Conduent v. AIG Specialty Insurance - Summary Judgment Denied

IN THE S UPERIOR COURT OF T HE STATE OF DEL AWARE CONDUENT STATE HEALTHCARE, LLC,) f/k/a XEROX STATE HEALTHCAR E, LLC,) f/k/a ACS STATE HEALTHCARE, LLC,)) Plaintiffs,)) v.)) AIG SPECIALTY INSURANCE) COMPANY f/k/ a CHARTIS SPEC IALTY) C.A. No. N18C-12- 074 EMD C CLD INSURANCE C OMPANY, ACE AMER ICAN) INSURANCE C OMPANY, IRONSHOR E) SPECIALTY INSURAN CE COMP ANY,) ASPEN SP ECIALTY INSURANC E) COMPANY, IND IAN HARB OR INSURANCE) COMPANY, GENER AL SEC URITY) INDEMNITY COM PANY OF AR IZONA,) NAVIGATORS SPECIALTY INSURANCE) COMPANY, S TARSTONE SP ECIALTY) INSURANCE C OMPANY f/k/a TORUS) SPECIALTY INSURAN CE COMP ANY,) QBE SPEC IALTY INSURANCE C OMPANY,) and LEXINGTON INSURANCE C OMPANY,)) Defend ant s.) Submitted: November 3, 2025 Decided: Febru ary 1 8, 20 26 Upon Plaintiffs ’ Motion for Summary Judgment DENIED Jennifer C. Was son, Esqui re, Carla M. Jones, Esquire, Potter Anderson & Corroon LLP, Robin L. Cohen, Esquir e, Kei th Mc Kenna, Esquir e, Orri e A. L evy, Esquire, Cohen Ziffer Frenchm an & McK enna LLP, New York, N ew York. Attorneys for Plaintiff. John L. Reed, Esquire, Courtney Kurz, Esq uir e, D LA Piper LLP, W ilmington, Delaware, Michael B. Carlinsky, Esquire, Ryan A. Rakower, Esquire, Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York. Attorneys for Defendants. DAVIS, P. J.

1 I. INTRODUCTIO N This is a civil matte r assign ed to the c omplex c ommercial litiga tion divisio n (“CCLD”). The Court presided over a trial with Plaintiff Conduent Stat e Healthcar e, LLC, f/ k/a Xerox State H ealth care, LL C, f/k /a AC S St ate Health care, LL C (“Conduent”) and Defendan t s AIG Insurance Company, et al. (“A IG” or “ Insurer ”) on F ebruary 14, 2022. 0F 1 The dispute at trial related to Conduent’s claim that AIG breached its duty to provide insurance coverage after Texas sued Conduent. 1F 2 At the tria l’s conclusion, the jury returned a “confused” verdict that Conduent engaged in fraud and acted in bad faith when settling with Texas. 2F 3 In its verdict, the jury also found that Conduent’s settlement with T exas was r eason abl e and there was no co llu sion between t he two. 3F 4 After trial, the Court granted Conduent’s post- trial motions, vacated t he jury’s verdict and grant ed a ne w trial to prevent “manifest injustic e” due to evidentiary issues during the origina l trial. 4F 5 Following the Court’s post- trial motion s, AIG sought an interlocutory appeal on February 3, 2025, which the Supreme Court accepted. 5F 6 A IG argued that in granting Conduent’s post-trial motions to vacate the jury verdict and grant a new trial the Court exceeded its discretion. 6F 7 The Supreme Court reject ed AIG’s arguments and affirmed t he Court ’s ruling. 7F 8 1 See Trial trans cript ta ken on February 14, 2022, be fore the H onorable Ma ry J ohnst on (D. I. No. 760); see Firs t Amended a nd Suppl ement ed Compl aint (D.I. N o. 48). 2 AIG Special ty I ns. C o. v. Con duent St ate H ealthc are, LL C, 339 A. 3d 6 80, 683 (Del. F eb. 3, 2025); s ee generall y Firs t Ame nded and Supple mented C ompla int (D.I. No. 48). 3 Conduent State H ealthc are, L LC v. AIG Spec ialty Ins. C o., 2023 W L 2256 052, at *14 (D el. Super. F eb. 14, 2023). 4 Id. at *2 - 3. 5 Id. at *1 4; Conduent State He alt hcare, L LC v. AIG Speci alt y Ins. C o., 2 024 WL 5 5372 (D el. S uper. Jan. 4, 2024) (Rule 59(d), Mot ion t o Se t Asi de the Ve rdict, and R ule 59(a), Moti on for a New T rial). 6 See generally A IG, 339 A.3d 680. 7 Id. at 693. 8 Id.

