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.
The Delaware case is one of several policyholder victories affording coverage for FCA-related claims. The parties in Guaranteed Rate cross-moved for summary judgment on coverage for the underlying settlement. The court’s 24-page opinion covers a variety of topics. The following takeaways, discussed separately below, are particularly important for policyholders to consider when assessing potential insurance coverage for FCA exposures:
Breaches of duties owed to the government should not trigger professional services exclusions that are applicable to the rendering or failure services to clients;
Policyholders seeking coverage for FCA claims should be wary of notice provisions if they are relying on documents filed under seal to satisfy notice provisions or other requirements...
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