• No Professional Liability Insurance Coverage for Substandard Quality of Care False Claims Act Liability
  • July 10, 2008 | Author: Robert M. Wolin
  • Law Firm: Baker & Hostetler LLP - Houston Office
  • The government brought a substandard quality of care False Claims Act case against O'Hara Regional Center for Rehabilitation claiming that the facility was inadequately staffed to meet the statutory and regulatory requirements under its provider agreements. In essence, the government claimed that O'Hara's Medicare and Medicaid claims were false because the care was grossly inadequate or worthless.

    Based on these allegations, O'Hara sought to obtain coverage from its professional liability carriers for the defense costs related to the government's claims. O'Hara believed that it was entitled to coverage under the policies because the government's claims related to a "liability caused by errors and omissions in the furnishing or failure to furnish professional services – in this case, O'Hara's billing and staffing practices." The insurers, predictably, claimed that the policies did not provide coverage for fraud claims.

    The court found that the policies did not cover substandard quality of care False Claims Act allegations. The court stated that "the government's injury resulted not from the failure to provide professional services, but instead resulted from O'Hara's submission of false" claims. The problem was not the professional services provided, according to the court, but rather that O'Hara billed the government for services it did not provide.

    The court viewed the government's claims as a billing dispute, rather than a quality of care case for purposes of analyzing professional liability insurance coverage. The court reached this conclusion even though the insurance policies covered injuries "related to" and "arising out of" a medical or business entity incident. Had the government sought recompense for injuries to patients, the result may well have been different.