Las Vegas Sun

March 28, 2024

Appeals court orders $6.4 million for Las Vegas doctor

CARSON CITY – A federal appeals court has ordered a major insurance company to pay $6.4 million to a Las Vegas physician because it breached its contract when the doctor became disabled.

The U.S. Ninth Circuit Court of Appeals overturned the decision of District Judge Robert C. Jones, who had ruled in favor of Certain Underwriters at Lloyd’s, London in its dispute with cardiologist Dr. Zev Lagstein in 2001.

The court rejected the decision of Jones, who ruled that $2.4 million awarded for damages and emotional distress was excessive. It also reversed his decision that an arbitration panel didn't have authority to award $4 million in punitive damages.

Lagstein purchased an insurance policy from Lloyd’s in 1999 in which the company agreed to pay the physician $15,000 per month for up to 60 months if the doctor was disabled and unable to practice medicine.

In 2001 Lagstein developed heart disease, severe migraine headaches and other problems. The company didn't decide his claim so Lagstein went back to work in 2002 against the advice of his doctors.

The doctor filed suit in September 2003 in U.S. District Court in Las Vegas arguing breach of contract, breach of good faith and unfair trade practices.

A panel was set up for binding arbitration. In a 2-1 decision, the panel ruled in August 2006 that Lagstein was entitled to the full value of his policy at $900,000 as well as $1.5 million for emotional distress.

Panel member Ralph Williams, who was appointed by Lloyds, said Lagstein was entitled to only $11,000.

The panel then voted 2-1 that Lloyd’s should pay $4 million in punitive damages. Williams dissented, arguing the panel lacked jurisdiction. And even if it had jurisdiction, Williams said the punitive damages amounted to $50,000.

Lloyd’s filed suit in district court to overturn the $6.4 million award. Jones vacated the decisions of the arbitration panel and ruled that the $900,000 and the $1.5 million were excessive. He also held the arbitration panel exceeded its authority in making a punitive damage award.

The appeals court, in a decision Thursday written by Judge William Canby Jr., said, "A district court may not vacate an arbitration award simply because the court disagrees with its size. Thus it was error for the district court to vacate the arbitration awards simply because it found the total size either shocking or unsupported by the record."

The appeals court also rejected the argument of Lloyd’s that the panel exceeded its authority in awarding the $4 million in punitive damages because it took too long in making its decision.

The appeals court also denied the argument of Lloyd’s that the award should be overturned because two of the three panel members -- Jerry Carr Whitehead and Charles Springer -- had ethics problems in the past.

Jones said there was no evidence to show Whitehead and Springer were partial in this case and the appeals court upheld that ruling.

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