Delaware high court says Conduent entitled to new coverage trial

The Delaware Supreme Court Monday affirmed a ruling granting Conduent State Healthcare LLC’s motion for a new trial in a dispute with insurers over coverage for a $235 settlement it reached with the state of Texas.

The high court in AIG Specialty Insurance Co. et al. v. Conduent State Healthcare LLC agreed with the trial judge that the jury’s verdict was inconsistent because it found that Conduent acted in bad faith and fraudulently arranged the settlement. The jury also said Conduent could have cooperated with its insurers and sought their consent but failed to do so.

The justices also sustained the trial judge’s post-trial ruling that said, under New York law, an insurer that unjustifiably denies its defense obligations cannot insist on the cooperation of a policyholder during settlement negotiations.

Texas contracted with Conduent in the early 2000s to administer its Medicaid program. In 2012, it began an investigation into alleged overbilling by orthodontics offices. Texas later terminated its contract with Conduent, and the company was sued by both the state and the providers, court records show.

Conduent sought coverage from its primary insurer, American International Group Inc., and excess insurers Chubb Ltd. unit Ace American Insurance Co. and AIG’s Lexington Insurance Co., which agreed to defend against the provider actions but not Texas’ lawsuit. Conduent sued the insurers in December 2018 and reached a settlement with Texas in February 2019, court records show.

Following a six-day trial, the jury concluded that Conduent engaged in fraud when settling with Texas but did not collude with the state or act unreasonably. The jury also found that Conduent did not show that cooperating and seeking consent from its insurers would have been futile.

Conduent requested a new trial based on the trial judge’s evidentiary rulings and the jury’s inconsistent verdict.

New York-based Robin Cohen, a founding partner of Cohen Ziffer Frenchman & McKenna LLP who represented Conduent, said the company “is gratified by the Delaware Supreme Court’s decision, which makes clear that adherence to the rules of evidence matter and that a win-at-all-costs approach to litigation has consequences.”

Representatives for the insurers did not respond to requests for comment.