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The professional liability insurer violated the guidelines by refusing to defend the lawsuit under the False Claims Act INSURANCE

An appeals court has overturned an insurer’s successful dismissal of an insurance coverage dispute resulting from the insurer’s refusal to defend a residential carer in North Carolina in a lawsuit under the False Claims Act, in which damages in excess of $ 60 million were received -Dollar is claimed. The court ruled that the insurer was wrong to deny coverage under the operator’s professional liability insurance (which “covers damage due to a medical incident claim”) because the allegedly improper billing was causally related to the operator’s failure to provide medical services and therefore arose from a covered medical incident.

The Affinity Living Group has been sued for allegedly filing false Medicaid reimbursement claims for adult Affinity care home residents who the applicant claimed were never provided. Affinity filed an insurance claim under StarStone Specialty Insurance Company’s professional liability insurance. StarStone contested the allegation on the grounds that the allegations of false allegations did not fit the policy coverage for “alleged medical claim harm”. Affinity filed a cover claim against StarStone and sought a judgment that the policy provided coverage and that StarStone violated the policy by wrongly refusing Affinity’s claim. The district court confirmed the rejection and rejected the judgment and the contact claims.

In the appeal process, the parties agreed that the provision or non-provision of personal care services is considered a “medical incident”. Affinity argued that the claims for false claims “arise from a medical incident” because they claim compensation for Medicaid reimbursement, and although filing reimbursement claims is not a “medical incident”, the claims still result from the alleged failure to provide of personal care services that are involved in the wrongful litigation litigation. The fourth circuit matched Affinity.

When investigating a number of cases in North Carolina, the court concluded that the term “arising from” must be interpreted differently depending on the context of its use in the policy. When used in a provision to extend coverage, the term “arising from” must be interpreted broadly to require only a “causal relationship”. In contrast, when used in a determination without coverage, the expression must be narrowed to require immediate causation. Since the term in the affinity directive “falls under a provision that extends coverage,” the court said, it must be interpreted broadly to only provide a causal link between the behavior defined in the policy and the damage for which coverage is sought, to require.

In practice, a policyholder can only meet this minor burden if the injury was “directly caused by an independent act or an intervening cause that is completely separate from, independent of, and removed from the behavior defined in the policy “. According to the court, the allegations of “wrong accounting” in the context of the legal dispute because of false claims do not arise in a vacuum. Since the alleged failure to provide professional services has led to allegations of incorrect claims for incorrect Medicaid billing, the failure to provide these services is causally related to billing, even if the incorrect billing itself is not a “medical “Is an incident.” Therefore, the court ruled that the false claim was covered by the policy, waived the dismissal, and returned the case to the district court.

The affinity The decision highlights two important points. The first is that policyholders should carefully follow the language of causality regarding professional liability, directors and officers, and other policies to assess the level of coverage for suspected misconduct that only relates to the act or omission covered in the policy, or this results. Like in the affinity Depending on the specific cause of the cause of the loss, an insurer may be required to cover claims that relate to actions that are not exactly the behavior specified in the policy. Second, the case underlines the importance of evaluating the meaning of terms depending on the context of their use in the directive, including whether the terms are used expand Coverage (in which case they should be interpreted generally in favor of coverage) or to exclude Coverage (in this case, they should be interpreted closely). Both questions depend heavily on the specific political language and the applicable state law that governs the dispute. The full case name is Affinity Living Group, LLC v StarStone Specialty Insurance Co., et. al18-2376 (4th Cir. May 26, 2020).

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