2 Since the Supreme Court’s decision, the CCLD judge appointed to preside over the matter has retired. The Court subsequently reassigned the matter. Before the Court now is Plaintiff’ s Motion for Summary Judgment on Defendants’ Affirmative Defenses of Reasonableness, Fraud, Collusion, and Bad Faith (the “Motion”) filed on May 8, 2025. 8F 9 A IG filed its Opposition to the Motion on June 11, 2025. 9F 10 The Court hear d arguments on the Motion on S eptember 12, 2025, and November 3, 2025. After the hearings, the Court took the Motion under advisement. For the reasons stated below, th e Court DEN IES the Motion. II. FACTS A. T HE S ETTLEMENT OF THE S TATE A CTI ON The St ate of Tex as cont racted w ith Conduent in the early 2000s to admini ster its Medicaid program. 10F 11 In 2012, Texas began investigating Conduent for allegedly assisting orthodontics offices over bill for services. 11F 12 In M ay 2014, Tex as sue d several orthodontic providers to recover payments. 12F 13 Texas, through a letter, also terminated the state’s c ontract with Conduent. 13F 14 In its termination lette r, Texas clai med Conduent materially breached the contract by failing to establish a prior authorization review process with qualified clinic al staff. 14F 15 Later th at same mo nth, Texas sued Conduent under the Texas Medicaid Fraud Prevention 9 See generally Plaintiff ’ s Moti on for Summar y Judgment (hereinafter “MSJ”) (D.I. No. 829). 10 See generally Defendant ’ s M otion in O pposi tion t o Summa ry Judgme nt (he rei nafter “ MSJ Opp ’ n”) (D.I. No. 839). 11 AIG, 339 A.3d at 68 3. 12 Id. 13 Id.; Conduent Stat e Healt hcar e, LL C v. AIG Special ty Ins. Co., 202 1 WL 266 0679, a t *2 (Del. Super. June 23, 2021). 14 Id. 15 AIG, 339 A.3d at 68 3.

3 Act (“TM FPA”) for civil pena lties and injunctive relief (“State Action”). 15F 16 Conduent notified its insurer, AIG, of the State Ac tion and sought coverage related to the suit. 16F 17 A IG ref used cov erag e for the State Action, basing its rejection on Texas’ fraud allegatio ns agains t Conduent. 17F 18 AIG contends such conduct is contractually excluded from cover age und er th e relevan t pol icies. 18F 19 In December 2018, Cond uent and Texas engaged in settlement negotiations. 19F 20 During these negotiations, Conduent pushed Texas to amend its pe tition and include breach o f contr act and n eg ligence cl aims. 20F 21 Conduent and Texa s trad ed draf ts of amended settlement s, so me w hich s uggest ed Texas would amend t he Stat e Action to add breach an d negli gence c aus es of acti on. 21 F 22 On December 10, 2018, Conduent f iled its Compl aint here agains t AIG fo r denying coverage. 22F 23 On December 15, 2018, Conduent notified AIG about its proposed settlemen t with Texa s and the plan to amend the State Action to include br each and neglig ence claim s. 23F 24 While Conduent and Texas negotiated settlement amendments, AIG continued to deny requests for coverage related to the State Action. 2 F 25 Texas f iled its Third Amended P etition, w hich included the breach and neg li gence causes of actio n on February 15, 2019. 25F 26 Three d ays l ater, o n February 18, T exas and 16 Id. 17 Id. 18 Id. (noting t hat AIG pr ovided de fense c overage to C onduen t for rel ated s uits by orth odont ic provide rs suing C onduent). 19 Id. 20 Id. 21 Id. 22 Id. 23 Origina l Complain t (D.I. No. 1); se e also MSJ Opp ’n a t 9. 24 AIG, 339 A.3d at 68 4. 25 Id. 26 Id.

4 Conduent reached a fin al settleme nt on the State Action for $236 million (the “Settle ment Agreement ”). 26F 27 The Set tlement Agreement all ocate d approximately $212 million to breach of contract damages and $23.5 million to attorneys’ fees and expenses. 27F 28 Conduent and Texas allocated no portion of the settlement to any fines, penalties, or other punitive assessments. 28F 29 Conduent did not seek AIG ’s consen t b efore entering into the Settlement Agreement. 29F 30 After settling with Texa s, Conduent provided AIG with the Third Amended Petition and S ettlement A greement. 30 F 31 Conduent then amended its C omplaint here to plead A IG b rea ched its duties to defend and indemnify for the settlement payment and atto rney f ees. 31 F 32 B. F IRST T RIAL The first trial began on February 14, 2022. 32F 33 P rior to trial, the Court made two rulings. First, the Court held that New York law governs this dispute. 33F 34 The Court also ruled that AIG has a duty to defend Conduent for Medicaid-related claims and Conduent made a prima facia showi ng that AIG had a duty to indemnify. 34F 35 On February 22, 2022, the jury returned a verdict finding Conduent engaged in fraud and did not settle the Stat e 27 See id. (noting th at the parties ref er to the settlemen t amount as $ 236 million, whereas the Supr eme Court ’ s f igure st ates $235 mil li on). 28 Id. at 686. 29 Id. at 684. 30 Id. 31 Id. 32 Id.; see a lso First Amende d and S upplem ented C omplaint (D.I. No. 4 8); see also Condue nt, 202 1 WL 2660679, at *8 (hol ding t hat AIG has a duty to defe nd and indemni fy Medi caid - Related Claims). 33 See Trial trans cript ta ken on February 14, 2022, be fore the H onorable Ma ry J ohnst on (D. I. No. 760). 34 Conduent, 2021 W L 266067 9, a t *3 -4, 8. 35 Id. at *8 (“The C ourt fi nds th at C onduent has made a prima facia showing tha t [AIG] ha [s ] a duty to indemnify Condue nt…The refore, the C ourt c annot gr ant s ummary ju dgment t o ei ther Co nduent or [AIG] with respect to the issue o f indemnificatio n for the settle ment.”); Verd ict Form a t 3 (verdicts 7 and 9 respect ively) (D.I. No. 707).

