On March 6, 2015, I will co-host a session with Manuel Mungia Jr. from Akin Gump at the ABA Insurance Coverage Litigation Committee Annual CLE Seminar in Tucson, AZ, titled “Exploring the Coverage Issues Emerging From the Recent Avalanche of Qui Tam Lawsuits.”
The U.S. Department of Justice reported a record-setting $5.69 billion in False Claims Act recoveries in fiscal year 2014—including more than $3 billion from 700+ qui tam actions and $435 million paid to whistleblowers. Qui tam lawsuits are easier than ever to bring and, given the potentially lucrative payday, plaintiffs are bringing them more frequently. Policyholders often turn to their PII, EPLI, and D&O policies for coverage.
During our upcoming speaking engagement, we will discuss emerging (often unique) coverage issues arising from these claims, which generally involve whistleblowers (known as relators), government agencies, and confidential investigations. As the volume and size of qui tam suits continue to grow, policyholders and insurers are increasingly forced to navigate (and litigate) a variety of complex and intriguing issues when assessing available insurance coverage.
These issues include:
- What constitutes a “claim” and when does an insured need to provide notice of a “claim” or “circumstance,” particularly where an insured is facing a confidential government investigation or a DOJ complaint that has been filed under seal and is only available to the target company?
- Is it proper for an insurer and insured to allocate between covered and uncovered claims when paying defense costs or a lump settlement?
- Is a whistleblower an “employee” under an EPLI policy for purposes of a retaliatory termination claim?
- What are the potential implications of a qui tam action on Side C D&O coverage?
Given the increasing number of qui tam lawsuits (including those initiated under the expanded reach of the FCA), companies should pay close attention to these issues. Companies should also proactively review and understand their liability policies to become familiar with what events may constitute “claims” and what steps a company must take to provide notice to and cooperate with its insurer. Even though qui tam lawsuits can be costly, maximizing a company’s insurance assets may significantly soften the blow to the bottom line.