A federal appeals court has reversed a lower court ruling in Lloyd’s of London’s favor and ruled a children’s therapy firm is entitled to more than the $25,000 limit under the billing errors endorsement in its professional liability policy, in connection with whistleblower litigation.

Reno, Nevada-based My Left Foot Children’s Therapy Services L.L.C., a small family-owned business that provides speech, physical and occupational therapy to children, had purchased a professional liability policy from Lloyd’s for the period April 2005 through April 2006, according to court papers in My Left Foot Children’s Therapy L.L.C.; Jonathan Gottlieb; Ann Marie Gottlieb v. Certain Underwriters at Lloyd’s et al.

The policy contained a liability limit of $2 million per claim and $4 million in the aggregate and a $2,500 deductible, according to court papers.

It also included a billing errors endorsement that indemnified the firm for up to $25,000 for losses incurred in connection with whistleblower lawsuits alleging plaintiffs had submitted false claims to government health benefit payers.

In June 2015, the plaintiffs received notice of a whistleblower lawsuit alleging they had provided medically unnecessary therapy services in violation of federal and state false claims acts.

After they informed it of the lawsuit, Lloyd’s extended only $25,000 of coverage for any loss and claims expense combined that the plaintiffs incurred in connection with the underlying litigation.

Left Foot filed suit in U.S. District Court in Reno seeking additional coverage under their policy, and the District Court ruled in Lloyd’s favor.

The decision was reversed by a unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco, in a ruling filed Thursday.  “The policy provisions are ambiguous,” said the 9th Circuit ruling.  “Certainly, a reasonable insured could expect coverage of Claims Expenses” of up to $2 million. 

“We need not, indeed under Nevada law cannot, consider whether we would resolve the ambiguity in the way Lloyd’s would prefer and the district court did. Rather, the ambiguity must be resolved in favor” of My Left Foot, said the panel, in reversing the lower court’s ruling.