August 14, 2025 | Atlanta, GA — MedLegalNews.com — An ongoing workplace malpractice coverage dispute has reached the Eleventh Circuit, where Medmarc Casualty Insurance Co. is seeking to avoid defending a Georgia law firm in a high-stakes malpractice case. The insurer argues its policy excludes claims tied to misappropriation, conversion, or improper commingling of funds.
The case highlights broader concerns in the legal industry over how insurers interpret exclusions in professional liability policies. For firms, a malpractice coverage dispute can have far-reaching implications, affecting not only defense funding but also client relationships, reputational standing, and overall risk management strategies. Legal analysts note that the Eleventh Circuit’s ruling could set precedent on how narrowly or broadly such exclusions are applied in future cases.
Insurer Challenges Duty to Defend
Medmarc’s appeal stems from a February ruling by a federal judge in Atlanta that dismissed its declaratory judgment action. The lower court found that even if some malpractice claims involved excluded conduct, others might still fall within the scope of the policy—requiring Medmarc to defend the entire case.
Medmarc contends the district court misinterpreted its coverage exclusions and is urging the Eleventh Circuit to conduct a de novo review rather than relying on an abuse-of-discretion standard.
Legal observers note that the outcome of this malpractice coverage dispute could significantly influence how courts assess overlapping claims in professional liability cases. A ruling in Medmarc’s favor could give insurers broader discretion to limit defense obligations when excluded conduct is alleged alongside covered claims, potentially reshaping defense strategies in similar disputes nationwide.
Background of the Malpractice Dispute
The underlying state court suit involves Fellows LaBriola LLP and attorney Steven Kushner, accused of mishandling representation for business owner Zankhana Patel and her company, PNP Amusement Games LLC.
Patel alleges her attorneys improperly transferred $11 million in settlement funds to her ex-husband’s company, leaving her without proceeds. She also claims her then-husband received a BMW and jewelry as part of the alleged mishandling of assets.
Medmarc maintains that such allegations fall squarely within policy exclusions for conversion, improper commingling, and misappropriation.
Policy Language at the Heart of the Appeal
The dispute hinges on whether the malpractice claims constitute a “suit” or a “claim” under Medmarc’s policy language. PNP and Fellows LaBriola argue the policy’s use of “suit” obligates Medmarc to defend any litigation that includes at least one covered claim.
Medmarc counters that Georgia law and its policy definitions support its interpretation, barring coverage for any claim involving misappropriation—regardless of other allegations in the case.
For more details on legal standards for insurance coverage disputes, see the U.S. Courts of Appeals official resource.
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FAQs: Workplace Malpractice Coverage Dispute
What is the main issue in the Medmarc workplace malpractice coverage dispute?
The dispute centers on whether Medmarc must defend a law firm in a malpractice suit despite policy exclusions for misappropriation and related conduct.
Why is the case before the Eleventh Circuit?
Medmarc appealed a federal district court ruling that required it to defend the entire lawsuit if any claim potentially fell under the policy’s coverage.
How could this case impact future insurance coverage disputes?
A ruling favoring Medmarc could strengthen insurers’ ability to deny defense obligations when exclusions are broadly written, especially in professional liability policies.
What role do policy exclusions play in malpractice coverage disputes?
Policy exclusions define circumstances under which insurers are not required to provide coverage. In malpractice coverage disputes, these exclusions often become the focal point for determining defense and indemnity obligations.
Could this case influence settlement strategies in malpractice lawsuits?
Yes. If insurers gain broader discretion to deny defense in cases involving excluded conduct, law firms and insured professionals may be pressured to settle earlier to avoid protracted litigation costs.