The False Conception That FCA Claims Are Not Covered

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In 2013, the United States Department of Justice recovered $3.8 billion under the False Claims Act (“FCA”), bringing the total amount secured by the Justice Department since 2009 to $17 billion. Whistleblowers recovered another $345 million last year. These recoveries came in a wide variety of circumstances and from companies in multiple industries, including pharmaceutical companies accused of improper off-label marketing and/or sale of adulterated drugs, meatpacking companies that allegedly sold meat from mistreated cattle, hospitals that allegedly overbilled the government, and mortgage companies that allegedly falsified applications to secure federally-funded insurance. Companies and their insurers often assume that there is no coverage for FCA claims. Those companies may be making a costly mistake.

Directors and Officers (“D&O”) insurance is one potential source of funding the defense and settlement of FCA claims. Many D&O policies – particularly policies issued to privately-held companies – may offer broad coverage for amounts that the company must pay for its own alleged conduct, not just the conduct of its directors and officers. Indeed, in several recent decisions, courts have rejected the insurers’ attempts to avoid coverage under their D&O policies for FCA claims. See Carolina Cas. Ins. v. Omeros Corp., 2013 WL 5530588 (W.D. Wa. March 11, 2013); Community Heath Ctr. of Buffalo, Inc. v. RSUI Indem. Co., 2012 WL 713305 (W.D.N.Y. March 5, 2012).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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