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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

Doc Sues Westchester to Force Coverage for Government Claim

February 6th, 2013 - A Virginia doctor has sued Westchester Fire Insurance Co. in an effort to obtain indemnity from a federal government fraud claim against him that could top $80 million.

The ACE Group unit had sold a directors and officers liability policy to Imagimed LLC, for a period covering February 1st, 2008, to February 1st, 2009. At the time, William B. Wolf III was co-chief executive officer of Rockville, Maryland-based Imagimed, which conducts medical imaging procedures.

During the policy period, the U.S. Department of Justice alleged that Wolf had violated the False Claims Act and the Anti-Kickback Statute by way of bogus bills submitted to Medicare for more than 6,000 medical procedures done without a medical doctor being present. The government contended that Wolf was joint and severally liable for repayments plus penalties.

On December 20th, 2012, Wolf said that the Justice Department made a last-ditch “take-it-or-leave-it” offer to settle the claims for $1.75 million. If Wolf did not respond affirmatively by January 31st, 2013, Justice reportedly said it intended to sue Wolf for damages in excess of the settlement offer, plus civil penalties and treble damages.

Since September, 2012, Wolf said he had repeatedly asked that Westchester settle the government’s claim for an amount within its $3 million policy limit. Westchester allegedly has acknowledged a duty to defend Wolf, but not to indemnify him.

Wolf said Westchester based its denial on its position that any settlement would not be a covered loss because the government’s claims are for restitution of payments made by Medicare and include treble damages, which the insurer asserted are not covered by the policy.

In a suit filed in U.S. District Court in the Southern Division of Maryland, Wolf called Westchester’s refusal baseless and a bad faith breach of its obligation under terms of both its policy and Maryland law.

Wolf seeks a judgment that Westchester has a duty to indemnify him. In the alternative, he seeks a declaration that Westchester is liable for any consequences of its failure to indemnify the plaintiff. And he asks for damages as a result of Westchester’s alleged breach of contract.

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