Court reverses large verdict rendered in favor of chiropractor and against his insurer

Micheil Hanczaryk sued his lawyer and his insurers after they alleged pressured him into settling a malpractice claim.  A patient had sued Hanczaryk, arguing that he performed a spinal manipulation when he should not have, causing her permanent injury.  Hanczaryk claimed that he never performed the manipulation, even though his company "mistakenly" billed for performing one.  In the case in chief, Hanczaryk's insurer-retained counsel, Boyd Chapin, prepared an affidavit of meritorious defense but inexplicably failed to file it, resulting in a court ruling that Hanczaryk could not present other expert testimony to support his defense.

Hanczaryk ultimately agreed to settle that underlying claim, but then sued his lawyer and his insurer, arguing that the lawyer's malpractice forced him to compromise a claim that had no merit.  He also argued that the disclosure of the settlement by the insurer defamed him and that the insurance company erred by failing to appoint new counsel after Chapin's error was discovered because from that point forward, the defendants' sole motivation was to protect their own interests.

Chapin's insurer compromised the claim against the attorney but the case involving the insurer went to trial; it resulted in a verdict for several million dollars in favor of the chiropractor and against the insurer. The insurer appealed, raising numerous flaws in the trial and in the court's management of the proceedings.  While the higher court dismissed many of the insurance company's objections, it agreed that the instructions given to the jurors were contradictory and would be presumed to have influenced the jurors to award a verdict based on a finding of mere negligence and not "bad faith."   It also concluded that the insurance company owed no duty to the chiropractor other than those duties set forth in the insurance contract--meaning that the insurance company should have been granted a directed verdict on any negligence claims.  Finally, it noted that the chiropractor had contributed to the preparation of the disclosure of the settlement which was in all respects substantially true and a fair account of the proceedings:  therefore, the chiropractor could not reasonably argue that it was defamatory.

On the basis of these errors, the appellate court concluded that the verdict should be overturned and a new trial ordered.