D&O Policy's Professional Services Exclusion Does Not Bar Coverage For False Claims Act Settlement

The Delaware Supreme Court has held that a professional services exclusion in a D&O policy does not bar coverage for a False Claims Act settlement. ACE Am. Ins. Co. v. Guaranteed Rate, Inc., 2023 WL 5965619 (Del. Sept. 14, 2023).

In 2017, a former employee of the insured mortgage loan company brought a qui tam action against the company alleging that the company had falsely certified loans to the government that it endorsed as eligible for government insurance in violation of the False Claims Act. In 2019, the U.S. Department of Justice initiated an investigation into the company's alleged failure to meet applicable quality-control standards in its process for underwriting mortgage loans. The insured and the federal government reached a $15 million settlement. The insured sought coverage for the defense costs associated with the government investigation and the qui tam action and also sought coverage for the settlement under its D&O insurance policy. The insurer