A federal court in Georgia on Thursday dismissed a hospital’s bad faith claim against a Beazley PLC Lloyd’s of London syndicate, but said other issues in the coverage litigation must be decided by a jury.

The hospital’s attorney said his client is pleased the case would finally be heard by a jury.

Macon, Georgia-based Navicent Health Inc. was the focus of a government investigation sparked by a whistleblower claim that it had illegally billed Medicare and Medicaid programs for emergency transportation of patients who did not require it, according to the ruling by the U.S. District Court in Macon, Georgia, in Lloyd’s of London Syndicate No. 2623 v. Navicent Health Inc.

A settlement was eventually reached with the government and the whistleblower, but Lloyd’s filed suit in the District Court seeking a declaratory judgment it had no obligation to cover Navicent’s indemnification claim because of the hospital’s alleged failure to provide requested  documents and because of a prior knowledge exclusion in the policy.  Navicent filed motions for summary judgment on these issues as well as a bad faith claim.

The court ruled a jury must decide the documents and prior knowledge  issues. “Because there are questions of fact  that preclude the Court from determining whether the exclusions bar coverage as matter of law, the Court must deny both parties’ motion for summary judgment on Lloyd’s of cooperation and prior-knowledge defenses,”  the ruling said.

The court did agree to dismiss the bad faith claim. This case “is a close one,” said the court.  “There is no clear evidence to establish that Lloyd’s of London’s refusal to indemnify Navicent was frivolous or unfounded.  Therefore, Lloyd’s is entitled to summary judgment on Navicent’s counterclaim for bad faith.”

“Our general reaction is ,we were pleased,” said Navicent attorney Anthony P. Tatum, a partner with King & Spalding LLP in Atlanta, who stated the settlement with the federal government and whistleblower resulted in a loss to the hospital of slightly more than $3 million.

“We thought the court could have ruled in our favor” on the documents and prior knowledge issues, but “we’re very pleased that after years of trying to get coverage we’ll be able to present our case to the jury.”

Beazley’s attorney had no comment.