Unserved Qui Tam Complaint Does Not Satisfy “Claim First Made” Requirement of Claims-Made Policy

A federal district court in California has ruled that an unserved qui tam complaint was a “Claim” but that it did not trigger coverage because, without service, the complaint was not “first made” during the operative policy period. Braden Partners, LP v. Twin City Fire Ins. Co., No. 14-cv-01689-JST (N.D. Cal. Apr. 3, 2015).

Following an initial investigation by the Department of Justice, the insured was notified of a pending qui tam lawsuit against it, which alleged violations of the Federal and California False Claims Acts. The insured reported the suit to its insurer, which denied coverage on several grounds.

In the litigation that followed, the court found that the complaint against the insured constituted a “claim” within the meaning of the policy. The court, however, further found that the policy did not respond to that claim because it was not a claim first made during the claims-made period of the policy. In this regard, the court noted that the policy provided that a claim would “be deemed to have been made … on the date that a summons or similar document is first served ….” According to the court, because the qui tam complaint was not served on the insured, it was not “first made” against the insured.