Software program Developer Denied D&O Protection for $118 Million DOJ Settlement As a result of Skilled Providers Exclusion
In a latest Consumer Alert, Hunton insurance coverage companion Geoffrey Fehling discusses the affect of the California appellate courtroom choice Apply Fusion, Inc. v. Freedom Specialty Insurance coverage Co., the place the courtroom denied protection underneath a administrators and officers legal responsibility coverage for a software program developer’s $118 million settlement with the US Division of Justice to resolve allegations that the corporate violated anti-kickback legal guidelines in designing and implementing sponsored alerts in digital well being information software program. The courtroom affirmed the insurer’s denial of protection underneath the D&O coverage’s skilled providers exclusions that barred protection for claims “alleging, arising out of, based mostly upon or attributable to” the corporate’s efficiency {of professional} providers for others.
The choice underscores the significance of coordinating between coverages throughout insurance coverage program, together with evaluating protection for skilled legal responsibility exposures that could be excluded underneath D&O insurance policies, negotiating appropriately tailor-made exclusionary language, and auditing insurance policies at procurement and renewal to establish and repair any problematic language or protection gaps to assist keep away from surprises within the occasion of a declare.