio).