Springstone, Inc. v. Hiscox Ins. Co.

Springstone, Inc. v. Hiscox Ins. Co.

Opinion

SILER, Circuit Judge. Responding to lawsuits and investigations is expensive (even when they are without merit). That reality played out when Plaintiff Springstone, Inc. incurred substantial legal fees responding to a government subpoena based on a sealed qui tam lawsuit. Springstone thought, however, it was in luck. After all, it had purchased insurance from Defendant Hiscox Insurance Company, Inc. to cover it from certain legal claims. But its coverage does not extend so far. Springstone's policy does not cover qui tam actions filed before the coverage period, nor does it cover subpoena responses. Accordingly, the district court's judgment is AFFIRMED.

Springstone (headquartered [*2]  in Louisville) provides behavioral health services across several facilities. In January 2017, it purchased insurance from Hiscox. That insurance plan included Directors & Officers (D&O) Liability Coverage. Only two parts of that coverage are relevant here:

• Coverage B: Company Reimbursement Coverage

• This D&O Coverage Part shall pay the Loss of a Company arising from a Claim first made against an Individual insured during the Policy Period or the Discovery Period (if applicable) for any actual or alleged Wrongful Act of such Individual Insured, but only when and to the extent that such Company has indemnified such Individual Insured for such Loss.

• Coverage C: Company Coverage

• This D&O Coverage Part shall pay the Loss of a Company arising from a Claim first made against a Company during the Policy Period or the Discovery Period (if applicable) for any actual or alleged Wrongful Act of a Company.

In July 2016, a qui tam lawsuit was filed—under seal—against Springstone. It alleged that "Springstone had violated the False Claims Act by obtaining reimbursement from Medicare and Medicaid for medically unnecessary services that it provided to patients." A year after the lawsuit was filed, [*3]  the Office of the Inspector General for the Department of Health and Human Services sent Springstone a subpoena related to its investigation of the qui tam complaint. That subpoena requested documents related to Springstone's patient treatment and management practices.

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