A recent decision by the U.S. District Court for the Eastern District of New York illustrates how directors and officers (D&O) policies can provide valuable insurance coverage for defense costs and potential liabilities arising from False Claims Act (FCA) litigation. In Northern Metropolitan Foundation for Healthcare, Inc. v. RSUI Indemnity Company, the insured — an owner and operator of adult healthcare centers in Brooklyn, New York — sought coverage under a D&O policy for defense costs for a relators’ qui tam action alleging that the insured defrauded the federal and New York state governments in submitting claims for reimbursement. The government chose not to intervene, and the qui tam lawsuit was ultimately dismissed. The D&O policy at issue contained a Government Funding Defense Expense Coverage provision excluding “the return of funds which were received from any federal, state, or local government agency” from the policy’s definition of “Loss,” and limiting coverage for “any Claim arising out of the return, or request to return, such funds.”

Read on to learn more about the decision and how healthcare providers can protect themselves against the risk of expensive government investigations and FCA litigation.