A federal appeals court on Tuesday affirmed a lower-court ruling dismissing a lawsuit against insurer Cigna Corp. for allegedly committing fraud by misleading shareholders about its compliance with Medicare regulations.
The three-judge appellate panel agreed that Cigna's alleged misstatements about its Medicare subsidiary HealthSpring can't be considered fraud.
"We conclude that a reasonable investor would not rely on the challenged statements as representations of regulatory compliance," Judge José Cabranes wrote for the unanimous panel.
The shareholders claimed the insurer and its officers violated federal securities laws by making materially misleading statements about HealthSpring, which was sanctioned by the CMS in 2016 for failing to comply with the agency's requirements regarding coverage determinations, appeals, benefits administration and others. Their proposed class action suit, Singh v. Cigna Corp., was dismissed by a federal judge in Connecticut in October 2017.
The district court decided that the alleged misstatements in its 2014 code of ethics and annual report to the Securities and Exchange Commission did not amount to fraud, and the appeals court agreed.
"If anything, these statements seem to reflect Cigna's uncertainty as to the very possibility of maintaining adequate compliance mechanism in light of complex and shifting government regulations," Judge Cabranes wrote.