Massachusetts Court Holds No E&O Coverage for Medical Provider’s Alleged Billing Fraud

In its recent decision in Barron v. NCMIC Ins. Co., 2018 U.S. Dist. LEXIS 75512 (D. Mass. May 4, 2018), the United States District Court for the District of Massachusetts had occasion to consider whether billing practices qualify as a professional service insured under a medical malpractice insurance policy.

NCMIC insured a group of chiropractors under a professional liability policy affording coverage for “damages because of an injury” subject to the requirement that the injury be caused by an accident arising from the negligent omission, act, or error in the provision of professional services, a term defined as “services which are within the scope of practice of a chiropractor in the state or states in which the chiropractor is licensed.”

The insured chiropractic group sought coverage for an underlying suit brought against it by GEICO. GEICO alleged that the chiropractic group engaged in various fraudulent schemes in an effort to obtain higher payments from GEICO under Massachusetts’ No-Fault Personal Injury Protection (PIP) statute. Among other things, the suit alleged that the group overprescribed treatments without regard to any individual person’s actual injuries, and engaged in practices designed to maximize the amount of treatment rendered and PIP benefits received. GEICO also alleged that the group engaged in numerous other schemes, such as manipulating patients’ injury complaints, manipulating invoices, and manipulating service codes.

The court held that GEICO’s lawsuit did not come within the Policy’s grant of coverage, and in doing so, rejected the insured’s argument that GEICO’s suit alleged a “mix of both negligence claims and fraudulent billing. While the underlying suit made reference to patients having been mistreated as a result of the insured’s negligent care, the court concluded that the suit did not allege that this mistreatment caused injury to any particular individual, nor was any relief sought by GEICO for such injuries.

The court further observed that the policy issued by NCMIC did not broadly cover all suits arising out of the insured’s rendering of professional services, but only suits seeking damages for injuries resulting from such services. Thus, the court concluded, “The Underlying Action targets alleged fraudulent billing practices that caused GEICO to pay or settle false or inflated medical insurance claims, not professional malpractice that caused patient injuries.”