Cigna 2009 Annual Report Download - page 186

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Managed care litigation. On April 7, 2000, several pending actions were consolidated in the United States District Court for the
Southern District of Florida in a multi-district litigation proceeding captioned In re Managed Care Litigation challenging, in general
terms, the mechanisms used by managed care companies in connection with the delivery of or payment for health care services. The
consolidated cases include Shane v. Humana, Inc., et al., Mangieri v. CIGNA Corporation, Kaiser and Corrigan v. CIGNA
Corporation, et al. and Amer. Dental Ass’n v. CIGNA Corp. et al.
In 2004, the court approved a settlement agreement between the physician class and CIGNA. However, a dispute over disallowed
claims under the settlement submitted by a representative of certain class member physicians is in arbitration. Separately, in 2005, the
court approved a settlement between CIGNA and a class of non-physician health care providers. Only the American Dental
Association case remains unresolved. On March 2, 2009, the Court dismissed with prejudice five of the six counts of the complaint.
On March 20, 2009, the Court declined to exercise supplemental jurisdiction over the remaining state law claim and dismissed the
case. Plaintiffs filed a notice of appeal on April 17, 2009. The appeal is fully briefed and pending and oral argument is scheduled for
February 26, 2010 before the United States Court of Appeals for the Eleventh Circuit. CIGNA denies the allegations and will continue
to vigorously defend itself.
CIGNA has received insurance recoveries related to the In re Managed Care Litigation. In 2008, the Court of Common Pleas of
Philadelphia County ruled that the Company is not entitled to insurance recoveries from one of the two insurers from which the
Company is pursuing further recoveries. CIGNA appealed that decision and on June 3, 2009, the Superior Court of Pennsylvania
reversed the trial court’s decision, remanding the case to the trial court for further proceedings.
Broker compensation. Beginning in 2004, the Company, other insurance companies and certain insurance brokers received subpoenas
and inquiries from various regulators, including the New York and Connecticut Attorneys General, the Florida Office of Insurance
Regulation, the U.S. Attorney’s Office for the Southern District of California and the U.S. Department of Labor relating to their
investigations of insurance broker compensation. CIGNA cooperated with the inquiries and investigations.
On August 1, 2005, two CIGNA subsidiaries, Connecticut General Life Insurance Company and Life Insurance Company of North
America, were named as defendants in a multi-district litigation proceeding, In re Insurance Brokerage Antitrust Litigation,
consolidated in the United States District Court for the District of New Jersey. The complaint alleges that brokers and insurers
conspired to hide commissions, thus increasing the cost of employee benefit plans, and seeks treble damages and injunctive relief.
Numerous insurance brokers and other insurance companies are named as defendants. In 2008, the court ordered the clerk to enter
judgment against plaintiffs and in favor of the defendants. Plaintiffs appealed. CIGNA denies the allegations and will continue to
vigorously defend itself.
Amara cash balance pension plan litigation. On December 18, 2001, Janice Amara filed a class action lawsuit, captioned Janice C.
Amara, Gisela R. Broderick, Annette S. Glanz, individually and on behalf of all others similarly situated v. CIGNA Corporation and
CIGNA Pension Plan, in the United States District Court for the District of Connecticut against CIGNA Corporation and the CIGNA
Pension Plan on behalf of herself and other similarly situated participants in the CIGNA Pension Plan affected by the 1998 conversion
to a cash balance formula. The plaintiffs allege various ERISA violations including, among other things, that the Plan’s cash balance
formula discriminates against older employees; the conversion resulted in a wear away period (during which the pre-conversion
accrued benefit exceeded the post-conversion benefit); and these conditions are not adequately disclosed in the Plan.
In 2008, the court issued a decision finding in favor of CIGNA Corporation and the CIGNA Pension Plan on the age discrimination
and wear away claims. However, the court found in favor of the plaintiffs on many aspects of the disclosure claims and ordered an
enhanced level of benefits from the existing cash balance formula for the majority of the class, requiring class members to receive
their frozen benefits under the pre-conversion CIGNA Pension Plan and their accrued benefits under the post-conversion CIGNA
Pension Plan. The court also ordered, among other things, pre-judgment and post-judgment interest. Both parties appealed the court’s
decisions to the United States Court of Appeals for the Second Circuit which issued a decision on October 6, 2009 affirming the
District Court’s judgment and order on all issues. On January 4, 2010, the Company and the plaintiffs filed separate petitions for a
writ of certiorari to the United States Supreme Court. The implementation of the judgment is currently stayed. The Company will
continue to vigorously defend itself in this case. In the second quarter of 2008, the Company recorded a charge of $80 million pre-tax
($52 million after-tax), which principally reflects the Company’s best estimate of the liabilities related to the court order.