The headline reads: “LA Hospital’s Late Notice Sinks $42M FCA Deal Coverage.” The pleadings show that the hospital in question did not notify its insurer of a DOJ False Claims Act investigation for more than a year after the first grand jury subpoena was received. When the hospital entered into the $42 million settlement with the government and sought coverage, the insurer declined. Yesterday, U.S. District Court Judge Stephen V. Wilson agreed with the insurer.
The hospital argued in part that it did not call its insurer because DOJ’s subpoena included the standard DOJ request that the recipient not “disclose the existence of or compliance with the subpoena.” But as anyone who has ever been a federal prosecutor (like Judge Wilson) knows, the request is only that – a request.
If you receive a federal grand jury subpoena, unless you are a financial institution, there are no legal restrictions that prohibit you from telling others about that subpoena and, in most cases, even sharing copies of the subpoena. The same is true if you are compelled to testify before a grand jury – the prosecutor may ask you not to tell anyone about what you were asked and what you said, but has no ability to compel you to do so. (See an example of someone spilling the beans here.)
And even in the limited cases where a prosecutor could argue that disclosing the fact of a grand jury subpoena somehow constitutes obstruction of justice (a hard row to hoe), confidential disclosure to one’s insurer would surely be allowed.
We’ll see what happens with the case of the $42m phone call that wasn’t made, but the lesson is clear: let your insurer know as soon as you even think you might be the subject of an investigation.