5 Action in good faith. 35F 36 The jury also found Conduent’ s settleme nt with Texas w as not unreasonable and Conduent did not collude with Texas. 36F 37 C. C ONDUENT ’ S P OST -T RIAL M OTIONS & E VIDEN TIARY I SSUES AT F IRST T RIAL 1. Conduent’s Post- Trial Motions After trial, Conduent filed three post- tria l motions. 37F 38 Conduent filed a renewed motion for judgment as a matter of law pursuant to Rule 50, to set aside the judgment pursuant to Rule 59(d), and for a new trial under Rule 59(a). 38F 39 On February 14, 2023, the Court granted Conduent’s Rule 59(a) and (d) motions as those motions sought to s et asi de the jury verdict and grant a new trial. 39F 40 The Court concluded that evidentiar y issues at trial l ikely “confused the j ury” and “t ainted ” the v erdict s. 4 0F 41 As a res ult, t he Court set aside t he jury’s ve rdict to “prevent manifest injustice.” 41F 42 2. Evidentiary Issues at First Trial The Court found several evidentiary issues that necessitated gr anting the motion to vacate th e jury ’s verd ict and grant a new t rial. 42F 43 a. Winte r Submiss ion In a February 2023 opinion, the Court noted that the Office of the Texas Attorney General declined to provide any witness for deposition in this case. 43F 44 After m eeting and conferring, Conduent and AIG agreed to permit Raymond Winter, a representative of the 36 Verdict F orm at 3 (ve rdic ts 7 and 9 re spect ively) (D.I. N o. 7 07). 37 Id. at 3 - 4 (verdicts 10 and 8 respectively). 38 Conduent’s Omni bus Br ief in Support of its Rene wed Moti on fo r Judg ment as a Matt er of La w Purs uant to Rule 50, to Set Asi de/Amen d/Al ter the Judgme nt Under R ul e 59(d), a nd/or for a New Tr ial Under Rul e 59(a) (he reina fter “C onduent ’s Post - Trial Motio ns”) (D. I. No. 71 1). 39 Id. 40 Conduent, 2023 WL 225605 2, at * 1, 14 (D. I. No. 771). 41 Id. 42 Id. 43 Id. at *3 - 14. 44 Id. at *3.

6 Texas Attorney General’s Office, to answer written questions (“Winter Submission”). 44F 45 At trial, the Winter S ubmis sion b ecame a focal point of contention. 45F 46 b. Conduent’s Privilege Logs Prior to tria l, the Court is sued a le tter explain ing how the parties could use information in the parties’ privilege logs. 46F 47 The Court warned counsel they could not ask the jury to draw inferences from the privilege logs or argue that insurance coverage was discus sed at m eeting whe re Conduent was present. 47F 48 Howev er, at tri al, AIG’s counsel made seve ral re ferenc es to information in Conduent’s privilege logs. 48F 49 c. Texas A ttorney G enera l’s Press Rele ase (Trial Exhibit No. 335) Before tri al, th e Court ruled th e Press R elease fro m the Texas Attor ney Gener al was inad missi ble hears ay. 49 F 50 The Court ruled the exhibit was inadmissible be cause it had the potential to be unduly prejudicial. 50F 51 However, A IG repe atedly r eferred to t he Pres s Release i n the pr esenc e of t he jury at trial. 51F 52 d. The Cour t’s Grant ing of C onduent ’s Pos t -Trial Motions In granting Conduent’s post- trial motions, the Court arti culated fo ur re ason s compelling a new trial. First, the Court held th e Wi nter Su bmis sion was “clearly” inadmissible double and triple hearsay. 52F 53 Nonethless, Mr. Win ter’s c redibi lity b ecame a 45 Id. (noting t hat t his i s a gener all y accept ed pra ctice in Super ior C ourt civi l cas es and t hat t he Court will not interpose its own judgme nt against tha t of the partie s’). 46 Id. 47 Id. at *4- 5 (“[D]emonstrating, for example, that a meeting took place on a certain date, who att ended the meeting, and the general topic of the meeting.”); J. Johns ton ’s Let ter to C ounsel (D.I. No. 685). 48 Conduent, 2023 W L 225605 2, at * 4-5 (“The pri vilege logs the mselve s are not subjec t to the att orney - client privil ege. Howe ver, t he cont ent of any c onvers ations with c ounsel l ist ed in the l ogs is pri vileged. ”). 49 See i d. at *5-7; J. Johns ton’s Lett er to C ounsel (D.I. No. 685) 50 Conduent, 2023 W L 225605 2, a t * 8- 12; J. Johnst on’s Lette r to Couns el (D.I. No. 68 5). 51 Conduent, 2023 W L 225605 2, a t *8. 52 Id. at *8 - 9 (“[T ] he [Texas] Attorney General’s Office issued the following Press Release: AG Paxton Recovers Rec ord $236 Mi llio n for T exas i n Medicaid Fraud Sett lement….”). 53 Id. at *3.

