No Coverage for Qui Tam Suit Filed Before Inception of Policy

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Responding to lawsuits and investigations is expensive (even when they are without merit). That reality became clear when Plaintiff Springstone, Inc. incurred substantial legal fees responding to a government subpoena based on a sealed qui tam lawsuit. Springstone thought it had purchased insurance from Defendant Hiscox Insurance Company, Inc. to cover it from certain legal claims, including the expenses of dealing with the government. In Springstone, Inc. v. Hiscox Insurance Company, Inc., No. 20-6014, United States Court of Appeals, Sixth Circuit (September 17, 2021) the Sixth Circuit was asked to compel an insurer to pay for defense costs resulting from a whistleblower law suit that Hiscox proved to the trial court it was not covered.

ZALMA OPINION

Springtone learned, by this litigation, that no insurance policy covers every possible incident that might cost the insured money to defend every possible event. In addition, a D&O policy is claims made and there is no right to recover if the suit was filed – as was the qui tam suit, before the policy came into effect. Insurance covers a lot but not everything.