{"id":901661,"date":"2023-09-28T14:19:19","date_gmt":"2023-09-28T20:19:19","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=901661"},"modified":"2023-09-28T14:19:22","modified_gmt":"2023-09-28T20:19:22","slug":"false-claims-act","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/","title":{"rendered":"False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says"},"content":{"rendered":"\n

Lilit Asadourian and Alice Kyureghian | Barnes & Thornburg<\/a><\/p>\n\n\n\n

Highlights<\/strong><\/p>\n\n\n\n

The Delaware Supreme Court affirmed a summary judgment ruling against ACE, finding that the professional services exclusion in ACE\u2019s management liability insurance policy does not apply to bar coverage for a False Claims Act (FCA) investigation against Guaranteed Rate. This landmark case carries substantial precedential significance for policyholders facing FCA investigations and related qui tam lawsuits<\/em><\/p>\n\n\n\n

In a unanimous decision, the court held that \u201c[t]here is \u2018no causal connection\u2019 between the failure to perform professional services and the damages alleged by the government\u201d<\/em><\/p>\n\n\n\n

Policyholders should be aware of positions previously taken by insurers involving similar policies and similar circumstances, which could provide insight into how the insurers have interpreted key policy provisions<\/em><\/p>\n\n\n\n

The Delaware Supreme Court on Sept. 14 affirmed a summary judgment ruling against ACE (a Chubb unit), finding that the professional services exclusion in ACE\u2019s management liability (D&O) insurance policy does not apply to bar coverage for a False Claims Act<\/a> (FCA) investigation by the government against mortgage lender, Guaranteed Rate (GRI). This landmark case carries substantial precedential significance for policyholders across the nation facing False Claims Act investigations and related qui tam lawsuits, which are costly to defend and settle.<\/p>\n\n\n\n

In a 23-page opinion, the Supreme Court comprehensively analyzed whether FCA allegations \u201carise out of\u201d professional services and determined that they do not, finding instead that the certifications GRI made to the government about its quality control and compliance with the Federal Housing Administration (FHA) and the Veterans Administration (VA) program rules were a separate act that broke the causal chain.<\/p>\n\n\n\n

By way of background, ACE sold GRI a primary D&O insurance policy that agreed to pay for loss that GRI becomes legally obligated to pay by reason of a claim for \u201cany error, misstatement, misleading statement, act, omission, negligent, or breach of duty actually or allegedly committed by\u201d GRI. As relevant here, the policy contained what is commonly known as a \u201cprofessional services\u201d exclusion, which excluded coverage for loss \u201carising out of\u201d GRI\u2019s rendering or failure to render professional services.<\/p>\n\n\n\n

GRI is a mortgage lender whose professional services include originating and underwriting loans for borrowers. GRI is also an approved lender in the federal government\u2019s Direct Endorsement mortgage insurance program, which requires GRI to certify to the government that loans meet FHA and VA program rules.<\/p>\n\n\n\n

In 2019, the federal government initiated an investigation against GRI for alleged FCA violations after a whistleblower alleged that GRI originated and underwrote federally insured loans that did not meet program guidelines. GRI tendered the claim to ACE, which denied coverage under the professional services exclusion. ACE argued that the FCA claim \u201carose out of\u201d GRI\u2019s professional services and was therefore excluded under the policy. Relying on Delaware courts\u2019 liberal interpretation of the term \u201carising out of,\u201d ACE argued that \u201cbut for\u201d GRI\u2019s professional services, the FCA claims would not exist. The Delaware Superior Court ruled in GRI\u2019s favor on both a motion for judgment on the pleadings and again on summary judgment. ACE appealed the rulings to the Delaware Supreme Court.<\/p>\n\n\n\n

The Delaware Supreme Court disagreed with ACE and affirmed the trial court rulings. In a unanimous decision, the court held that \u201c[t]here is \u2018no causal connection\u2019 between the failure to perform professional services and the damages alleged by the government.\u201d The court emphasized that the term \u201carising out of\u201d requires a meaningful linkage \u2013 not just a tangential one. A meaningful linkage was missing here because the FCA allegations were not based on any failure to perform professional services, but rather on false certifications \u2013 which interrupted the \u201cbut for\u201d causal chain.<\/p>\n\n\n\n

In reaching its decision, the Supreme Court adopted the of reasoning of other courts, including Iberiabank Corp. v. Illinois Union Insurance Co.<\/em>, 2019 WL 585288 (E.D. La. Feb. 13, 2019), aff\u2019d, 953 F.3d 339 (5th Cir. 2020), in which Chubb successfully argued that FCA claims involving false loan compliance certifications did not qualify as professional services. In Iberiabank<\/em>, Chubb had issued a professional services (E&O) policy agreeing to cover loss for any claims arising out of Iberiabank\u2019s rendering or failure to render professional services. Thus, taking a contradictory position in Iberiabank<\/em> meant Chubb again avoided coverage.<\/p>\n\n\n\n

The court noted that while Iberiabank<\/em> was not pertinent as a matter of judicial estoppel, it did bear on how Chubb (ACE) has interpreted \u201cprofessional services\u201d under similar policies in similar circumstances.<\/p>\n\n\n\n