7 focal p oint of the tr ial. 53F 54 However, due to the inability to cross- examin e Mr. Wint er, the jury could not evaluate his cre dibility. 54F 55 Moreover, Mr. Winter answer ed questions about the settlement negotiation meetings, even though he was not pre sent for th em, and his answers contrad icted t he terms o f the Set tlemen t Agreemen t. 5 5F 56 As the trial progressed, the Winte r Submission, and spe culative evidence about Mr. Wint er’s credibility, became a centr al focus. 56F 57 The Court held that the W inter Submission was “so replete” with evidentiary issues that it never should have been admitted into evidence for any reason. 5 F 58 Second, t he Court held A IG’s rep eated i nfer ences t o Conduent’s privilege logs and that it had no coverage obligations to Conduent were “inaccurate” and “unduly prejudicial.” 58F 59 Despit e repeat ed admoni shmen ts, th e Court noted that AIG continually encourag e d the jury to draw improper inferences from information set forth in privilege logs. 59F 60 Third, AIG’s co unsel rep eated ly refer red the jury t o the Pres s Releas e after the Court deemed it inadmissible. 60F 61 The Court held the Press Release was “unquestionably hearsay, had indicia of a lack of credibility and political motivation, there was no date of creation, no author was identified, no cross-examination was possible, and the language directl y contrad ict ed the stated ter ms of the Settleme nt Agree ment. ” 61F 62 As such, the Court ruled the Press Release had the potential to be unduly prejudicial. 62F 63 54 Conduent, 2023 W L 225605 2, a t *3. 55 Id. 56 Id. at *3 - 4, 14. 57 Id.; Conduent, 2024 WL 553 72, at * 1; see generally D.I. N os. 246 - 47. 58 Conduent, 2023 W L 225605 2, a t *14. 59 Id. at * 7. 60 Id. at *5, 14. 61 Id. at *8 -9, 1 4; J. Johns ton’s Let ter to C ounsel (D.I. No. 685). 62 Conduent, 2023 W L 225605 2, a t *8. 63 Id.

8 Finally, AIG “ in accuratel y and impro perly ” argued at trial that it n ever had coverage obligations to Conduent. 63F 64 According to the Court, AIG’s argument wa s directly in violation of the Court’s pretrial holding that AIG breached its contractual duty to pay defense costs. 64F 65 In its opinion on the post- trial motio ns, the Cour t also granted Conduent’s Rule 50 motion in part. 65F 66 The Court found as a matter of law: A IG ’ s initial denial of coverage, and c ontinued repudiation of coverage obligations, relieved Conduent of any duty to cooperate or to se ek consent with rega rd to settle ment with the Te xas Attor ney Gene ral. 66F 67 T he Court held that Conduent was relieved of its duties to cooperate and seek consent before settling with Texas. 67F 68 U nder New Yor k law, an insure d is excused from those dutie s if an insurer unjustifiably denies or repudiates def ense cov erage. 6 F 69 The Court found AIG had done both. 69F 70 D. T HE P ARTIE S ’ C ROSS - M OTI ONS FOR S UMMARY J UDGM ENT ON E XCLUSIO N 3(A) The Court addressed the parties’ cross-motions for summary judgment on Exclusion 3(a), the “fraud exclusion,” on January 4, 2024. 70F 71 In moving for summary judgment, Conduent stated that AIG waived the 3(a) Exclusion as a defense. 71F 72 A IG argued that it never waived the 3(a) Exclusion defense. 72F 73 The Court agreed with AIG, 64 Id. at *14. 65 Id. at *1 3 - 14 (“The C ourt pre vious ly rule d that AIG bre ach ed its contrac tual d uty to pay de fense c osts under the releva nt insurance policies. ”); Conduent, 2 024 W L 55372, at *1. 66 Conduent, 2023 W L 225605 2, at * 1, 14; C onduent, 202 4 WL 553 72, at *1. 67 Conduent, 2023 W L 225605 2, at *14; Conduent, 2024 W L 5537 2, at *1. 68 Conduent, 2023 W L 225605 2, at *13 - 14. 69 Id. 70 Id.; see a lso Conduent, 2 024 WL 55372, at *1. 71 Conduent, 2024 W L 55372, at *1 -2; AIG, 339 A. 3d at 68 5 - 86. 72 Conduent, 2024 W L 55372, at *1 -2. 73 Id. at *1 - 2.

9 but it also found that AIG failed to pro ve th e defens e appli ed as to d efeat its coverage obligations. 73F 74 According to the Court: Upon retrial, a jury may find that the Settlement resulted from fraud or collusion. In that event, Defendants would be relieved of any indemnification obligation and the Exclusion 3(a) issue would be moot. 74F 75 E. P ROCEEDINGS IN THE S UPREME C OURT After the Co urt ’s rulings regarding the 3(a) Exclusi on, AIG sought and obtained an inter locuto ry app eal at the Sup reme Cou rt of D elaware. 75F 76 On appeal, A IG argued the Court exceeded its discretion in granting Conduent’s motion for a new trial and erred in its post- trial rulings. 76F 77 On February 3, 2025, the Supreme Court rejected AIG’ s arguments and affirmed the Court’s rulings vacat ing t he jury verdict, granting a new trial, and finding that Exclusion 3(a) did not bar A IG ’ s coverag e obligations. 77F 78 The Supreme Court held that the C ourt’s granting of a n ew tri al did not exceed the “bounds of reason or ignore the law and custom to produce injustice.” 78F 79 According to the Supreme Court, common sense suggests that a “fraudulent, non-collusive, reasonabl e set tlemen t arr anged i n bad f aith is a conf used ver dict. ” 79F 80 The Supreme Court also held that the held that AIG’s breach of the duty to defend excused Conduent’s duties to cooperate and seek consent before settling with the State Action. 80F 81 However, t he Supreme Court also noted that AIG would have anoth er opportunity to litigate its affirmati ve defen ses t hat Condu ent arrang ed th e sett lement 74 Id. at *2, 4. 75 Id. at * 4. 76 See generally AIG, 339 A.3d 680. 77 Id. at 683, 689. 78 Id. at 683, 687, 69 3. 79 Id. at 693. 80 Id. (emphas is added). 81 Id. at 688.

