Court Sends Disputes Regarding Cooperation and Prior Knowledge to the Jury

Applying Georgia law, a federal district court denied cross-motions for summary judgment regarding cooperation and prior knowledge, sending both issues to the jury.  Lloyd’s of London Syndicate No. 2623 v. Navicent Health Inc., 2019 WL 4889269 (M.D. Ga. Oct. 3, 2019).  However, the court granted the insurer’s motion for summary judgment on the insured’s bad faith claim, concluding that the coverage disputes were “close” and therefore the insurer’s denial of coverage was neither frivolous nor unfounded.

A hospital sought coverage from its insurer in connection with a False Claims Act qui tam action and related government investigation arising out of alleged fraudulent billings to Medicare and Medicaid for emergency services.  The insurer requested a variety of information relating to the underlying action and investigation, some of which the hospital refused to provide.  After the hospital settled with the qui tam relator and government, the insurer refused to indemnify the hospital for the settlement or its attorneys’ fees.

The insurer subsequently filed suit seeking declaratory judgments that (1) the hospital breached the policy’s cooperation provision by failing to provide all the requested documents, and (2) the policy’s prior knowledge condition was not satisfied because internal hospital emails demonstrated that the hospital provided additional training to its staff with respect to coding for emergency services because there had been a number of billings rejected by the government.

The insurer and the hospital filed cross-motions for summary judgment.  The court denied the motions with respect to the coverage issues, determining that they were issues properly left to the jury, but did grant the insurer’s motion for summary judgment on the bad faith claim.  Specifically, the court determined that the insurer could only deny coverage for breach of the policy’s cooperation provision if the lack of cooperation is material, which the court held was a factual issue for the jury.  Additionally, the court held that a jury must decide whether the internal emails regarding billings demonstrate previous knowledge of wrongful acts such that the prior knowledge condition is not satisfied.