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Jury verdict reversed, health care policyholder granted new trial


In a rare move, a Delaware Superior Court judge reversed a pro-insurer jury verdict issued last year in an insurance coverage dispute between an American International Group Inc. unit and a health care organization, and granted the policyholder a new trial.

AIG asked Wednesday that the court permit it to reargue the issue.

In June 2019, the Wilmington, Delaware, court held that the Texas attorney general’s investigation into Dallas-based Conduent State Healthcare, which had processed requests from orthodontic providers for Medicaid services, triggered the duty to pay defense costs under the relevant insurance policies, according to the Feb. 14 ruling by the court in Conduent State Healthcare LLC et al. v. AIG Specialty Insurance Co., which was just unsealed.

The court also held that Conduent had established a prima facia case that defendants had a duty to indemnify the company, the ruling said.

AIG had issued a professional liability insurance policy to Conduent, according to court papers. 

There was ultimately a $236 million settlement in that case.

“However, there were certain factual questions that remained for the jury,” including whether Conduent had breached its duty to cooperate with insurers and to seek consent in connection with the Texas AG settlement, the Feb. 14 ruling said.

In February 2022, the jury ruled in AIG’s favor after a six-day trial, holding among other issues that Conduent had breached its duty to cooperate with their insurers.

In her opinion reversing the jury verdict, Judge Mary M. Johnston said. “In almost 20 years on this bench, I have never set aside a jury verdict,” which are “entitled to great deference.” Doing so, she said, “should only be done under circumstances in which justice otherwise would be denied.”

One of the reasons cited by the court for reversing the verdict was a submission by the Texas attorney general. Judge Johnson said she went against her “better judgment” in agreeing to the submission, which was clearly “inadmissible hearsay, indeed double and triple hearsay” that “was not subject to cross-examination.”

“In short order, (the submission’s) credibility became a centerpiece of the trial. And there was no way the jury could adequately evaluate” its validity in the absence of … out-of-court testimony, subject to cross-examination.”

AIG asked in Wednesday’s filing that the court grant it reargument on its ruling, “specifically to address critical legal premises underlying its extraordinary decision to nullify the jury’s verdict…which 12 jurors unanimously reached in less than two hours on four independent grounds.”

It said if the court stands by its grant of a new trial, it would seek an appeal.

Conduent issued a statement in response to the Feb. 14 ruling that said in part, “We knew that overturning a jury determination is extremely rare but felt strongly that the jury had been misled and justice was not remotely served a year ago. So, we are grateful for the sophistication of the Delaware courts and feel vindicated by the court’s decision to set aside the verdict.”

Conduent attorney Robin Cohen, chair of Cohen Ziffer Frenchman & McKenna, issued a statement that said, “The judge set the ground rules before the jury trial.

“AIG and its counsel continually and unambiguously violated them in many respects throughout the trial, beginning with the opening and continuing throughout the closing, which severely tainted the process.”

AIG had no comment.