10 through fraud or collusion. 81F 82 If A IG i s successful at the new tria l, it will have no duty to indemnify Conduent. 82F 83 III. STANDARD OF REVIE W A. M OTION FOR S UMMARY J UDGME NT Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 83F 84 The moving party bears the burden of establishing the non- exist ence o f material issu es of fact. 84 F 85 The Court must view the record in a light most favorable to the non-moving party. 85F 86 Once t he moving party meets its burden, the burden shifts to the non-moving party to establish the exist ence of m aterial i ssu es of fa ct. 8 6F 87 If, howev er, t he reco rd rev eals that mat erial fa cts are in dispute, or if the factual record has not been developed thoroughly enough to allow the Court to apply the law to the factual record, The Court will not grant summary judgment. 87F 88 B. I NTERPRETATION OF I NSURANCE C ONTRACTS The interpretation of contractual language, including in insurance policies, “is a question of law.” 88F 89 The principles governing the interpr etation of an insurance contract are well - settled. I n attempting to resolve a dispute over the proper interpretation of an 82 Id. at 687 n.27. 83 Id. at 687 - 88 n.2 7 (disti nguis hing the duty t o inde mnify w it h the d uty to defend, which a ris e “only once liability ha s been co nclusively established.”). 84 Del. Super. Ct. Ci v. R. 56(c). 85 Moore v. Sizem ore, 405 A.2d 679, 680 (De l. 1979). 86 Burkhart v. Davies, 602 A. 2d 56, 5 9 (Del. 1991). 87 Moore, 405 A.2d at 681. 88 Ebersol e v. Low engrub, 1 80 A.2d 467, 4 70 (D el. 19 62); see also Cook v. Cit y of Har ringt on, 1990 W L 35244, at * 3 (Del. S uper. Feb. 22, 1990) (cit ing Ebersole, 180 A.2d at 467) (“S ummary j ud gment wil l not be grante d under any ci rcums tances when t he rec ord indi cat es . . . that i t is de sira ble to i nqui re more thoroughl y int o the facts in orde r to clar ify t he appl icat ion of l aw to t he circu mst ances. ”). 89 CVR Ref., LP v. XL Specialty Ins. Co., 2021 WL 54 92671, at * 8 (Del. Super. N ov. 21, 202 3).

11 insurance policy, “a court should first seek to determine the parties’ intent from th e language of the insurance contract itself.” 89F 90 In reviewing the terms of an insurance policy, the Court considers “the reasonable expectations of the insured at the time of entering into the contrac t to see if the policy terms are ambiguous or conflicting, contain a hidden trap or pitfall, or if the fine print takes away that which has been provided by the large print.” 90F 91 Ambiguity exists when the disputed term “is fairly or reasonably susceptible to more than one meaning.” 91F 92 Absent any ambiguity, contract terms should be accorded their plain, ordinary meaning. 92F 93 If an insurance policy contains an ambiguous term, then the policy is to be construed in favor of the insured to further the contract’s purpose and against the insurer, as the insurer drafts the policy and controls coverage. 93F 94 When determining an insurer’s duty to defend a claim asserted a gainst an insured, the Court will look to the allegations in the underlying complaint to decide whether the 90 Alstrin v. St. Pau l Mercu ry Ins. Co., 179 F. Su pp. 2d 3 76, 3 88 (D. De l. 200 2); see also Emmons v. Hartfo rd Un derwrite rs In s. Co., 697 A.2 d 742, 7 45 (D el. 19 97) (“T he scope of an insura nce pol icy ’ s coverage... is prescr ibed by th e language of the poli cy.”) (cit ing Rho ne – Poule nc Bas ic C hems. C o. v. Am. Moto rists I ns. Co., 616 A.2d 1192, 1195 - 96 (Del. 199 2)); Playt ex FP, Inc. v. C olumbi a Cas. Co., 622 A.2d 1074, 10 76 - 77 (Del. Supe r. May 21, 1992) (citi ng E.I. du Po nt de N emour s & Co., Inc. v. Shel l Oil Co., 498 A.2d 1 108, 11 13 (Del. 19 85)); Kai ser Aluminum Corp. v. M atheson, 681 A.2 d 392, 395 (D el. 1 996). 91 E.I. du Po nt de N emours & Co. v. Admir al Ins. Co., 1996 W L 111205, a t *2 (D el. S uper. Jan. 30, 19 96) (citation o mitted); see Steigler v. Ins. Co. of N. Am., 38 4 A.2d 398, 401 (D el. 1978) (“[A]n insura nce contract shoul d be rea d to acc ord wi th the reas onable e xpect ati ons of the purchas er so far a s the language will permit. ”) (quotin g State F arm Mut. Aut o. Ins. C o. v. Johns on, 320 A.2 d 345, 345 (Del. 1974) (inte rnal quotation m arks omitt ed)). 92 Alta Berkeley VIC. V. v. Omneon, Inc., 41 A.3d 38 1, 385 (D el. 2012). 93 See id.; see a lso Goggin v. N at ’ l Uni on Fire I ns. Co. of Pi tts burgh, 2018 WL 6266195, at *4 (Del. Super. Nov. 30, 20 18); IDT C orp. v. U.S. Spe cialt y Ins. Co., 2 019 WL 41369 4, at * 7 (Del. Supe r. J an. 31, 2019). 94 See Alstrin, 179 F. Supp. 2d at 390 (“Ge nerall y speaki ng, h owever, D elawa re...c ourts conti nue to s trict ly construe ambigui ties wit hin ins urance cont racts agai nst t he insure r and i n favor of the i nsu red in s itua tions where the insure r dra fted the la nguage t hat is being int erpre te d regardl ess of whethe r the i ns ured is a large, sophisticated comp any.”) (citation s omitted); Nat ’ l Union Fir e Ins. Co. v. Rho ne – Poulenc Basic Chems. Co., 1992 WL 22690, at *8 (D el. Super. J an. 16, 199 2) (“Ap plicat ion of the [co ntra pr ofer entem ] doc trine turns not o n the s ize o r sophi stic ation of t he i nsured, but rat h er on the fact t hat the poli cy la nguage a t is sue is draft ed by t he insur er and is not negot iate d.” (cit ation omi tted)).

