The False Claims Act (FCA) is a powerful weapon in the government's arsenal to police alleged and actual fraud and abuse in government-funded programs, imposing treble damages and other penalties on companies that knowingly submit false or fraudulent claims for payment to federal governmental programs. See 31 U.S.C. Sections 3729-3733. The U.S. Department of Justice's (DOJ) Civil Division announced in February 2023 that settlements and judgments under the FCA exceeded $2.2 billion in the fiscal year ending Sept. 30, 2022—the second-highest total annual recovery on record. In recent years, the DOJ has focused an especially notable number of FCA enforcement actions on the health care and life sciences industries, reaching six-to-eight-figure settlements with companies in those industries. In addition to facing potential FCA-related investigations and lawsuits brought by the government, companies confronting potential liability under the FCA may also be targets of civil qui tam actions initiated by relators (colloquially, whistleblowers) who claim to have evidence of the purported fraud and who seek to recover funds on behalf of the government.

When confronted with an FCA investigation or lawsuit, corporate policyholders should review the full suite of their liability insurance policies, including directors and officers (D&O) liability policies, errors and omissions (E&O) policies, commercial general liability (CGL) policies, and employment practices liability (EPL) policies). Any or all of these different types of insurance may present valuable opportunities to obtain coverage for significant FCA-related exposures and related defense costs depending on the specific nature of the allegations against the FCA target.