The 10th-seeded Nalbandian was leading Cilic 7-6 (7-3), 3-4 when he kicked an advertising sign in a fit of pique. A segment of the sign went flying and hit a line judge, causing bleeding on his left shin.
Officials stopped the match at that point and named sixth-seeded Cilic the victor by default at The Queen's Club in London.
With the decision, the Croatian won his first event of year after losing to Philipp Kohlschreiber in the finals at Munich last month improving to 7-7 all-time in finals.
Argentina's Nalbandian, meanwhile, fell to 11-12 in career finals. He was seeking his first crown since 2010 in Washington.