12 action against the policy holder states a claim covered by the policy. 94F 95 Generally, an insurer’s duty to defend is broader than its duty to indemnify an insured. 95F 96 An insurer has a duty to defend where the factual allegations in the underlying complaint potentially support a covered claim. 96F 97 The Court generally will look to two documents in its determination of the insurer’s duty to defend: the insurance policy and the pleadings of the underlying lawsuit. 97F 98 The duty to defend arises where the insured can show that the underlying complaint, read as a whole, alleges a risk potentially within the coverage of the policy. 98F 99 The insurer will have a duty to indemnify only when the facts in that claim are actuall y establ ished. 99 F 100 C. L AW OF T HE C ASE D OC TRINE The law of the case doct rine is a procedural rule of law, not substantive. 10 F 101 The doctrine “is designed to prevent the relitigation of prior determinations and inconsistent judgments.” 101F 102 The l aw of t he cas e becom es app licabl e when t he C ourt ap pli es a legal principle to an issue based on facts that have s tayed constant over the course of the litigation. 102F 103 “[A] prior legal ruling based on a c onstant set of fa cts should be re considered 95 Verizo n Com mc ’ ns Inc. v. Nat ’ l Union Fire I ns. Co. of Pi tts burgh, P a, 2021 W L 7108 16, at *6 (De l. Super. Feb. 23, 202 1). 96 Id. 97 Id. 98 Id. 99 Id. 100 Id. 101 Myer v. Dyer, 643 A.2d 1382, 1386 (Del. S uper. D ec. 2 2, 19 93) (citi ng M ellow v. Board of Adj ustme nt of New Castl e Count y, 567 A.2d 42 2 (De l. 198 9) (ORD ER)). 102 Fanean v. R ite Ai d Corp. of Del., 984 A.2d 8 12, 818 (Del. Super. D ec. 3, 2009) (citi ng E.I. du Pont d e Nemou rs & Co. v. Ad miral Ins. Co., 711 A.2d 45, 55 (Del. S uper. Aug. 23, 1995) (ci ting M oses v. State Farm F ire & Ca s. In s. Co., 1992 W L 179488 (Del. S uper. Jun e 25, 19 92)). 103 Id. (citing Kenton v. Kent on, 571 A.2 d 778, 784 (Del. 199 0)).

13 only if it is ‘clearly wrong, produc es an injustice or should be r evisited because of changed circums tances.’” 10 3F 104 Without such a showing, there can be no new consideration. 104F 105 IV. DISCUSS ION The Court can only revisit prior legal ruling based on constant facts if it produces an outcome that is clearly wrong, unjust, or there are chan ged circum stanc es. 105F 106 Here, none of these justifications apply to AIG’s affi rmati ve defenses. The Court will not revisit pr ior lega l rulings made in this civil matter. As such, the Court will require AIG to prove th e eleme nts established for its af firmative de fenses a s instructe d at the first trial. 106F 107 Moreover, AIG cannot argue that it has no coverage obligations to Conduent for Medicai d -related claims, as the Court held in 2021. 107F 108 A. T HE C OURT D ENIES THE M OTION AS TO AIG ’ S F RAUD D EFENSE B ECAUSE AIG P RESENTS G ENUINE D ISPUTES OF M ATERI AL F ACT. In the first trial, the Court held that to prove its fraud defe nse, AIG must show: (i) Conduent made a material misrepresentation or omission of fact which re ndered a representation false; (ii) Conduent knew that the statement was false; and (iii) Conduent made the statemen t to try to cause [AIG] to rely upon it. 108F 109 The Court deni es the Motion for two reasons. First, AIG presents disputed facts upon which a reasonable jury could find in its favor. 1 9F 110 Even without the inadmissible Winter Submission, Privilege Log, or Press Release evidence, AIG argu es t hat the 104 Pivotal Payments Direct Corp. v. Planet Payment, Inc., 20 20 WL 702 8597, a t *6 (D el. S uper. N ov. 3 0, 2020). 105 Fanean, 9 84 A.2 d at 818 (citing Kent on, 571 A.2d at 784). 106 Pivotal Payments Direct, 202 0 WL 7028 597, at *6. 107 See Jury Inst ructi ons at 2 1 - 24; MSJ at 27; MSJ Reply Br. at 14 - 15. 108 Conduent, 2021 W L 266067 9, a t *4 - 5. 109 Jury Inst ructio ns at 21 (D.I. No. 70 5). 110 See MSJ Op p ’ n at 27 - 29.

