In a recent decision, the Delaware Supreme Court analysed the professional services exclusion in a D&O policy. The outcome adds an essential slant on how insurers apply exclusions to the allegations of False Claims Act (FCA) violation.
The court found that policy’s professional services exclusion did not bar coverage for an FCA settlement. The lawsuit, initiated by a former employee of the insured mortgage loan company, involved allegations of falsely certified loans. The company reportedly endorsed these as eligible for government insurance in contravention of the False Claims Act.
Typically, a professional services exclusion clause in D&O policies can help curtail the insurer exposure, but this ruling accentuates potential limitations. Likewise, it can trigger a possible coverage ambiguity when claims implicate violations of government statues such as the FCA.
It is crucial for legal professionals, especially those involved in corporate cases, to gain insights from this case. The scenario highlights the vital importance of the phrasing of professional service exclusions in D&O policies, and how they provide—or preclude—coverage for various claims.
For more detailed information on the court’s decision, readers are suggested to visit the full record of the court decision.