Liberty Mutual Firm Balks at TeamHealth’s $42M Settlement in Whistleblower Case

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A Liberty Mutual Insurance subsidiary is asking a federal court to absolve it of responsibility for part of a multi-million-dollar settlement against one of the country’s largest emergency medicine providers, arguing that fraud is not covered by the E&O policy and the health company did not provide proper notice of the settlement.

It’s the latest legal skirmish in several cases against Knoxville, Tennessee-based TeamHealth, a major provider of outsourced emergency room services around the U.S. Whistleblowers have alleged that the company overbilled for emergency room services and engaged in other fraudulent actions. TeamHealth has paid millions to settle some of the claims, but has denied wrongdoing, according to news reports and court filings.

In 2016, TeamHealth employees in Texas filed a whistleblower lawsuit against the firm, detailing how TeamHealth allegedly ordered coders for years to pad ER charges. That prompted health insurers, including Medicare, to audit their payments to TeamHealth, according to the complaint and a report in the Tennessee Lookout news outlet.

On June 14, 2021, TeamHealth reached an agreement with the Centers for Medicare and Medicaid Services and the Texas whistleblowers to settle the case for $42 million, $17 million of which went to the whistleblowers and their attorneys. TeamHealth then asked its insurers, AIG and Ironshore, to help cover the cost.

TeamHealth held a $10 million limited liability policy with AIG, and an excess policy with Ironshore Specialty Insurance Co., a Liberty Mutual firm, for up to $10 million, the complaint shows.

But Ironshore, based in Arizona and Massachusetts, is now balking at having to pay any of the settlement costs. The policy requires the insured to notify Ironshore of the claims and to obtain consent from the carrier before settling, Ironshore attorneys said in the November court filing.

“Despite the AIG Policy’s clear language, and that of Ironshore’s Excess Policy, Team Health failed to satisfy both the notice and consent conditions with regard to Ironshore,” reads the lawsuit, filed in U.S. District Court for the Eastern District of Tennessee.

Furthermore, the complaint notes, “the underlying litigation arises from and is based upon fraudulent conduct by Team Health in submitting false claims to federal healthcare programs in order to receive payments for services that were not provided and/or were medically unnecessary. Such conduct is not covered under the Ironshore excess policy and is not insurable under the law.”

The complaint acknowledges that TeamHealth argues that it provided notice through a loss run in 2017, sent to its insurance broker, Alliant Insurance Services. But that came 66 days after the Ironshore policy had expired, the insurer noted.

Ironshore, represented by Nashville attorney Reid Leitner and others, is asking the court to declare that TeamHealth failed to meet its policy obligations and that coverage does not apply. TeamHealth has not yet responded to the suit, but officials told the Tennessee Lookout that the company had followed a widely used business model and had never been found guilty of violating laws that govern the corporate practice of medicine.

TeamHealth in 2016 was acquired by the Blackstone Group, a large private equity firm, for $6.1 billion, according to news reports.

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