Federal Insurance Co. must pay the $10 million policy limit in a directors and officers policy issued it to Astellas Pharma, despite the carrier’s assertion that Illinois public policy forbids it from reimbursing the drugmaker for the cost of settling allegations that it violated anti-kickback laws, a federal appellate panel ruled.
The 7th Circuit Court of Appeals affirmed a decision by the US District Court that the $100 million payment to resolve a Justice Department investigation was covered by the D&O policy and public policy did not bar payment.
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The appellate panel said the policy included “settlements” as a type of covered loss. The fact that the policy excluded losses caused by deliberate fraud or illegal renumeration only if there were “final adjudication” shows that Federal intended to cover the settlement payment, the opinion says.
“In essence, the ‘final adjudication’ exclusions show that Federal wrote the policy to extend coverage to the limits of applicable law and public policy. Federal was willing to extend coverage, if permissible, to settlements even for claims for deliberate fraud and willful violations of the law, so long as there was no final adjudication,” the opinion says.
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