Cigna can now proceed with its appeal of a Philadelphia judge’s ruling that it could not sue its liability insurers for coverage of an ERISA class action.
Philadelphia Court of Common Pleas Judge Albert J. Snite Jr., who denied Cigna’s motion for reconsideration in December, clearing the way for an appeal, issued an order Jan. 2 adopting his Oct. 18 opinion. In that opinion, Snite ruled to bar Cigna from suing its insurers, Executive Risk Indemnity Inc. and Nutmeg Insurance Co., in Cigna v. Executive Risk Indemnity.
Cigna sued its insurers for coverage relating to employee benefits. Snite noted that a federal court found that Cigna deliberately misled its employees about pension and retirement information.
Snite based his ruling on the decision of U.S. District Judge Mark R. Kravitz of the District of Connecticut in the underlying case, Amara v. Cigna. In that case, Kravitz found Cigna liable for misleading conduct. According to the docket, the Amara case is still in litigation.
Snite wrote in his opinion that a clause excluding coverage for deliberately fraudulent acts in the policy between Cigna and its insurers was binding in the case.
“The district court’s opinion was a final judgment that Cigna’s actions were fraud, and therefore the deliberately fraudulent acts exclusion in the defendants’ insurance policies applies,” Snite said.
The national class-action case in Amara was initiated by current and former employees of Cigna seeking payment of benefits relating to Cigna’s amendment of its retirement plan in 1998, according to Snite.
The district court found that “Cigna’s deficient notice led to its employees’ misunderstanding of the contract, that instead of taking steps to correct its mistake Cigna affirmatively misled and prevented employees from obtaining the information that they needed to evaluate the distinctions between the old and new plans,” Snite said.
“As a result of Cigna’s actions, its employees were mistaken as to their retirement benefits,” Snite added.
The policy was originally handled by certain underwriters of Lloyd’s of London from March 1999 to March 2002. Snite said the defendants in the present case are “part of the first layer of insurance excess to the Lloyd’s policy.”
Kravitz issued two opinions in the case, one regarding Cigna’s liability, and the other pertaining to remedies and reformation of the retirement plan in regard to the Employee Retirement Income Security Act, in 2004 and 2008, respectively, Snite said.
Kravitz’s ruling was affirmed by the U.S. Court of Appeals for the Second Circuit. Cigna subsequently appealed the remedies opinion.
The U.S. Supreme Court reversed Kravitz’s judgment, ruling that Cigna’s retirement plan should not have been reformed based on ERISA, Snite said.
However, the Supreme Court determined that “substantially similar relief” could be derived from ERISA, and remanded the case to the district court to determine if reforming the plan could constitute “other equitable relief” under Section 502(a)(3) of ERISA.
The case went before U.S. District Judge Janet Bond Arterton, who handled the case after Kravitz’s death, Snite said. Arterton found the employees did establish a basis for the court to reform the retirement plan due to Cigna’s fraud coupled with the employees’ “unilateral mistake.”
Cigna argued that the second set of remedies, offered by Arterton, couldn’t serve as grounds to bar coverage under the deliberately fraudulent acts exclusion, according to Snite.
Cigna asserted that despite the Supreme Court’s remand of the remedies decision to Arterton’s courtroom, the original district court ruling on Cigna’s liability still remained as controlling in the liability facet of the case, according to Snite. Therefore, Cigna claimed, Arterton’s ruling that Cigna’s conduct was fraudulent was nothing more than “nonbinding dictum.”
Snite said the finding of fraud was integral to the court’s decision and not dicta.
“Judge Arterton was not able to find that reformation was an appropriate remedy … unless she made the determination of Cigna’s fraudulent acts and its employees’ resulting mistake,” Snite wrote.
Francis J. Deasey of Deasey, Mahoney, Valentini & North in Philadelphia represented Cigna and did not return calls seeking comment. Ronald P. Schiller and Daniel J. Layden of Hangley Aronchick Segal Pudlin & Schiller represented the defendants in the case.
Mark Schussel, a spokesman for Chubb, Executive Risk Indemnity’s parent company, declined to comment.
The Hartford is the parent company of Nutmeg Insurance Co. A call to Thomas Hambrick of The Hartford’s media relations office was not returned.
(Copies of the eight-page opinion in Cigna v. Executive Risk Indemnity, PICS No. 14-0010, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •