Hunton Insurance Recovery Blog

Companies have long favored Delaware for business purposes for a multitude of reasons. One new reason to add to that list may be Delaware’s approach to coverage under directors and officers, errors and omissions, and other claims-made liability policies for costs incurred in responding to government investigations. Building upon prior pro-policyholder rulings, a Delaware court recently concluded that a DOJ civil investigative demand (CID) was a covered “Claim,” even where the policy expressly included other, more limited coverage targeting governmental investigation expenses.

What Happened?

In The Cigna Group v. XL Specialty Insurance Co. et al., C.A. No. N23C-03-009 SKR CCLD (Del. Super. Ct. Dec. 8, 2025), a healthcare company sought coverage under a managed care E&O policy for costs incurred in responding to a DOJ CID issued in connection with an investigation into False Claims Act violations. Cigna asserted the CID was a covered “Claim,” which was defined as “any written notice received by [the company] that a person or entity intends to hold [the company] responsible for a Wrongful Act.” It said the CID was a Claim because it was a written notice received by the company, which intended to hold it responsible, and was for Wrongful Acts allegedly committed by the company as outlined in the CID.

The insurers disagreed, arguing that the CID was a “Governmental Investigation,” which was defined to include a “civil investigative demand,” and not a “Claim,” because the CID did not convey an intent to hold the company responsible for any wrongful acts. That distinction mattered because the policy did not cover expenses incurred in responding to Governmental Investigations.

The Superior Court was asked to address whether the CID intended to hold the company responsible for alleged wrongdoing, which would provide coverage for the CID as a “Claim.”

The Court’s Decision

The Superior Court ruled in favor of coverage. The Court first noted that the presence of Governmental Investigation coverage, even to include a “civil investigative demand,” is persuasive and not conclusive of whether the CID was also a Claim. Delaware case law, the Court explained, showed that “a government CID seeking information to investigate specific alleged wrongdoing by the recipient demonstrates an intent to hold the receiver responsible for that conduct.”

Applying those standards and building upon prior pro-coverage rulings addressing investigation coverage, the Superior Court concluded that the CID was a “Claim” because it requested information as part of a government investigation, concerned actions by the recipient, and suggested that conduct violated a specific statute. Furthermore, because the CID requested information as part of a government investigation about the recipient and suggested that conduct violated a statute, the CID’s reference to “investigation” was not materially different from an accusation that the recipient violated the FCA.

The Superior Court also rejected the insurers’ argument that interpreting “Claim” to include CIDs rendered the policy’s definition of “Government Investigation,” which included CIDs, superfluous. The Court explained that the policy “still applies to CIDs that do not become Claims” if, for example, the policyholder received a CID investigating billing practices of a competitor and not as part of an investigation into the policyholder’s conduct.

Though the CID was a “Claim,” the policyholder was not yet entitled to reimbursement because further analysis of defense costs was needed. The Superior Court did not accept the policyholder’s proposal that mere payment of defense costs meant they were reasonable. Instead, the Superior Court ordered the insurers to review the costs within 45 days and identify any contested amounts.

Practical Tips

This is not the first time that Delaware has addressed whether there is coverage for costs associated with responding to a CID under a D&O policy. In 2019, a Delaware court held that a CID issued by the Texas Attorney General was a claim “alleging a wrongful act.” A few years later, another court concluded that the government initiates a claim simply by imposing its authority on the insured and that insureds cannot simply decline to cooperate without risking criminal sanctions for the very things being investigated. Those principles were reinforced in the latest opinion, further cementing Delaware’s broad view of government investigation coverage.

These cases provide important takeaways for policyholders to help maximize coverage for these types of costs.

Scrutinize “Claim” Definitions, Even Where Policies Provide Express Investigation Coverage

Policyholders should closely examine all potential coverage triggers, even “traditional” insuring agreements covering “Claims.” From geopolitical shifts to artificial intelligence, growing regulatory exposures have led to increased investigation coverage disputes. Those exposures have in turn led to insurers modifying policies to expressly carve out matters like subpoenas, interview requests, and similar “informal” government inquiries, usually subject to limited or more stringent coverage compared to “Claims.”

But as the Cigna decision shows, even policies that account for government investigations do not foreclose the possibility of securing full coverage for investigations as “Claims,” as long as the requisite elements of the insuring agreement are met. Understand those coverage triggers and push back on attempts to shift investigations outside of coverage in ways that are inconsistent with the policy language drafted by the insurer.

Investigations Can Be “for” Wrongful Acts

Key to the Cigna court’s ruling was the idea that governmental bodies have inherent police power that compels compliance with subpoenas and CIDs not available to private parties. Recipients simply cannot refuse compliance without risking civil and even criminal liability. As a result, the insurers’ defense based on the CID as a mere “investigation” tool and not a claim for wrongful acts was “a distinction without a difference.” At least in Delaware, investigative tools referencing “investigation” of potential wrongdoing are not meaningful different from accusations of actual wrongdoing by the recipients.

Courts Uphold Broad Coverage for FCA Claims

In addition to Delaware’s strong stance on government investigation coverage, the Cigna ruling represents another win for policyholders in seeking coverage for defense and indemnity in FCA matters.

In the past several years, Delaware courts have affirmed summary judgment in favor of a mortgage lender seeking government investigation coverage for FCA violations and held that D&O insurers had a duty to defend release state holding companies in underlying FCA whistleblower actions. Other courts have similarly upheld broad FCA coverage for both defense costs and settlement.  With whistleblower filing qui tam lawsuits at the highest single year in the history of the FCA and the government recovering more than $6.8 billion from FCA settlements and judgments last fiscal year, companies facing potential FCA exposure should revisit their D&O and other management liability coverages to ensure they are up to the task.

All in all, this Delaware decision helps emphasize the importance of reviewing insurance policies to ensure comprehensive coverage, while at the same time reinforcing Delaware’s reputation as a preferred jurisdiction for business.