By Kileen Dietrich
The False Claims Act (FCA) is a federal statute that sets criminal and civil penalties for falsely billing the government. While allowing the United States Attorney General to pursue perpetrators of fraud on its own, the FCA also allows private citizens to file suits on behalf of the government (“qui tam” suits) Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283 (2010).
Recent Executive Orders which include language that mirrors provisions in the FCA are significant, particularly with regard to policyholders and insurers. With the mandates set forth in the Executive Order, new certification and materiality requirements, whistleblowers may be incentivized to bring FCA actions. While it is unclear how FCA actions will play out, courts in multiple jurisdictions have held that insurance companies may be liable for coverage of these actions.
D&O Coverage
FCA claims typically are brought under professional liability or directors and officers (D&O) policies. Recently, courts have found that D&O policies provide coverage for underlying FCA claims.
On March 12, 2025, a Delaware Superior Court judge ruled that a pair of D&O insurers must provide coverage to real estate holding companies in an underlying FCA whistleblower action. Pangea Equity Partners, LP v. Great Am. Ins. Grp., No. N23C-12-060 MAA CCLD, 2025 WL 786050 (Del. Super. Ct. Mar. 12, 2025). The Court granted the insureds’ Motion for Judgment on the Pleadings, finding a duty to defend. Id. In FCA cases, there are questions regarding whether contract-related exclusions would apply. The Superior Court found that the Breach of Contract Exclusion was inapplicable to the Qui Tam action where the underlying action was not one for breach of contract. Id. The Court reasoned that an overbroad application would “effectively [extend} coverage of the exclusion to just about anything remotely connected”. Id.
The Illinois False Claims Act (IFCA) is an anti-fraud statute modeled after the FCA. Lyons Twp. ex rel. Kielczynski v. Vill. of Indian Head Park, 2017 IL App (1st) 161574, 84 N.E.3d 1118, as modified on denial of reh’g (June 23, 2017).
Illinois courts have found at least a potential for coverage under D&O policies.
The Seventh Circuit has recently held that under Illinois law and public policy, an insured pharmaceutical company was entitled to coverage under its D&O excess liability policy for its payment to settle the federal government’s FCA claim. Astellas US Holding, Inc. v. Fed. Ins. Co., 66 F.4th 1055 (7th Cir. 2023).
With a potential uptick in FCA suits, insurance coverage for FCA is likely to become a prevalent issue.
About Kileen Dietrich
Kileen is an associate attorney in Tressler’s Insurance Services Practice Group in the Chicago Office. Kileen focuses her practice on coverage analysis in matters involving a wide range of policies, including professional liability and commercial general liability. Click here to read Kileen's full attorney bio.