Appeals court dismisses Cigna fraud case

A FEDERAL APPEALS COURT last week affirmed a lower-court ruling dismissing a lawsuit against insurer Cigna Corp. for allegedly committing fraud by misleading shareholders about its compliance with Medicare regulations.

The three-judge panel of the 2nd U.S. Circuit Court of Appeals agreed that Cigna’s alleged misstatements about its Medicare subsidiary HealthSpring can’t be considered fraud.

“We conclude that a reasonable investor would not rely on the challenged statements as representations of regula- tory compliance,” Judge José Cabranes wrote for the unanimous panel.

The shareholders claimed Cigna and its officers violated securities laws by making materially misleading statements about HealthSpring, which was sanctioned by the CMS in 2016 for failing to comply with requirements regarding coverage determinations, appeals, benefits administration and other issues. Their proposed class action, Singh v. Cigna Corp., was dismissed by a federal judge in Connecticut in October 2017.

The district court ruled that the alleged misstatements in its 2014 code of ethics and annual report to the Securities and Exchange Commission did not amount to fraud. The appeals court agreed.

“If anything, these statements seem to reflect Cigna’s uncertainty as to the very possibility of maintaining adequate compliance mechanism in light of complex and shifting government regulations,” Cabranes wrote. ●