Kaiser Permanente is taking nine of its D&O insurers to court, alleging they walked away from a hundreds-of-millions-dollar settlement.
The healthcare giant filed a suit on February 20 in the US District Court for the Northern District of California, naming National Union Fire Insurance Company of Pittsburgh, Pa. (AIG), Federal Insurance Company (Chubb), Berkley National Insurance Company, Starr Indemnity & Liability Company, National Fire & Marine Insurance Company, RSUI Indemnity Company, Markel American Insurance Company, Fair American Select Insurance Company, and Allianz Global Risks US Insurance Company as defendants.
At the heart of the dispute is a settlement Kaiser reached in January 2026 to resolve a sprawling False Claims Act case that had been building since 2013. That case = brought by the US Department of Justice and six whistleblower plaintiffs - accused Kaiser of submitting improper risk-adjusted Medicare Advantage claims tied to diagnoses allegedly added through addenda dating back to 2009. The DOJ's case included allegations of presenting false claims, using false records or statements, and conspiring to violate the False Claims Act, among other counts. The government sought treble damages, civil penalties, and costs.
Kaiser carried a D&O liability insurance tower totaling $95 million, anchored by a primary policy from AIG with $10 million in coverage sitting above a $10 million self-insured retention. Eight excess carriers followed form to that primary policy, adding another $85 million in limits. The primary policy defined covered loss broadly — encompassing damages, settlements, judgments, defense costs, and, notably, multiplied damages where insurable under applicable law.
According to the filing, AIG accepted the underlying action as a covered claim and agreed that Kaiser had satisfied the self-insured retention. But when it came time to pay, AIG pointed to an endorsement in the policy - the "Governmental Funding Defense Cost Coverage" provision - and capped its defense cost reimbursement at $1 million. That same endorsement carved out from covered loss the "return of funds which were received from any federal, state or local governmental agency or any interest, fines or penalties arising out of the return of such funds." All eight excess carriers then fell in line behind AIG's position, declining to pay anything.
Kaiser argues the exclusion simply does not reach the multiplied damages portion of its settlement. Treble damages, the filing contends, are by nature amounts above and beyond whatever Kaiser received from the government - and cannot logically be characterized as a "return of funds." Kaiser makes a similar argument for amounts tied to non-intervened whistleblower claims and payments to relators.
The case raises a coverage question with potentially wide implications for the D&O market: how far can a governmental funding exclusion stretch when a settlement resolves claims involving both actual damages and statutory multipliers?
Kaiser is seeking indemnification up to the full policy limits, a judicial declaration of the parties' rights and obligations, interest, and costs. The case remains in its earliest stages, with no determination on the merits.
