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The Delaware Supreme Court recently affirmed a grant of summary judgment in favor of a mortgage lender who sought coverage for a government investigation under its management liability insurance policy, in the case ACE American Ins. Co. v. Guaranteed Rate, Inc., No. 360, 2022 (Del.). We previously reported on the trial court’s grant of summary judgment to the policyholder and ruling in favor of the policyholder on cross-motions for judgment on the pleadings. The Supreme Court rejected the insurers’ arguments that it had no duty to defend the policyholder in connection with a $15 million False Claims Act (FCA) investigation and settlement.
Continue Reading Delaware Supreme Court Affirms that D&O Insurer Must Cover Settlement of Alleged False Claims Act Violations

The False Claims Act continues to make headlines. The DOJ announced earlier this year that its fiscal-year recoveries—across 351 settlements and judgments—exceeded $2.2 billion, which was the second-highest number of settlements recorded in a single year. More recently, the US Supreme Court heard oral argument and is poised to issue a decision in a closely-watched FCA case that could radically change the balance of power between the government and industry.Continue Reading Drugmaker Wins (Again) in False Claims Act Coverage Dispute Over DOJ Settlement

Earlier this month, the US District Court for the Northern District of Illinois ruled that Call One Inc., a tele-communications company, must litigate a claim by its insurer, Berkley Insurance Company, seeking to rescind coverage based on the information provided by the policyholder in its application for insurance. The coverage dispute is illustrative of insurers’ increased scrutiny of the answers to all policy application questions—including where no response is provided—to identify new or additional grounds to avoid coverage, even if it requires rescission of the policy. Policyholders should thus carefully consider all questions and requirements during the policy application process (including during renewal) to avoid potential disclosure disputes should a claim arise.Continue Reading Recent Decision Highlights the Importance of Avoiding Disclosure Pitfalls

A Delaware court recently granted summary judgment to a mortgage broker targeted in a federal government investigation for alleged False Claims Act violations, holding that the company’s directors and officers liability (“D&O”) insurer was required to indemnify more than $15 million in settlement costs with the U.S. Department of Justice. Guaranteed Rate, Inc. v. ACE American Insurance Company, No. N20C-04-268 MMJ CCLD (Del. Super. Ct. Sept. 6, 2021). We previously reported on the policyholder’s earlier victory in this case, in which the court held that a Civil Investigative Demand (“CID”) from federal authorities triggered the insurer’s obligation to pay defense costs under the D&O policy.
Continue Reading D&O Insurer Must Cover Mortgage Broker’s $15 Million Settlement of Alleged False Claims Act Violations

While total False Claims Act recoveries decreased in 2020, FCA litigation and investigations are expected to continue to rise under the Biden administration, driven in part by the DOJ opening 250 new FCA investigations and actions in 2020, which is the highest number of new matters since 1994. As recent decisions show, the good news is that companies incurring legal fees defending against government investigations or negotiating settlements with regulators to resolve FCA claims may be able to look to D&O coverage to mitigate those losses. One such company recently prevailed in its $10 million claim against an excess D&O insurer following the insurer’s improper refused to contribute its policy limits to an FCA settlement with the DOJ. The Illinois federal court decision, Astellas US Holdings, Inc. v. Starr Indemnity & Liability Co., No. 17-cv-08220 (E.D. Ill. Oct. 8, 2021), which focuses on whether $50 million of Astellas’s settlement payment to the DOJ was covered “Loss” under the D&O policy, provides useful guidance for companies facing potential FCA exposures.
Continue Reading Policyholder Win Highlights Key Issues to Maximize Coverage for False Claims Act Settlements

The Superior Court of Delaware held that a directors and officers liability insurer must advance defense costs to a mortgage broker targeted in a federal government investigation of alleged False Claims Act violations. In Guaranteed Rate, Inc. v. ACE American Insurance Company, No. N20C-04-268 MMJ CCLD (Del. Sup. Ct. Aug. 18, 2021), Guaranteed Rate received a Civil Investigative Demand from federal authorities in June 2019 regarding the company’s underwriting and issuance of federally-insured mortgage loans. Eleven days later, Guaranteed Rate provided notice of the CID under a private company management liability policy issued by ACE American Insurance Company.
Continue Reading D&O Insurer Must Fund $18 Million Defense of Mortgage Broker in Fed’s Investigation of False Claims Act Violations

An appeals court has overturned an insurer’s successful dismissal of an insurance coverage lawsuit arising from the insurer’s refusal to defend a North Carolina assisted living operator in a False Claims Act lawsuit alleging more than $60 million in damages. The court held that that the insurer improperly denied coverage under the operator’s professional liability policy (covering “damages resulting from a claim arising out of a medical incident”) because the alleged improper billing had a causal connection to the operator’s failure to render medical professional services and, therefore, “arose out of” a covered medical incident.
Continue Reading Professional Liability Insurer Breached Policy by Refusing to Defend False Claims Act Lawsuit