Insurer off the hook for California hospital's $42M false claims settlement

A district court judge dismissed a lawsuit filed by Los Angeles-based Pacific Alliance Medical Center against its insurer for refusing to cover the hospital's $42 million False Claims Act settlement and costs related to a federal investigation, according to JD Supra.

Seven things to know:

1. In 2013, a whistle-blower filed a lawsuit against PAMC under the qui tam provisions of the False Claims Act. The whistle-blower accused the hospital of having improper financial relationships with certain physicians and billing Medicare and California's Medicaid program for services provided to patients referred to the hospital by those physicians.

2. The court unsealed the complaint in December 2015, and the hospital and the whistle-blower reached a settlement agreement in February 2017.

3. In April 2017, the hospital submitted notice to its insurer, National Union Fire Insurance Company of Pittsburgh, seeking coverage of the costs associated with the federal investigation and that whistle-blower action.

4. The insurer denied coverage, stating the claims were in the 2015-16 coverage period, and that the hospital had failed to report them during that time. The hospital subsequently sued National Union.

5. The 2015-16 insurance policy covered "claims first made" during the policy period or within 90 days of the end of the policy period. The court determined that a claim is "first made" when the hospital initially becomes aware of it.

6. The hospital claimed it waited to give the insurer notice due to nondisclosure language in a subpoena cover letter from the Justice Department, but the judge was unconvinced by that argument, according to JD Supra.

7. The court held it was proper for National Union to deny coverage to PAMC because the hospital submitted notice of the claim outside of the coverage period provided by the policy.

Access the full JD Supra article here.

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