In an insurance coverage action for breach of contract the Superior Court of the state of Delaware found that two exclusions commonly used by carriers to get out of covering regulatory investigations don't apply when the government is investigating the insured under the False Claims Act. The case is Guaranteed Rate v. Ace Am. Ins. Co., 2022 Del. Super. LEXIS 367 (Super. Ct. Aug. 24, 2022).

Guaranteed Rate, Inc. (GRI), an underwriter and issuer of federally-insured mortgage loans, sought $18 million from insurer ACE in connection with the settlement of a government investigation. The U.S. Department of Justice and the U.S. Attorney's Office for the Northern District of New York investigated alleged violations of the False Claims Act, and on June 27, 2019, GRI received a Civil Investigation Demand (CID). The parties filed cross-motions for summary judgment. GRI subsequently filed a motion for judicial notice of two False Claims Act cases, which GRI believes to have similarities relevant to their arguments against ACE.

GRI is seeking indemnification for approximately $15,060,000 in settlement costs with the U.S. Department of Justice, arising from the company's defects in underwriting individual loans. The company asserts that the settlement represented "damages the Government allegedly incurred for insurance payments it made to third parties, plus a multiplier under the False Claims Act." The policy's Professional Services Exclusion provides that the Insurer shall not be liable for Loss on account of any Claim: alleging, based upon, arising out of, or attributable to any insureds rendering or failure to render professional services. According to the language of the Settlement Agreement, the settlement must be a "loss," not taxes, fines, penalties, or disgorgement. ACE denied coverage arguing that the civil investigative demand did not qualify as a "claim."