On May 3, 2023, the Seventh Circuit affirmed $10 million in insurance coverage for a False Claims Act (FCA) settlement in a case based on alleged Anti-Kickback Statute violations. Astellas US Holding, Inc. v. Federal Insurance Company concerns a settlement of an investigation into whether a pharmaceutical manufacturer’s sponsorship of patient assistance plans violated the Anti-Kickback Statute. The matter settled in the investigatory phase, and no action had been filed against the company.
After agreeing to a $100 million settlement, the pharmaceutical manufacturer demanded the $10 million policy limit from its directors-and-officers liability insurance policy with the defendant Federal Insurance Company. The district court found that an Illinois state law against insurability in cases that would present a moral hazard — and which specifically bars insurance coverage for restitutionary settlement payments — did not prohibit coverage.
As an initial matter on appeal, the Seventh Circuit found that the two exclusions in the policy for “final adjudications” of “improper or illegal remuneration” and “deliberate fraudulent act[s]” did not apply because a settlement was not a final adjudication. Moreover, the court found that the existence of these exclusions showed that the insurer was willing to extend coverage to settlements of these issues as long as there was no final adjudication.
The court then analyzed whether the settlement constituted a compensatory (insurable) or...
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