Health Care Industry Liability Insurance Program v. Momence Meadows Nursing Center, Inc., 566 F.3d 689 (7th Cir. 2009), entails the question of whether a liability policy affords an insured a defense against a qui tam action. On the facts of this case, the court found no such coverage.

Momence made a demand on its CGL insurer, Health Cap, to provide Momence with a defense against a qui tam and retaliatory-discharge action. Two former employees of Momence’s nursing home charged Momence with submitting thousands of false charges to Medicare and Medicaid and for terminating them in retaliation for complaining to Momence’s management about the failure to provide adequate care to the residents of the nursing home.

The court held that Health Cap had no obligation to defend Momence because the allegations of the complaint fell outside the insuring agreement, which required a “bodily injury.” The court rejected Momence’s argument that the complaint triggered a duty to defend because the plaintiffs alleged that Momence had submitted claims for Medicare and Medicaid reimbursement for substandard care that had been provided to its patients. “That line of argument effectively bypasses” the trigger because the “statutory damages they seek result from those allegedly false filings, and not from any alleged bodily injury to the residents.” Id. at 694-95. Other courts “uniformly hold that an insurer is not obligated to defend a qui tam suit merely because the insurer would have to defend the insured against a suit for damages resulting from the insured’s conduct underlying the qui tam action.” Id. at 695. The court explained that the factual allegations in the underlying complaint that describe the residents’ personal injuries were “only important insofar as they point to a theory of recovery.” Id. at 695.

The court further concluded that the employment-related practices exclusion excluded coverage for the retaliatory-discharge claim. The exclusion applied to “any claim by a person arising out of any termination of that person’s employment or employment-related practices, policies, acts, or omissions, such as coercion, defamation, harassment, humiliation, or discrimination directed at that person.” Id. at 697.