Kaiser Foundation Health Plan's lawsuit seeking $95 million in coverage for a recently settled whistleblower action raises an important challenge to policy language that limits coverage for claims related to returning funds received from government agencies, as policyholder attorneys tell Law360 the language should be construed broadly.

Kaiser sued an AIG unit and several other insurers Feb. 20, alleging that the carriers breached their obligations to indemnify Kaiser up to its policy limits in connection with a consolidated qui tam, or whistleblower, action against the managed care organization, which culminated in a $556 million settlement in January...

"This is a common example of what insurance companies do in these situations where they try to use exclusions that are partial exclusions, not total exclusions, to try to exclude coverage for an entire settlement," said Raymond A. Mascia Jr., a shareholder at Anderson Kill PC.

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