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Executive Risk Indemnity, Inc. v. Cigna Corp.

June 3, 2009

EXECUTIVE RISK INDEMNITY, INC., APPELLEE
v.
CIGNA CORPORATION, APPELLANT



Appeal from the Order entered March 19, 2008 In the Court of Common Pleas of Philadelphia County, Civil, No. 01495.

The opinion of the court was delivered by: Klein, J.

Petition for Reargument Filed June 17, 2009

BEFORE: KLEIN, SHOGAN, JJ. and McEWEN, P.J.E.

OPINION

¶ 1 CIGNA Corporation appeals from the order entered in the Court of Common Pleas of Philadelphia County entering declaratory judgment in favor of Executive Risk Indemnity, Inc. At issue was the determination of coverage for CIGNA by Executive Risk regarding claims made against CIGNA that it systematically, and in collusion with other health insurers, underpaid certain claims. These allegations represent both a civil Racketeer Influenced and Corrupt Organization (RICO) claim and breach of contract claim. CIGNA settled the underlying lawsuit for $140,000,000 without an admission of wrongdoing and without indicating how much of the settlement was apportioned for the RICO claim and how much to the breach of contract claim. The trial court determined the Executive Risk professional liability policy did not offer coverage for the claims made. After a thorough review of the submissions by the parties, the official record and relevant law, we reverse and remand for further proceedings consistent with this decision.

History

¶ 2 From 1999 to 2002, CIGNA was a defendant in several federal class action lawsuits. These lawsuits, usually referred to as the Mangieri, Shane and Kaiser cases, claimed that CIGNA, along with several other managed care organizations, systematically underpaid claims by medical providers submitted to them. The complaints charged CIGNA with breach of contract as well as RICO violations in conspiring with the other insurance companies to keep payments improperly low.*fn1 Eventually, Mangieri and Shane were consolidated under Shane. Then in 2003 CIGNA settled the Shane and Kaiser cases together under the auspices of the United States District Court, Southern District of Florida, docket number MDL No. 1334 (In re Managed Care Litigation).

¶ 3 As is true in virtually all settled cases, there was no admission of wrongdoing. The settlement agreement also provided for specific means for class members to seek payment. These means were based on showing that certain claims previously submitted to CIGNA had been part of that class of claims that had allegedly been underpaid. There was also a statement in the settlement agreement that none of the claimants would be required to prove specific aspects of the RICO claims. Thus, while the settlement document acknowledged both breach of contract claims and RICO claims, the settlement agreement did not apportion the settlement amount between the claim types.

¶ 4 CIGNA then sought indemnity from its many professional responsibility insurers, including Executive Risk. Executive Risk claims that its policy does not cover the losses incurred in the underlying lawsuit/settlement because the losses are directly attributable to CIGNA's contractual duty to pay the claims of its medical providers seeking reimbursement. On the other hand, CIGNA claims that the settlement encompassed both breach of contract claims and RICO claims, therefore Executive Risk is bound to cover this claim.

¶ 5 The trial court ruled that because the claimants are seeking payment on the basis of service provided, the settlement was based on breach of contract and was therefore excluded from coverage.

Discussion

¶ 6 Initially, we note our scope and standard of review regarding the grant of summary judgment. We may reverse if there has been an error of law or an abuse of discretion. Our standard of review is de novo, and our scope is plenary. We must view the record in the light most favorable to the non-moving party and all doubts as to the existence of a genuine issue of material fact must also be resolved against the moving party. See Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., 941 A.2d 706, 712 (Pa. Super. 2007).

ΒΆ 7 Additionally, the interpretation of an insurance policy is a question of law for the court. Continental Casualty Co. v. Pro Machine, 916 A.2d 1111, 1118 (Pa. Super 2007). "The polestar ...


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