A federal appellate court on Friday reversed a $2.3 million award to a nursing home owner that sued its insurer, finding coverage for a whistleblower retaliation lawsuit was clearly excluded because the policyholder did not disclose that it was under investigation by the government.
A panel of the 6th Circuit Court of Appeals ruled that the US District Court in Cleveland erred when it ruled that SHH Holdings LLC did not fail to disclose relevant information to its insurer because two questions on the insurance application were ambiguous.
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The panel said it didn’t matter that the specific questions asked on the application did not relate exactly to the coverage requested.
The opinion says “requiring broad disclosure makes sense in this context because the number and nature of matters recently brought against an applicant is relevant information for an insurance company assessing the potential underwriting risk, even if those matters do not tie directly to the pursued policy.”
SHH Holdings owns and operates nursing homes and receives reimbursement from Medicare. In November 2016, a whistleblower filed a False Claims Act complaint under seal alleging that SHH was providing unreasonable and unnecessary services to patients in order to claim the highest possible reimbursement.
SHH learned about the complaint in January 2017, when it...
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