Health Care Industry Liability Ins. v. U.S.
| Decision Date | 22 February 2008 |
| Docket Number | No. 07-CV-2005.,07-CV-2005. |
| Citation | 548 F.Supp.2d 632 |
| Parties | The HEALTH CARE INDUSTRY LIABILITY INSURANCE PROGRAM, Plaintiff, v. UNITED STATES of America and the State of Illinois, ex rel Vanessa Absher and Lynda Mitchell; Momence Meadows Nursing Center, Inc.; and Jacob Graff, individually, Defendants. |
| Court | U.S. District Court — Central District of Illinois |
Jo T. Wetherill, Peter R. Jennetten, Robert H. Jennetten, Quinn Johnston Henderson & Pretorius, Peoria, IL, for Plaintiff.
Howard M. Hoffmann, Amy E. McCracken, Duane Morris LLP, Chicago, IL, for Defendants.
This case is before the court for ruling on the Motion for Summary Judgment (# 34) filed by Plaintiff, Health Care Industry Liability Insurance Program (HealthCap).1 This court has carefully and thoroughly reviewed the arguments of the parties and the documents submitted by the parties. Following this careful review, Plaintiffs Motion for Summary Judgment (#34) is GRANTED in part and DENIED in part.
On September 29, 2004, Plaintiffs, United States of America and the State of Illinois, ex rel. Vanessa Absher and Lynda Mitchell (the relators), filed a Complaint against Defendants Momence Meadows Nursing Center, Inc. (Momence) and Jacob Graff. The case was assigned to Senior United States District Judge Harold A. Baker and given Case No. 04-2289. In the Complaint, the relators stated that they were bringing a qui tam action against Defendants.2 The United States was allowed numerous extensions of time to determine whether it would intervene in the case, and documents filed in the case were filed under seal. On May 10, 2006, the United States and the State of Illinois filed a Notice of Election to Decline Intervention.3 On May 22, 2006, Judge Baker entered an Order stating that the case would be unsealed beginning with the Second Amended Complaint. On March 16, 2007, the relators filed their Third Amended Complaint. They stated that they were bringing a qui tam action to recover treble damages and penalties pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq., and the Illinois Whistleblower Reward and Protection Act, 740 Ill. Comp. Stat. 175/1 et seq. The Third Amended Complaint stated that Absher is a licensed practical nurse and Mitchell is a registered nurse. They are both former employees of Momence. Momence is a 140-bed skilled nursing facility that houses disabled and elderly patients. At all relevant times, Jacob Graff was Momence's owner and operator. The vast majority of Momence's residents are Medicare and Medicaid patients. The Medicare and Medicaid programs impose minimum staffing, quality of life and other requirements upon facilities that receive payment from these programs. The relators alleged that a number of residents at Momence received grossly substandard care for which Medicare and Medicaid were billed. They included allegations that residents of Momence suffered unnecessary pain, suffering, disease and illness, and even death, because of the substandard care.
The relators alleged that employees were directed to falsify: (1) patient and medication records to reflect that care and medication had been provided, when it had not; and (2) staffing records, to show minimum staffing levels were reached. They alleged that employees were also told to "rechart" patient records to conceal events leading to the injury, illness, or death of some residents. They alleged that, in Momence's effort to conceal the true conditions existing at its facility, an employee was directed to place an "out of order" sign on the photocopier so inspectors from the Illinois Department of Public Health could not duplicate the records. The 38-page Third Amended Complaint includes shocking allegations of neglect of Momence's residents. The relators alleged that the worthless or substantially diminished services provided by Defendants to the elderly and disabled residents of Momence resulted in the submission of thousands of false claims to the federal and state-funded Medicare and Medicaid programs. The relators also alleged that Defendants falsely certified compliance with Medicare Rules and Regulations, which certifications were a condition of payment under Medicare.
