D & O Policy Professional Services Exclusion - Post 4830
Read the full article at https://lnkd.in/g-Srqy6m, see the full video at https://lnkd.in/gvhVhEnY and at https://lnkd.in/gGMGepXT, and at https://zalma.com/blog plus more than 4800 posts.
The California Court of Appeals was asked to resolve a dispute over the applicability of professional services coverage exclusions in directors and officers liability insurance policies. The policies were issued to Practice Fusion, Inc., a company that develops and licenses electronic health record software for use by healthcare providers.
In Practice Fusion, Inc. v. Freedom Specialty Insurance Company et al., A167130, A167886, California Court of Appeals, First District, Second Division (June 21, 2024) it responded.
FACTUAL BACKGROUND
An electronic health record is an electronic version of a patient’s medical history as maintained by a healthcare provider.
Following investigations by the United States Department of Justice, Practice Fusion entered into a civil settlement with the United States that resolved two distinct sets of claims that alleged that Practice Fusion violated the federal Anti-Kickback Statute. Further, although the alerts appeared to healthcare providers as unbiased medical information, in some instances they were designed to encourage healthcare providers to prescribe a specific product or class of products to the benefit of the sponsoring pharmaceutical company.
Practice Fusion sought insurance coverage for the civil settlement under its directors and officers liability insurance policies. The insurers denied coverage on the ground that the policies’ professional services exclusions applied to the losses. Practice Fusion then sued the insurers for breach of contract.
The trial court granted the insurers’ motion for summary adjudication because the claims arose from Practice Fusion providing professional services to the pharmaceutical companies and its claim was barred by the professional services exclusion in the policies.
The Settlement Between the United States Department of Justice and Practice Fusion
In January 2020, Practice Fusion agreed to pay $118,642,000 plus interest to the United States and participating states to resolve claims arising from investigations relating to Practice Fusion’s electronic health record software.
Practice Fusion’s Insurance Coverage
Several insurers relevant to the CDS claims insured Practice Fusion under primary or excess directors and officers (D&O) liability insurance policies. The policies in an “insurance tower” provided a total of $50 million in coverage. All policies contained an exclusion that applies to all “Insureds” and bars coverage for “Loss in connection with any Claim made against any Insured . . . alleging, arising out of, based upon or attributable to an Insured’s performance of or failure to perform professional services for others, or any act(s), error(s) or omission(s) relating thereto; ….”
DISCUSSION
At issue in this case are exclusions that apply to losses connected to claims arising from “professional services for others.” The loss claimed by Practice Fusion as a result of its settlement with the United States as to the CDS alerts falls within the provisions in Practice Fusion’s D&O policies exclude coverage for claims arising out of, based upon or attributable to an Insured’s performance of professional services for others, or any act(s), error(s) or omission(s) relating thereto.
Practice Fusion conceded it agreed to modify its software to include the CDS alerts, which were targeted for particular patients with particular conditions based on selected guidelines. The contracts between Practice Fusion and the pharmaceutical companies are premised upon Practice Fusion providing the companies with professional services. The Court of Appeals concluded that the CDS claims, which Practice Fusion settled, are claims that meet the terms of the exclusion.
Accordingly, the loss connected to the settlement of the DOJ’s claims regarding the CDS alerts was barred by the professional services exclusion. The contracts included as a major objective for Practice Fusion to provide the companies with services by deploying CDS alerts in its software and by “arranging for or recommending” that healthcare providers prescribe their products.
ZALMA OPINION
Health insurance fraud is rampant. If you read Zalma’s Insurance Fraud Letter you will see dozens of convictions for fraud on government funded health care programs and multiple civil settlements like that reached with Practice Fusion. It would be ridiculous to allow a person or entity to insure for its fraudulent conduct and payment to avoid criminal prosecution. To do so would avoid the purpose of the kickback statutes and the crime that Practice Fusion avoided by agreeing to pay the Government and eliminate the fact that D&O insurance was designed to protect against fortuitous losses not intentional criminal conduct.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://barryzalma.substack.com/subscribe or Subscribe to my substack at https://lnkd.in/gmmzUVBy
Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg.
Go to the Insurance Claims Library – https://lnkd.in/gwEYk
Concurrent Cause Doctrine Does Not Apply When all Causes are Excluded
Post 5119
Death by Drug Overdose is Excluded
See the full video at https://lnkd.in/geQtybUJ and at https://lnkd.in/g_WNfMCZ, and at https://zalma.com/blog plus more than 5100 posts.
Southern Insurance Company Of Virginia v. Justin D. Mitchell, et al., No. 3:24-cv-00198, United States District Court, M.D. Tennessee, Nashville Division (October 10, 2024) Southern Insurance Company of Virginia sought a declaratory judgment regarding its duty to defend William Mitchell in a wrongful death case pending in California state court.
KEY POINTS
1. Motion for Judgment on the Pleadings: The Plaintiff moved for judgment on the pleadings, which was granted in part and denied in part.
2. Duty to Defend: The court found that the Plaintiff has no duty to defend William Mitchell in the California case due to a specific exclusion in the insurance policy.
3. Duty to Indemnify: The court could not determine at this stage whether the Plaintiff had a duty to ...
GEICO Sued Fraudulent Health Care Providers Under RICO and Settled with the Defendants Who Failed to Pay Settlement
See the full video at https://lnkd.in/gDpGzdR9 and at https://lnkd.in/gbDfikRG, and at https://zalma.com/blog plus more than 5100 posts.
Post 5119
Default of Settlement Agreement Reduced to Judgment
In Government Employees Insurance Company, Geico Indemnity Company, Geico General Insurance Company, and Geico Casualty Company v. Dominic Emeka Onyema, M.D., DEO Medical Services, P.C., and Healthwise Medical Associates, P.C., No. 24-CV-5287 (PKC) (JAM), United States District Court, E.D. New York (July 9, 2025)
Plaintiffs Government Employees Insurance Company and other GEICO companies (“GEICO”) sued Defendants Dominic Emeka Onyema, M.D. (“Onyema”), et al (collectively, “Defendants”) alleging breach of a settlement agreement entered into by the parties to resolve a previous, fraud-related lawsuit (the “Settlement Agreement”). GEICO moved the court for default judgment against ...
ZIFL – Volume 29, Issue 14
Post 5118
See the full video at https://lnkd.in/geddcnHj and at https://lnkd.in/g_rB9_th, and at https://zalma.com/blog plus more than 5100 posts.
You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
This issue contains the following articles about insurance fraud:
The Historical Basis of Punitive Damages
It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.
The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.
You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf
Insurer Refuses to Submit to No Fault Insurance Fraud
...
Rulings on Motions Reduced the Issues to be Presented at Trial
Read the full article at https://lnkd.in/gwJKZnCP and at https://zalma/blog plus more than 5100 posts.
CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.
This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
