A Richmond federal bankruptcy court judge dismissed a request for mediation by Health Diagnostic Laboratory, Inc. and instead approved their request to access $800,000 in insurance proceeds to help pay for legal costs. The mediation request was made by one of HDL’s directors and its former chief scientific officers, both of whom objected to the insurance money access.

HDL was a blood testing company, but filed for Chapter 11 bankruptcy protection in June 2015. This occurred approximately two months after the company agreed to pay nearly $50 million to the federal government so it could settle allegations. The company had paid kickbacks to healthcare providers.

HDL was based in downtown Richmond. It sold most of its assets in September to one of its competitors and began operating part of its lab and office under the new owner. Now, the company exists mainly as a shell and plans to liquidate its remaining assets.

Prior to filing for bankruptcy, the company secured a $10 million insurance policy to help it pay for any legal expenses it might face. In December, the bankruptcy court allowed HDL to access the insurance policy to help with legal costs. There were, however, limitation put on the amounts each of the former officers and directors could access. It was the legal expenses incurred in a lawsuit against HDL by health insurer Cigna that caused the financial issues and made access to the insurance fund necessary.

Those objecting to access to the fund argued HDL’s request was excessive and that the matters would be better settled through mediation. Attorneys for HDL stated the company expects to receive more than $500,000 in insurance proceeds.