This decision has several implications for policyholders across all industries. First, policyholders facing FCA claims should consider closely analyzing both their D&O and E&O policies to evaluate whether coverage may be available under either or both policy types. Second, regardless of the type of claim or policy at issue, this case may serve as precedential authority for interpreting the term \u201carising out of\u201d \u2013 a common term used across all policy types. Third, policyholders should be aware of positions previously taken by insurers involving similar policies and similar circumstances \u2013 as such positions could provide great insight into how the insurers have interpreted key policy provisions.<\/p>\n\n\n\n

\n\n\n\n

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Lilit Asadourian and Alice Kyureghian | Barnes & Thornburg Highlights The Delaware Supreme Court affirmed a summary judgment ruling against ACE, finding that the professional services exclusion in ACE\u2019s management liability insurance policy does not apply to bar coverage for a False Claims Act (FCA) investigation against Guaranteed Rate. This landmark case carries substantial precedential… Continue reading False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9914],"tags":[9895,11966,11227,23],"class_list":["post-901661","post","type-post","status-publish","format-standard","hentry","category-insurance-coverage","tag-advise-consult","tag-delaware","tag-false-claims-act","tag-insurance-coverage","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nFalse Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says - Advise & Consult, Inc.<\/title>\n<meta name=\"description\" content=\"professional services exclusion in ACE\u2019s management liability (D&O) insurance policy does not apply to bar coverage for a False Claims Act\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says - Advise & Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"professional services exclusion in ACE\u2019s management liability (D&O) insurance policy does not apply to bar coverage for a False Claims Act\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise & Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2023-09-28T20:19:19+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-09-28T20:19:22+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says\",\"datePublished\":\"2023-09-28T20:19:19+00:00\",\"dateModified\":\"2023-09-28T20:19:22+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/\"},\"wordCount\":904,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"keywords\":[\"Advise & Consult\",\"Delaware\",\"False Claims Act\",\"insurance coverage\"],\"articleSection\":[\"Insurance Coverage\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/\",\"name\":\"False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says - Advise & Consult, Inc.\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\"},\"datePublished\":\"2023-09-28T20:19:19+00:00\",\"dateModified\":\"2023-09-28T20:19:22+00:00\",\"description\":\"professional services exclusion in ACE\u2019s management liability (D&O) insurance policy does not apply to bar coverage for a False Claims Act\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"name\":\"Advise & Consult, Inc.\",\"description\":\"Construction Expert Witnesses\",\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\",\"name\":\"Advise & Consult\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"contentUrl\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"width\":162,\"height\":75,\"caption\":\"Advise & Consult\"},\"image\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\",\"https:\/\/x.com\/adviseconsult\",\"https:\/\/www.linkedin.com\/company-beta\/204526\/\",\"https:\/\/www.youtube.com\/user\/MrConstructionExpert\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\",\"name\":\"admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"caption\":\"admin\"},\"sameAs\":[\"http:\/\/www.expertwitnessinconstruction.com\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says - Advise & Consult, Inc.","description":"professional services exclusion in ACE\u2019s management liability (D&O) insurance policy does not apply to bar coverage for a False Claims Act","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/","og_locale":"en_US","og_type":"article","og_title":"False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says - Advise & Consult, Inc.","og_description":"professional services exclusion in ACE\u2019s management liability (D&O) insurance policy does not apply to bar coverage for a False Claims Act","og_url":"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/","og_site_name":"Advise & Consult, Inc.","article_publisher":"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","article_published_time":"2023-09-28T20:19:19+00:00","article_modified_time":"2023-09-28T20:19:22+00:00","author":"admin","twitter_card":"summary_large_image","twitter_creator":"@adviseconsult","twitter_site":"@adviseconsult","twitter_misc":{"Written by":"admin","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/#article","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/"},"author":{"name":"admin","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7"},"headline":"False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says","datePublished":"2023-09-28T20:19:19+00:00","dateModified":"2023-09-28T20:19:22+00:00","mainEntityOfPage":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/"},"wordCount":904,"commentCount":0,"publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"keywords":["Advise & Consult","Delaware","False Claims Act","insurance coverage"],"articleSection":["Insurance Coverage"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/","name":"False Claims Act Investigation Is Covered Under Insured\u2019s D&O Policy, Court Says - Advise & Consult, Inc.","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website"},"datePublished":"2023-09-28T20:19:19+00:00","dateModified":"2023-09-28T20:19:22+00:00","description":"professional services exclusion in ACE\u2019s management liability (D&O) insurance policy does not apply to bar coverage for a False Claims Act","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.myconstructionexpert.com\/blog\/false-claims-act\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website","url":"https:\/\/www.myconstructionexpert.com\/blog\/","name":"Advise & Consult, Inc.","description":"Construction Expert Witnesses","publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization","name":"Advise & Consult","url":"https:\/\/www.myconstructionexpert.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","contentUrl":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","width":162,"height":75,"caption":"Advise & Consult"},"image":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","https:\/\/x.com\/adviseconsult","https:\/\/www.linkedin.com\/company-beta\/204526\/","https:\/\/www.youtube.com\/user\/MrConstructionExpert"]},{"@type":"Person","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7","name":"admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","caption":"admin"},"sameAs":["http:\/\/www.expertwitnessinconstruction.com"]}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p2ztG6-3MyV","jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/901661","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=901661"}],"version-history":[{"count":1,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/901661\/revisions"}],"predecessor-version":[{"id":901662,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/901661\/revisions\/901662"}],"wp:attachment":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=901661"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=901661"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=901661"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}