Delaware Superior Court Holds Civil Investigative Demand Is A Claim Under Managed Care E&O Policy

The Superior Court of Delaware, applying Delaware law, has held that a federal civil investigative demand ("CID") issued by the Department of Justice ("DOJ") qualified as a "Claim" under a managed care errors and omissions (E&O) policy, rather than a "Governmental Investigation." Cigna Grp. v. XL Specialty Ins. Co., 2025 WL 3884858 (Del. Super. Ct. Dec. 8, 2025). While the court held that the CID was a Claim, it declined to order immediate reimbursement of defense costs, finding that factual questions remained regarding the reasonableness of those expenses.

The dispute arose after the insured health service company received a CID from the DOJ regarding the company's alleged one way chart review procedures, a practice that the DOJ alleged violates the False Claims Act. The company sought coverage for the costs it incurred in responding to the CID under its E&O policies. The primary insurer agreed that the CID constituted a Claim and thus entitled the company to indemnification for Defense Expenses. The excess insurers disagreed, asserting that the CID was a "Governmental Investigation," for which the Policy does not cover Defense Expenses unless the Wrongful Acts at issue in the Governmental Investigation subsequently give rise to a covered Claim.

The policy defined "Claim" as "any written notice received by [the insured] that a person or entity intends to hold [the insured] responsible for a Wrongful Act." "Wrongful Act" included "any actually or alleged act, error or omission in the performance or failure to perform Managed Care Professional Services . . . [or] Medical Information Protection by [the insured]." By contrast, "Governmental Investigation" was separately defined to include CIDs from any state or federal governmental or regulatory agency seeking documents or other data.

In the ensuing coverage litigation, the company and the excess insurers each moved for summary judgment addressing whether the CID constituted a Claim under the policy. The court opined that while there was no dispute over whether the CID was a written notice for a Wrongful Act, the parties disputed whether the government, by issuing the CID, intended to hold the health service company responsible for its alleged one-way chart reviews.

The court held that a government issued CID seeking information about specifically alleged wrongdoing by the recipient shows the government's intent to hold the receiver responsible for that conduct. The court noted the compulsory nature of government demands and determined that a CID's reference to an investigation into alleged unlawful acts is not meaningfully different than alleging them for purposes of the Claim definition.

The excess insurers had argued that calling a CID a "Claim" where the policy separately defines "Governmental Investigation" would render the latter term superfluous, but the court rejected that argument. The court determined that its interpretation preserved the role of Governmental Investigation coverage, as it would still apply to CIDs that do not become Claims, such as where the government issues a CID to an unrelated third party who might have information relevant to an ongoing investigation and where the government is not seeking to hold that party responsible for any violation.

Accordingly, the court granted summary judgment for the insured company on the grounds that the CID constituted a Claim that entitles the company to coverage for Defense Expenses, but the court found that issues of fact remained regarding the reasonableness of the claimed Defense Expenses.

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