Key Motion Turns North Carolina Coverage Case in Insurer’s Favor
In 2016, a lawyer filed a qui tam, or whistleblower, complaint against a company managing adult-care facilities in North Carolina that eventually would be felt in the offices of its insurance carriers.
The suit, filed against an assisted-living management company and its CEO on behalf of the United States and the state of North Carolina, alleges that almost four-dozen facilities run by the company were seeking Medicaid reimbursement for services they were too understaffed to provide — services such as helping facility residents eat, dress, bathe, or use the toilet. In all, the company defrauded the government of $60 million, the complaint alleges.
In response, the company itself filed suit, contending that the carrier of its professional-liability umbrella policy should cover its potentially costly defense in the qui tam case and indemnify it for any judgments entered or settlements reached in that action. The New Jersey-based private insurer retained legal representation of its own: Greensboro, NC-based Goldberg Segalla partners David L. Brown and Martha P. Brown.
In the course of defending the insurance company, David and Martha have built a compelling case not only for their client but also, tangentially, for the practice groups that have made Goldberg Segalla one of the premier law firms advising and representing the global insurance and reinsurance industry. David and Martha represent the smooth and effective melding of the resources, experience, and expertise of our practice groups.
In the fall of 2018, they brought the North Carolina declaratory judgment action to a major turning point in favor of its client by filing a motion for judgment on the pleadings — a request that the court, before accepting evidence, weigh case facts already on file. In response to the motion, a federal judge ruled on October 5 that the insurance company was not obligated to cover the adult-care company’s liability or legal bills in the Medicaid fraud case. That case, which alleges violations of the false-claims acts of North Carolina and the United States, didn’t rise out of health-care issues that were covered under the professional liability policy, the judge said; it was all about billing — and that, the judge ruled, does not qualify as a “medical professional service.”
The judge’s ruling likely won’t be the last word on the matter; the adult-care company is expected to appeal. Nevertheless, Martha says, as rulings go, this one was significant.