FCA Ruling Guides Insureds On Classifying Restitution Costs

By Courtney Horrigan, Dominic Rupprecht and Kathryn Bayes (October 27, 2021, 4:44 PM EDT) -- In a ruling likely to have far-reaching consequences for corporate policyholders, the U.S. District Court for the Northern District of Illinois recently held that a False Claims Act settlement qualified as insurable compensatory damages, not uninsurable disgorgement.

In Astellas US Holding Inc. v. Starr Indemnity and Liability Co., the court rejected two separate arguments by an insurer to avoid coverage based on the labels applied to the settlement payment.[1]

First, the court held that labeling a settlement payment as "restitution to the United States," as required to qualify for tax deductibility under the Tax Cuts and Jobs Act,[2] did not change...

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