Court Ruling Expands Insurance Coverage for Government Investigations

In a significant victory for policyholders, the Delaware Superior Court has ruled that Civil Investigative Demands (CIDs) issued by the Department of Justice qualify as a “Claim” under certain insurance policies, potentially broadening coverage options for companies facing government scrutiny.

The January 5, 2026 decision in The Cigna Group v. XL Specialty Insurance case determined that CIDs can trigger full policy coverage rather than just limited investigation coverage, as insurers have typically argued in the past.

At the heart of the dispute was whether Cigna could seek coverage for costs incurred responding to Department of Justice CIDs related to “one-way chart reviews” by Medicare Advantage Organizations. These reviews were alleged to violate the False Claims Act by only identifying information that would increase government reimbursements without accounting for information that could decrease payments.

When Cigna received the first of several CIDs in 2016, the company notified its insurers and sought coverage under its Managed Care Errors & Omissions insurance policies. The primary insurer, ACE American Insurance Company, initially denied coverage by classifying the CIDs as a “Governmental Investigation” rather than a “Claim,” though it later reversed its position.

However, excess insurers XL Specialty Insurance Company and Ironshore Specialty Insurance Company maintained their denial of coverage, prompting Cigna to file suit in March 2023.

The Delaware court’s decision hinged on whether the CIDs demonstrated an “intent to hold Cigna responsible” for alleged wrongdoing. The court determined that the DOJ’s demands were not routine information requests but targeted inquiries focused on Cigna’s specific practices that could potentially violate federal law.

“The court recognized a key distinction that many insurers try to blur,” explained Richard Anderson, a partner at the insurance recovery law firm Cohen Ziffer Frenchman & McKenna, who was not involved in the case. “When a government agency issues a CID targeting your company’s conduct, backed by potential penalties for non-compliance, that’s not just information gathering – it’s the beginning of a potential enforcement action.”

The ruling builds upon the court’s earlier decision in Conduent State Healthcare, LLC v. AIG Specialty Insurance Co., establishing that when a CID is directed at a policyholder’s conduct, references potential statutory violations, and carries the weight of government enforcement authority, it demonstrates an intent to hold the recipient responsible for alleged misconduct.

Importantly, the court rejected the insurers’ argument that the CIDs should be characterized solely as a “Governmental Investigation,” which would have limited or excluded coverage under the policy terms.

The decision creates a clear distinction between CIDs issued where the government’s focus is on the policyholder’s potential liability and those issued purely for informational purposes about unrelated entities. Only the latter would fall under the more limited “Governmental Investigation” category.

Insurance industry experts note this ruling could have far-reaching implications across multiple coverage lines, including directors’ and officers’ liability, errors and omissions, and cyber policies.

“Companies spend millions responding to government investigations, and this ruling affirms that properly structured insurance can help mitigate those costs,” said Maria Thompson, risk management consultant at Deloitte. “The court recognized that the technical distinction between investigating misconduct and alleging misconduct is often ‘a distinction without a difference’ when it comes to triggering coverage.”

The ruling comes amid increased regulatory scrutiny across healthcare, finance, and technology sectors, with government agencies increasingly using CIDs and similar tools in early investigative stages.

For policyholders, the decision provides a stronger foundation to seek coverage for responding to various government demands, even when policies contain limitations on investigation expenses. However, experts caution that coverage will still depend on specific policy language and the nature of the government inquiry in each case.

Insurance carriers will likely review and potentially revise policy language in response to this decision, as it challenges a common industry position on coverage limitations for government investigations.