ROR Letters and Kickback Investigations Coverage

Sometimes, when patients make claims or file lawsuits against their ophthalmologists, they allege certain acts, seek monetary awards, or sue other people that aren’t covered by the insured’s OMIC professional liability policy. When this happens, it is OMIC’s obligation to send a letter to the insured explaining who and what their policy does and does not cover.

Rest assured that OMIC will assign counsel and vigorously defend a claim or lawsuit filed against you. When you receive a ROR letter, OMIC is simply reserving its right not to pay monetary awards for uncovered activities, allegations, or damages, and to withdraw its defense in the unlikely event that no allegation or defendant remains in the lawsuit that is covered by your OMIC policy.

Some of the most common reasons OMIC reserves its rights are as follows:

The plaintiff alleges intentional acts, such as intentional infliction of emotion distress, willful and wanton conduct, fraud, or false advertising. Intentional acts are often alleged so that the plaintiff can seek punitive damages. It is often against public policy to insure intentional acts. Therefore, the OMIC policy, like most professional liability policies, does not cover intentional acts. OMIC is often successful in having such allegations removed from the complaint during litigation.

The plaintiff is seeking punitive damages. Punitive damages are uninsurable in most jurisdictions, and are excluded under the OMIC policy. Again, OMIC is often successful in getting demands for punitive damages dropped.

Other allegations for which OMIC provides a conditional defense but no payment of damages are criminal acts, sexual misconduct, acts or omissions caused by the insured’s substance abuse, guaranteed results, and vicarious liability due to an apparent partnership.

OMIC’s appointed defense counsel will defend you against all allegations, not just those covered by your policy. Your counsel will work to have uncovered allegations or damages removed from the complaint, whenever appropriate.

If you receive a reservation of rights letter, don’t be alarmed. Your claims representative will have discussed with you that OMIC will be reserving its rights and that a letter outlining the issues will be forthcoming. If you have questions about your coverage, please call us. Your OMIC defense attorney will do their best to protect your interests. You are always free to hire personal counsel to advise you, as well. You should also notify any other insurance carrier you have whose policy might cover the allegations or people that OMIC does not. Continuing to work closely with your OMIC defense team will give you the best chance of obtaining a swift and satisfactory resolution to the claim or lawsuit¹.

A recent multimillion dollar settlement between an ophthalmology group and the US government to resolve alleged violations of the False Claims Act and the Anti-Kickback Statute has heightened insureds’ awareness of the risks associated with the remunerative arrangements ophthalmology practices have with referring optometrists who co-managed patient care.² This case originated from a civil lawsuit filed by a whistleblower, under the qui tam provisions of the False Claims Act, which allows private parties to bring suit on behalf of the government and to share in any recovery. It was alleged that the ophthalmology group violated the Anti-Kickback Statute, which prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded health care programs.

OMIC can help you if you find yourself the subject of such an investigation. OMIC’s policy includes a Broad Regulatory Protection Benefit, which provides reimbursement of legal expenses and fines or penalties imposed as a result of billing errors proceedings and STARK proceedings, up to a maximum of $100,000.

A STARK proceeding means a proceeding by a government entity alleging violation of any federal, state, or local anti-kickback or self-referral laws. Billing errors proceedings include civil proceedings instituted by a qui tam plaintiff under the federal False Claims Act or by a government entity alleging presentation of erroneous billings to a government health benefit payer.

Under this benefit, the insured selects and retains their own attorney, and OMIC, through its partner Tokio Marine Houston Casualty Company (TMHCC), coordinates the reimbursement. The insured must provide timely written notice of the proceeding to OMIC’s Claims Department to trigger coverage, and certain exclusions apply (e.g., criminal acts, restitution of reimbursements). Insureds are encourage to reach out to OMIC’s Risk Management Department for advice on co-management to avoid these issues from the start.

¹ Policy Issues article in 2014 OMIC Digest Vol 24, No. 1.
² US Attorney’s Office, Eastern District of Texas. (2023, March 23). Ophthalmology Practice Agrees to Pay Over $2.9 Million to Settle Kickback Allegations [Press Release].