The relators alleged that they complained to management about the inadequate care being provided to residents, the failure to provide medications and meals to residents, the appalling condition in which residents were found, and other incidents involving Momence employees. The relators alleged that they also complained to their supervisors that Defendants failed to comply with federal and state laws governing quality of care. The relators alleged that, in addition, they reported several incidents on the Illinois Department of Public Health's hotline. Mitchell alleged that she was subjected to continuous verbal abuse and hostility, was told to "shut her mouth," and was also told that she could be terminated if she continued to complain. Mitchell alleged that she was terminated three days after one of the residents died. The Third Amended Complaint alleged that, when Absher learned that Mitchell was terminated, she felt she had no other reasonable choice but to resign. She alleged that Momence tried to prevent other employers from hiring her by faxing them a copy of her letter of resignation. The relators further alleged that Momence fabricated charges against both of them with the Illinois Department of Professional Regulation.
In the Third Amended Complaint, the relators asserted four claims against Defendants. Count I was brought pursuant to the False Claims Act and alleged that Defendants knowingly presented or caused to be presented thousands of false or fraudulent claims for Medicare and Medicaid reimbursement. The relators alleged that payment of these false or fraudulent claims resulted in the United States being damaged in an amount far in excess of millions of dollars, exclusive of interest. The relators sought, for the United States, treble damages, civil penalties, prejudgment interest, and costs incurred in bringing the action. For themselves, the relators sought the maximum amount allowed under the False Claims Act, reimbursement for their reasonable expenses, and an award of reasonable attorneys' fees and costs. In Count II, the relators alleged that Defendants were liable under the Illinois Whistleblower Reward and Protection Act for making false or fraudulent claims for payment as a result of which the State of Illinois was damaged in an amount far in excess of millions of dollars exclusive of interest. The relators sought, for the State of Illinois, three times its actual damages, civil penalties, prejudgment interest and the costs incurred in bringing this action. For themselves, the relators sought the maximum allowed by the statute, reimbursement for their reasonable expenses, and an award of attorneys' fees and costs.
In Count III, the relators alleged unlawful retaliation in violation of the False Claims Act. They alleged that Momence's conduct, including verbal harassment, led to mental and emotional stress. They alleged that Mitchell was unlawfully terminated and that Absher was constructively discharged due to Momence's conduct. The relators sought front pay and two times their back pay, plus interest, compensatory damages, including damages for emotional distress, punitive damages, and reasonable attorneys' fees and costs. In Count IV, the relators alleged retaliation in violation of the Illinois Whistleblower Reward and Protection Act. The relators again sought front pay and two times their back pay, plus interest, compensatory damages, including damages for emotional distress, punitive damages, and reasonable attorneys' fees and costs.
This case currently remains pending before Judge Baker.
On January 10, 2007, HealthCap filed its Complaint (# 1) against Defendants United States of America and the State of Illinois ex rel. Absher and Mitchell, Momence and Graff.4 The United States and the State of Illinois were subsequently dismissed as parties in this action. On September 7, 2007, HealthCap filed its Amended Complaint for Declaratory Judgment (# 27). HealthCap alleged that it issued a commercial general liability policy of insurance to Momence. HealthCap further alleged that no coverage is afforded under this policy for the allegations included in the lawsuit filed by the relators against Momence and Graff. HealthCap therefore sought a declaration from this court that it has no duty to defend or indemnify Momence or Graff in the underlying lawsuit based upon the insurance policy it issued to Momence. HealthCap attached a copy of the insurance policy and also attached a copy of the Third Amended Complaint filed in the underlying action.
On December 6, 2007, HealthCap filed a Motion for Summary Judgment (# 34). HealthCap argued that claims made pursuant to the False Claims Act in Count I of the underlying Third Amended Complaint do not fall within the coverage of the HealthCap policy. HealthCap also argued that there is no coverage under the policy for the claims in Counts II, III, and IV of the Third Amended Complaint because the employment-related practices exclusion of the policy precludes coverage for these claims. HealthCap again attached a copy of the policy at issue and the Third Amended Complaint filed in the underlying action. HealthCap argued that it is entitled to summary judgment on its declaratory judgment action seeking a declaration that it has no duty to defend or indemnify Momence or Graff in the underlying action.
On January 29, 2008, Defendants Momence and Graff filed their Response to Motion for Summary Judgment (# 40) and attached exhibits. Defendants contended that, based upon the terms of the insurance policy, HealthCap has a duty to defend them against the underlying lawsuit. Defendants also...
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