Companies facing whistleblower False Claims Act lawsuits are in for some time-consuming and expensive litigation. Learn about five strategies that businesses can use to obtain insurance to cover whistleblower defense and indemnity costs.  

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Here is the transcript of the video:

FCA, Whistleblower, or Qui Tam Cases

When companies find themselves subject to false claims act matters are brought in through a Qui Tam complaint and a whistle blower has brought claims against that business, these can be time-consuming and expensive matters both to defend with potentially high indemnity costs. There are strategies that businesses can use to obtain insurance to cover these defense and indemnity costs. 

The first strategy is to proceed with the understanding that FCA claims are covered. And insurers duty to defend is broader than an insurers duty to indemnify. What this means is that even if it is not certain that an insurer is obligated to defend an FCA claim, it still has a duty to defend the claim. A misconception that policyholders have is that there is no coverage for FCA claims because often the claims include allegations of fraud. There may be coverage for allegations of fraud and even if they’re not, there is at least is coverage for the defense of those claims. 

A second strategy for obtaining insurance coverage is to evaluate as early as possible in the process whether to tender notice of those claims under the insurance policies. Often the claims are filed under seal long before the policyholder ever receives or is served with a copy of the complaint. So what this means is often a policyholder’s first indication that there are allegations brought under the FCA is the inquiries or communications from the government. And as soon as one of these communications occurs policyholders should be considering carefully whether they may be a need to tender coverage of these claims. This is particularly important because the risk of forfeiting coverage is so high, if the policy holder does not tender notice of those claims as early as possible. 

The third strategy for obtaining insurance coverage for whistleblower or Qui Tam cases brought under the FCA is to tender noticed both to primary and excess carriers. We see instances and in fact there was recently a big case involving a Tennessee hospital healthcare system, where the policyholder tendered notice to its primary insurer of an investigation and then many months later after millions of dollars of defense costs had been incurred the policyholder then tendered notice to its excess carrier. This was a clear example of where the court adopted the insurers position that there was no coverage and they found that the policyholder had waived its insurance coverage. So the lesson there is even when the policyholder does not know whether this could be a $500,000 case or a $40 million case, tender notice to all the carriers, both primary and excess.