No Coverage for DOJ Investigation Costs
Whistleblowers filed lawsuits against the company for unlawfully encouraging healthcare providers to submit false and/or fraudulent claims to health insurers and for providing unlawful kickbacks to those healthcare providers. A U.S. Department of Justice (DOJ) investigation of the company followed. The company settled with the DOJ. It then sought coverage under its D&O insurance policy for its defense costs and the insurer denied coverage tying the investigation to the earlier lawsuits listed in the policy’s specific litigation exclusion and/or subject to the pending-or-prior litigation exclusion. The Ninth Circuit, applying California law, held that the DOJ investigation constitutes seven claims, but the insurer owed no duty to reimburse the costs of responding to a governmental investigation based on the policy exclusions.