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Vol. 5, Iss. 6
May 31, 2016

Unique “Claims Made” Case: Is A PowerPoint Presentation A “Claim?”

 

When it comes to cases addressing coverage under “claims made” policies, one issue dominates – timing. More specifically, at the heart of these cases is what is a “claim” and when was it first made against the insured? Because resolution of these questions is so often fact and policy language driven, prior case law may not answer the questions to all parties’ satisfaction. So litigation ensues. Decisions in this area have multiplied like tribbles.

Given how sui generis claims made “timing” cases can be [I always feel so smart when I use that term], I do not often address them in Coverage Opinions. When choosing cases for CO I’m generally looking for ones that provide an overarching lesson or that can be useful to a future case. Cases involving what is a claim, and when was it first made -- because they are so often fact and policy language driven -- are not always in this category.

Foundation Health Services, Inc. v. Zurich American Insurance Company, No. 15-59 (M.D. La. Apr. 20, 2016) is a claims made timing case that may provide an overarching lesson or be useful to a future case. But even if not, the facts are unique enough to warrant discussion.

At issue in Foundation Health was coverage for a False Claims Act claim asserted by the Department of Justice against Foundation Health Services. The DOJ alleged that the company had provided worthless services. The facts giving rise to the coverage dispute were described by the court as follows:

“In January 2012, the DOJ contacted [Foundation Health] and set a meeting for January 18, 2012, at the United States Attorney’s office in Baltimore, Maryland. An estimated 15–18 people attended, including several representatives of [Foundation Health], the Department of Health and Human Services, the Office of the Inspector General, the United States Attorneys’ Office, and the DOJ. During this meeting, the DOJ presented a PowerPoint presentation that identified numerous alleged deficiencies with the quality of patient care rendered by [Foundation Health], and cited issues with nurse training and staffing. No written materials were distributed at the January 18 Meeting. Although no written materials were distributed at the meeting, the DOJ emailed a redacted version of the PowerPoint slides to [Foundation Health] eight days later. Andrew Penn, a trial attorney with the DOJ who presented the PowerPoint at the January 18 Meeting, testified that the withheld slides were protected by the work product doctrine. The redacted version of the PowerPoint presentation did not assert the plaintiffs violated any laws or billed the government for worthless services. The redacted version also did not assert any demands of the plaintiffs—monetary or otherwise.”

On May 16, 2012, the DOJ sent a letter to Foundation Health that outlined damages sustained by Medicaid and Medicare for the worthless services provided at the Foundation Health facilities

Zurich issued two claims made policies to Foundation Health (one D&O and one not specified, but the type of policies is not important). To make it simple, I’ll call them policy one (June 1, 2011 to April 1, 2012) and policy two (May 1, 2012 to May 1, 2013).

Foundation Health provided notice of the DOJ’s May 16, 2012 letter to Zurich on May 24, 2012 – during the period of policy two.

Zurich acknowledged that the May 16th letter was a “claim” under the year two policy, but disclaimed coverage based on certain exclusions. Foundation Health next sought coverage under the year one policy. Zurich did not respond. Foundation Health, with Zurich’s consent, settled the DOJ matter for a monetary payment. Foundation Health then filed suit against Zurich for breach of contract for failing to defend and indemnify under the year one policy.

The court addressed whether a “claim” was first made against Foundation Health during the period of the year one policy. “Claim” was defined under the year one policy as follows: “1. a written demand for monetary damages, [or] ... 4. a formal administrative or regulatory proceeding commenced by the filing of a notice of charges, formal investigative order or similar document, against any Insured for a Wrongful Act.”

Zurich said no. Foundation Health disagreed, arguing that the PowerPoint presentation at the January 18, 2012 meeting satisfied both relevant definitions of “claim,” and, hence, a claim was made during the period of the year one policy.

The court couldn’t decide, concluding that there was a genuine issue of material fact whether the PowerPoint presentation constituted “a written demand for monetary damages,” i.e., a “claim.” As the court saw it, the facts were all over the place and summary judgment could not be granted for either party.

Foundation Health pointed to testimony, of several of its representatives who were present at the January 18, 2012 meeting, that the PowerPoint contained slides outlining the damages the DOJ sought from the company. However, Andrew Penn of the DOJ, who presented the PowerPoint, gave conflicting testimony as to the contents of the PowerPoint presentation and the purpose of the meeting. He described is as informing Foundation Health that “the claims against Foundation involved Foundation paying damages for violation of the False Claims Act,” and that “any resolution of this case would include a monetary settlement for worthless services.” However, as the court saw it, Penn also gave testimony favorable to Zurich, stating that “the government did not make a written demand for monetary damages at the January 18 Meeting and that the purpose of the meeting and the PowerPoint was merely to present the DOJ’s tentative findings with respect to its concerns regarding the quality of patient care.”

[As an aside, even if the court concludes that the January 18, 2012 PowerPoint presentation was a “claim” first made against Foundation Health during policy one, it wasn’t reported to Zurich until after the expiration of policy one. The opinion does not address why this would not be fatal to Foundation Health’s claim for coverage under policy one.]

 


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