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D&O insurance and the False Claims Act, as the Supreme Court of Delaware adjudicates on a case in favor of Guaranteed rate Inc against ACE American Insurance Company. A case that followed a former employee of Guaranteed rate Inc. alleging that the company had falsely certified loans to the government that it endorsed as eligible for government insurance, in violation of the False Claims Act.
Federal government reached a $15 million settlement with Guaranteed rate Inc. A settlement that Guaranteed Inc sought to cover under its D&O Management Liability and Professional Liability insurance policies. A claim that was denied by ACE.
One is not a lawyer, so one’s interpretation of the Supreme court finding in favor of Guaranteed rate Inc under their Management Liability Policy is that while they may have breached the duty under the FCA, it was not due to the actions of their professional services. That the False Claims Act investigation and settlement did not arise out of Guaranteed Rate’s professional services. Instead, it arose out of false certifications made to the government. Thus, the Management Liability Policy covered the loss.
One suspects that caselaw defined and documented in this case will be used to further develop the wording of D&O policies as they relate to regulatory breaches, such as those relating to cybersecurity risk.
Ted Dziekanowski Rachel V. Rose, JD, MBA Brian D. McCarthy Bob Dix
#directorsandofficers #cybersecurity #cyberriskmanagement #legal #theagustgroup
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