The Indiana Supreme Court in the US ruled that an insurer may be entitled to reinsurance coverage for nearly all its costs to defend and settle allegations that it failed to timeously or fully pay medical reimbursement claims.
It was held that even though the company was engaging in an improper, unfair, and deceptive scheme designed to systematically deny, delay and diminish claim payments, these were clearly ‘wrongful acts’ in the course of their claims-handling and adjusting services. They thus qualified as covered wrongful acts occurring in the rendering or failure to render professional services that were specified in its insurance agreement with its reinsurers under its self-insured E&O policy.
If insurers cover a ‘wrongful act’ they must bear in mind that the phrase is of very wide import and the policy wording will have to carefully and specifically exclude any liability that they don’t want to cover.
