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RLI Insurance Co. was entitled to reject coverage under a hospital’s $10 million claims-made excess policy because the hospital had filed its claim too late, said a federal appeals court in affirming a lower court ruling.
In May 2014, the U.S. Department of Justice announced that Ashland, Kentucky-based Ashland Hospital Corp., which does business as King’s Daughters Medical Center, agreed to pay $40.9 million to resolve allegations that it had submitted false claims to the Medicare and Kentucky Medicaid programs for medically unnecessary coronary stents and diagnostic catheterizations and also had prohibited financial relationships with physicians referring patients to the hospital, according to a Justice Department statement issued at the time.
Ashland had claims-made policies for the period of Oct. 1, 2010, to Oct. 2, 2011, including a $15 million primary policy with Farmington, Connecticut-based Darwin National Assurance Co., a unit of Pembroke, Bermuda-based Allied World Assurance Holdings A.G., according to court papers in Ashland Hospital Corp. et al. v. RLI Insurance Co.
It also had a “follow form” excess policy that provided an additional $10 million in coverage with RLI Insurance Co., a unit of Peoria, Illinois-based RLI Corp.
Ashland submitted its claim on the primary policy with Darwin on Dec. 30, 2011, the latest day permitted under the policy, and eventually recovered the $15 million, according to court papers.
Its excess claim, however, was filed on June 29, 2012, and RLI denied coverage on the basis that it had failed to satisfy the excess policy’s notice requirements.
Ashland filed suit in U.S. District Court in Covington, Kentucky, against RLI in September 2013, charging the insurer with breach of its obligations under the policy, and a failure to act in good faith.
The U.S. District Court granted summary judgment in RLI’s favor, which Ashland appealed to the 6th circuit U.S. Court of Appeals in Cincinnati.
On Monday, a three-judge panel of the 6th Circuit unanimously upheld the lower court’s ruling.
Ashland pointed to a 1991 ruling by the Kentucky Supreme Court that said there are certain circumstances for occurrence-based policies under which an insurer must show prejudice before rejecting a claim due to late notice, said the appeals court ruling.
“We agree with the district court’s prediction that the Supreme Court of Kentucky would not extend the notice-prejudice rule to a claims-made policy like the excess policy here, which contains unambiguous notice requirements as conditions precedent to collecting the policy,” said the appeals court in affirming the District Court’s ruling.
(Reuters) — Pfizer Inc. said its Wyeth unit has agreed to pay $784.6 million to settle cases related to the calculation of Medicaid rebates for a gastric drug between 2001 and 2006.