In Affinity Living Grp., LLC v. StarStone Specialty Ins. Co., 959 F.3d 634 (4th Cir. 2020), the United States Court of Appeals for the Fourth Circuit addressed whether a False Claims Act (“FCA”) suit against an insured for allegedly submitting false Medicaid reimbursement claims fell within an errors and omissions policy’s coverage grant for “damages resulting from a claim arising out of a medical incident.” The insured, an operator of adult care homes, allegedly submitted reimbursement claims for resident services that were never provided in violation of the federal False Claims Act and the North Carolina False Claims Act. A private party brought a qui tam action, and the insured sought insurance coverage for the suit.
The insurer’s policy covered “damages resulting from a claim arising out of a medical incident. The policy defined “[m]edical incident” as an “act, error or omission in [the insured’s] rendering or failure to render medical professional services,” i.e., health care services or the treatment of a patient. While the parties agreed that rendering, or failing to render, personal-care services qualifies as a “medical incident,” the insurer argued, and the court agreed that billing Medicaid for reimbursement is not itself a “medical incident.” Nevertheless, even though merely seeking Medicaid reimbursement is not itself a “medical...