14 following occurrences are sufficient for a reasonable jury to find in favor of its fraud defense: • October 31, 2018, Conduent wrote A IG with a summary of its October 4 meeting and Texas ’ s subseque nt settlement demand. Conduent reported “that the meet ing was short er than exp ected, ” and Conduent “intentiona lly” omitte d that it had u sed that meeting to “ar ticulate to [Texas] th at we req uest that t hey amend the public complaint and add contract and neg ligen ce cl aims. ” 110F 111 • December 15, 201 8, Conduent se nt an e - mail insis ting that AI G “c hange its coverage positions and agree to contribute to funding a settlement” because “[Texas] intends to prosecute its full array of claims, including for Conduent ’ s allegedly tortious conduct and its alleged breache s of obligations under contracts with the State of Texas and will further amend its c omplaint t o ref lect all of its c laims.” Cond uent “misrep resent ed” Tex as ’ s intentions. Texas tol d Conduent over a month later that it still “ much pr efer[red ] not to amend.” 111F 112 • January 4, 2019, Conduent “obfusca te[d]” on a call with AIG. Conduent’ s counsel stated there w as “[n ]ot much more to report ” regarding negotiations with Texas, and did not comply with AIG ’ s request for a copy of the set tlem ent agreem ent dra ft. 112F 113 • February 18, 2019, Conduent delivered “a c opy of the State of Texas ’ s Third Amended Petition” to AIG, without mentioning that the Third Amended Petition was requested and even coauthored by Conduent. 11 3F 114 Second, th e l aw of the case d octrin e requi res the Court to adh ere to th e requirem ents of AIG ’s fraud defense articulated i n the original jury instructions. 114F 115 Contrary to Conduent’s position, AIG need not prove both reliance and damages as par t 111 Id. at 28. 112 Id. 113 Id. at 29. 114 Id. 115 See Fanean, 984 A.2d at 818 (“Only up on a sh owing o f the exis tence of ne wly discove red evi dence, a change in the la w, or a resul ting mani fest i njust ice s hould t he C ourt reope n decis ions that i t has alrea dy adjudicated.”).

15 of its defense. 115F 116 The four instan ces noted by AIG provide sufficient factual disputes for a reason able f actfinde r to find Conduent engaged in fraud. 116F 117 Moreover, Conduent failed to carry its burden of demonstrating that there are no disputes of material fact and th at it is entitle d to judgment as a matte r of law. 117F 118 The Court agree s with the Sup reme Court tha t AI G will have an opportunity to litigate its aff irmative defenses at th e new tri al. 118F 119 B. T HE C OURT D ENIES THE M OTION AS T O AIG’ S B AD F AIT H D EFENSE B ECAUSE AIG P RESENTS D ISPUTES OF M ATERIAL F ACT. The jury instructions required AIG to prove that Conduent did not settle the State Action with Texas in good faith. 119F 120 “Conduent acted in bad faith if it manufactured insurance coverage that would not have existed otherwise; or purposefully structured the settlement for the sole purpose of securing insurance coverage that would not have existed otherwise.” 120F 121 AIG contends that the fact s demo nstrate Tex as spent years resisting Conduent’s requests to amend the State Action to inc lude breach of contract and negligence claims. 121F 122 According to AIG, Texas and Conduent exchanged multiple drafts of the Settl ement A greement, and T exas rep eatedly eras ed and rej ected lan guag e that tended to add the b reach and negl igence claims. 122F 123 Even when Conduent offered a record $236 116 MSJ Rep ly Br. at 16 - 18. 117 Del. Super. Ct. Civ. R. 56 (c). 118 Id. 119 AIG, 339 A.3d at 687 n.27. 120 Jury Inst ructio ns at 23. 121 Id. 122 MSJ Opp’n a t 22. 123 Id. at 12 - 14, 22 - 23 (noting t hat in the S ixth Dra ft, Te xas re sponde d: “[W] e would much pr efer not to amend the pleadings themselves to allege contract claims.”).

