Life Sciences Legal Update

Government Investigations: Don't Forget About D&O Insurance When That Subpoena Arrives

This post was written by Mark S. Hersh and Paul E. Breene.

Government investigations can be both time-consuming and hugely expensive. Earlier this year, the U.S. Department of Justice and the U.S. Department of Health and Human Services announced that its 2011 health care fraud prevention and enforcement efforts resulted in record-breaking recoveries totaling more than $4 billion -- the largest sum ever recovered in a single year. With health care fraud and abuse as a top priority for the current administration, life sciences and health care organizations would benefit from reviewing their insurance policies to ensure they are protected in the event of an investigation.

When an investigation is commenced by a federal or state government entity, a company should have two standard operating procedures: first, hire experienced counsel to respond to the investigation or subpoena; and second, determine whether insurance coverage may be available to pay for what are frequently significant defense costs that may be incurred in connection with the investigation. Securing insurance coverage for subpoenas and informal investigations, both civil and criminal, can be an arduous process, but policyholders who plan ahead and know the pitfalls can give themselves a significant advantage by having coverage to pay for the defense and cost of responding to such an investigation. Failing to secure coverage for an investigation can mean that there will be no coverage if the investigation leads to lawsuits or other legal proceedings.

To learn more about how your life sciences or health care company can secure coverage to protect against costly government investigations, read the full alert.

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Reed Smith LLP