Insurers Sued for Refusing to Cover Kaiser's $556M Medicare Fraud Settlement

AIG and other major insurers are accused of denying coverage for the massive False Claims Act payout.

Published on Feb. 20, 2026

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Kaiser Permanente affiliates have filed a lawsuit against American International Group (AIG) and several other major insurance companies, alleging they refused to cover a $556 million False Claims Act settlement. The settlement resolved allegations that Kaiser submitted invalid diagnosis codes to Medicare in order to receive higher payments.

Why it matters

This case highlights the ongoing tensions between healthcare providers and their insurers over the scope of liability coverage, especially for high-profile regulatory settlements. It also raises questions about how insurance policies should respond to allegations of fraudulent billing practices.

The details

According to the lawsuit, Kaiser held $95 million in directors and officers liability insurance through a primary policy with AIG and excess policies with eight other insurers, including units of Berkshire Hathaway, Chubb, and Allianz. However, the insurers have refused to cover the $556 million False Claims Act settlement that Kaiser paid to resolve allegations that its affiliates submitted invalid diagnosis codes to Medicare in order to receive higher payments.

  • The $556 million False Claims Act settlement was reached in 2026.

The players

American International Group (AIG)

A major American insurance corporation that provided a primary D&O liability policy to Kaiser Permanente.

Kaiser Permanente

A large non-profit health care organization that was accused of submitting invalid Medicare claims and paid a $556 million settlement.

Berkshire Hathaway

A major insurance company that provided excess D&O liability coverage to Kaiser Permanente.

Chubb

A major insurance company that provided excess D&O liability coverage to Kaiser Permanente.

Allianz

A major insurance company that provided excess D&O liability coverage to Kaiser Permanente.

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What’s next

The lawsuit filed by Kaiser's affiliates will determine whether the insurers are required to cover the $556 million False Claims Act settlement.

The takeaway

This case highlights the ongoing tensions between healthcare providers and their insurers over the scope of liability coverage, especially for high-profile regulatory settlements involving allegations of fraudulent billing practices.