The Delaware Supreme Court has ruled that two professional liability insurance carriers in the state may be partly responsible for the $159 million in damages associated with the PPO litigation/”Silent PPO” networks in Louisiana from the 90s. The two main defendants referenced here are CorVel and First Health, who both ran PPOs in Louisiana. The damages stem from “Louisiana’s Preferred Provider Organizations Act,” which created notification requirements in which the name of the PPO was clearly identified on a benefit card. This was designed to appease providers who found themselves fighting discounted bills without knowledge of having seen a PPO patient. If these notifications were not followed, damages for each violation were set at double the fair market value of the service, capped at $2,000. After working its way through the courts, First Health settled for over $150.5 million. Corvel settled for $9 million.
In light of the vast settlements, the primary insurers for First Health (Executive Risk Specialty Insurance Co.) and for CorVel (Homeland Insurance Co.) denied that they had an obligation to assist with settlement costs because such monies fell under “fines, penalties and taxes,” excluded under both policies. Both insurers filed a motion with the Delaware Superior Court asking for clarification. Delaware and Louisiana judges reached different conclusions on the matter. Last Friday, the Delaware Supreme Court agreed that it should bow to the Louisiana’s appellate interpretation of its own law. As such, the carriers are likely responsible for some of the settlement costs since they are now defined as “damages” not “penalties.”