In recent years, an increasing number of governmental and private party “whistleblower” claims alleging fraudulent claims for payment from the U.S. federal government have been brought against government contractors under the federal False Claims Act (FCA.)
Civil violations of the FCA carry severe economic consequences, potentially including treble damages, additional civil penalties, and payment of the government’s costs in pursuing the FCA case. Moreover, the legal costs of defending the company (and, in some cases, its officers or directors) from investigations and related actions under the FCA can be staggering, often reaching hundreds of thousands, if not millions, of dollars. It is therefore critical for companies that do business with the government to consider purchasing appropriate insurance coverage, and, if claims arise, carefully preserve and pursue coverage claims.
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