The United States Court of Appeals for the Tenth Circuit recently held that general liability insurance policies that provide coverage for injuries caused by acts or omission in providing “professional services” do not trigger a duty to defend or indemnify claims for false billing. Zurich American Ins. Co. et al. v. O’Hara Regional Center for Rehabilitation, Nos. 06-1357 and 06-1370 (10th Cir. June 18, 2008).
Following an audit of the billing practices of the O’Hara Regional Center for Rehabilitation, a long-term care facility, the U.S. and the State of Colorado concluded that O’Hara had submitted inflated invoices for patient services. They then filed a lawsuit against O’Hara alleging violation of the False Claims Act, as well as state common law claims for payment by mistake of fact, injust enrichment, fraud, restitution and disgorgement of illegal profits, and recoupment of overpayments.
After the commencement of the lawsuit, O’Hara tendered its defense to three of its general liability insurance carriers. The policies at issue contained roughly the same relevant coverage provisions, providing coverage if the insured causes injury by negligently (1) providing nursing or medical services or treatment; or (2) generally providing “professional services.”
All three insurers filed suit seeking declaratory judgment that they had no duty to defend or indemnify O’Hara. The district court granted summary judgment in favor of the insurers and O’Hara appealed.
The Tenth Circuit Court of Appeals confirmed, holding that the false billing claims did not trigger a duty to defend or indemnify because billing practices did not constitute “professional services.” In particular, the court commented that, although processing Medicare and Medicaid claims may be difficult and time consuming, the activity is not a “professional service.”