Working in the disability insurance field on behalf of policyholders who get the short end of the stick day in and day out, it gave us a big boost when Cigna got hoisted on its own petard. Cigna found itself in the position of being the insured,who was denied benefits on a claim it brought against another company which insured it.
How does it feel, Cigna?
It all began when Cigna changed its pension plan and sent its employees a fraudulent notice which did not properly inform them of how they would be affected by the change. There were two opinions. The first, Amara v. Cigna Corp., 534 F. Supp. 2d 288 (D. Conn. 2008), in which the District Court found that Cigna affirmatively misled its employees about the differences between the old and new plans so that employees were misled about their retirement benefits. The second, Amara v. Cigna Corp., 559 F. Supp. 2d 192 (D. Conn. 2008), in which the Court discussed the availability of the remedy of reformation.
While on this long litigation trail, the Amara case made it to the U. S. Supreme Court, which issued an important decision about equitable rights, Cigna v, Amara, 131 S. Ct. 1866 (2011).
The Federal District Court which had originally tried the matter found that Cigna had performed deliberately fraudulent acts in advising its employees of what the change in retirement plan would mean to them.
Cigna itself had insurance with an excess insurance carrier for its liability in the class action brought against it in Amara. But that policy contained a specific coverage exclusion: Cigna’s insurer would not be liable to pay any claim brought about or contributed to by “…any deliberately fraudulent or criminal act or omission…” by an insured. Despite this clear exclusion, Cigna tried to get its insurer to pay its loss. The Pennsylvania court in which Cigna brought suit on its claim found for the insurer. Cigna was out of luck, Cigna v. Executive Risk Indemnity, Inc., et al, 2013 Phla. Ct.Comm Pl LEXIS 357.
Cigna has a long history of fiercely battling ERISA disability claimants who seek benefits under their policies. The company reacts the same as just about every carrier. It uses every inference and excuse it can dream up to deny benefits to claiming policyholders.
Hopefully, the experience of having its own claim denied will make Cigna more understanding when it has to deal with claims under the terms of its own policies.
Don’t bet on it!