• Recent Illinois Insurance-Related Opinions Part 3 - Coverage for Qui-tam Suits
  • January 26, 2010
  • Law Firm: Troutman Sanders LLP - Atlanta Office
  • A Fifth District Illinois Appellate Court holds there is no coverage under medical malpractice insurance policy for qui tam suit alleging Medicare fraud.

    Ismie Mut. Ins. Co. v. Michaelis Jackson & Assocs., LLC, No. 5-08-0426, (Ill. App. Ct. Dec. 30, 2009).

    In this declaratory judgment action, the Fifth District upheld the trial court’s judgment on the pleadings for ISMIE Mutual Insurance Company (“ISMIE”) against its insureds, Michaelis Jackson & Associates, LLC and Michaelis Billy Jackson, M.D. (collectively “Jackson”). Jackson sought coverage under a medical malpractice policy issued by ISMIE for a qui tam suit brought by two former employees under the federal False Claims Act. The suit alleged that Jackson had performed unnecessary surgeries and had filed false reports for reimbursement from Medicare.

    The ISMIE policy provided that:

    “ISMIE” will pay amounts any “insured” is legally obligated to pay as “damages” because of any “claim” against that “insured” that is “first made” to “ISMIE” during the “policy period” which involves “personal injury” and is caused by “professional services” provided on or after the “retroactive date” and prior to the policy expiration date.

    Further, the policy defined “personal injury” to include bodily injury to any patient which arises out of the rendering or failure to render professional services.

    ISMIE argued that there was no coverage for the Medicare fraud claims because they did not allege “personal injury,” and the policy requires a direct causal connection between the personal injury and the recovery sought. Jackson, however, argued that the claims need not allege “personal injury,” but rather it is enough that the claims merely involve “personal injury.” Here, argued Jackson, the Medicare fraud claims involved “personal injury” because the ultimate root of any Medicare fraud was its performance of unnecessary surgical procedures, which involved “personal injury” within the policy provisions.

    The appellate court rejected Jackson’s argument, noting that the Medicare fraud claim did not depend on a finding of “personal injury” to succeed and therefore was not a claim for “personal injury” caused by “professional services” covered under the policy.

    Link to opinion: