Software Developer Denied D&O Coverage for $118 Million DOJ Settlement Due to Professional Services Exclusion
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Categories: D&O

In a recent Client Alert, Hunton insurance partner Geoffrey Fehling discusses the impact of the California appellate court decision Practice Fusion, Inc. v. Freedom Specialty Insurance Co., where the court denied coverage under a directors and officers liability policy for a software developer’s $118 million settlement with the US Department of Justice to resolve allegations that the company violated anti-kickback laws in designing and implementing sponsored alerts in electronic health records software. The court affirmed the insurer’s denial of coverage under the D&O policy’s professional services exclusions that barred coverage for claims “alleging, arising out of, based upon or attributable to” the company’s performance of professional services for others.

The decision underscores the importance of coordinating between coverages across insurance program, including evaluating coverage for professional liability exposures that may be excluded under D&O policies, negotiating appropriately tailored exclusionary language, and auditing policies at procurement and renewal to identify and fix any problematic language or coverage gaps to help avoid surprises in the event of a claim.

Read the full alert.


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