16 million paymen t, Texas rejec ted the inclusion of contractual claims until Conduent conditione d the settle ment payment on Texas amending its claims. 12 F 124 Accepting AIG’s assertions as true, as the Court must, there ar e clear disput es of materia l fact. 12 4F 125 Based on Conduent allegedly conditioning its settlement on Texas amending its petition to include the contract ual cl aims, a reason able f actfin der coul d find Conduent acted in bad faith. AIG presents sufficient factual allegations to infer that Conduent manufactured insurance coverage or sought to structure the Sett lement Agreement to manu factu re cove rage. 125F 126 C. T HE C OURT D ENIES THE M OTION AS TO AIG ’ S R EASONABLENESS D EF ENSE B ECAUSE C ONDUENT F AILED TO D EMONS TRATE IT IS E NTI TLED TO J UDGMENT AS A M ATTER OF L AW. At the first tria l, the Court re quired AIG prove that Cond uent’s se ttlement with Texas was u nreaso nabl e. 12 6F 127 The Settlement Agreement allocated $212,347,800 to reimburse Texas for monetary losses it claimed to have resulted from Conduent's alleged failure to comply with its contractual obligations, $23,594,200 for attorney’s fees, costs, and legal expen ses incu rred by Texas, and allocated $0 t owards any other costs or penalti es. 127F 128 The S ettlement A greement sta tes the “ Settlemen t Amount is alloc ated to reimburse...[Texas] for monetary losses [due to Conduent’s] failures to comply with obligations…under the 2003 Contract and 2010 Contract.” 128F 129 “No portion of the 124 Id. (referri ng to C onduent req uiri ng Texas to amend its clai ms in orde r to s ett les as an “Ul timat um”). 125 Del. Super. Ct. Ci v. R. 56(c); see also Moore, 405 A.2d at 680. 126 Del. Super. Ct. Ci v. R. 56(c); see also Moore, 405 A.2d at 680. 127 Jury Inst ructio ns at 24. 128 Id. 129 Conduent, 2023 W L 225605 2, at * 4 (ident ifyin g the 2003 a nd 2010 c ontrac ts bet ween C onduent and Texas to process Medicaid claims).

17 Settlement A mount shall be allo cated or a ttributed to the p ayment of fines, pena lties, or other punitive assessments, or to disgorgement of revenues.” 129 F 130 The main contention between the parties’ positions is whether an “appropriate settlemen t” is distinguish able from one that is “reasonable.” 130F 131 A IG insists the S ettlement Agr eement between Conduent and Texas was not reasonab le. 131F 132 To survive summary judgment, AIG argu es it must only show that a reasonable factfinder could find allocat ing th e entire s ettl ement t o the b reach of con tract clai m was un reaso nable. 132F 133 Conversely, Conduent maintains the Set tlemen t Agreemen t with Texas was reas onabl e because all amo unts p aid w ere “appro priat ely” allocat ed to cov ered risks. 133F 134 Neither party presents materially different facts about the allocation or amount of the Settleme nt Agre ement. Moreover, t he part ies f ail to present cl ear leg al s tandards by which the Court can review the reasonab lenes s of the Settlement Alloc ation. Gr anting all inferen ces in fav or of A IG as the no n -movant, as it must, the Court finds Conduent failed to meet its burden on summary judgment— that it is en titled to judgme nt as a ma tter of law. 134F 135 A reasonable factfinder could find a llocating the entire Settlement Agreement to the breach o f contr act cl aim and not the TMFPA or negligence claims is unreasonable. 130 Id. 131 MSJ at 19 - 20; see MSJ O pp’n at 23. 132 MSJ Opp’n a t 20 - 23. 133 Id. 134 MSJ at 19 (sta ting the covere d ris ks are loss es al legedly re sult ing from C onduent ’s brea ches of its contracts with Texas and attorneys’ fees). 135 Ebe rsole, 180 A.2d at 470 (“ Under n o circums tance s, h owever, wi ll s ummary j udgment be gra nted when, from the evidence produced, there is a reas onable indication that a material fact is in dispute. Nor will summary judg ment be gra nted if, upon an exa minati on o f all the facts, it seems desira ble to inq uire thoroughl y int o them i n orde r to c larify t he appl icat ion of t he l aw to t he circums tance s.”); see also Cook, 1990 WL 3524 4, at *3; Del. Super. Ct. Civ. R. 56(c); M oore, 405 A. 2d at 680.

18 Even assuming the Settlement Allocation was reasonable, as Conduent asserts, this does not dispose of AIG’s other affi rmati ve defenses. 135F 136 AIG provides sufficient factual b ases t o disp ute the Motion and have its defens es tri ed befo re a jur y. D. T HE C OURT D ENIES THE M OTION AS TO AIG ’ S C OLL USION D EFENSE B ECAUSE AIG P RESENTS D ISPUTES OF M ATERIAL F AC T. For its collusion defense, the Court required AIG to show that Conduent and Texas ent ered in to a se cret ag reemen t and: (i) Conduent intended to manufacture insurance coverage that would not otherwi se be av ail able; (ii) Texas was at leas t awa re of C onduen t ’ s intent to manufacture insurance coverage tha t would not otherwise be a vailable; and (iii) [Texas ] was willing to assist Conduent in manufa cturing insurance coverage that would not otherwise be available. 136F 137 The jury instructions did not require AIG to prove that Texas intended to harm AIG. 137 F 138 Under the law of the case, the Court requires AIG to prove the same here. A IG submits eight factual bases that, it contends, demonstrates how Conduent and Texas colluded to manufacture insurance coverage that would not otherwise exist. 138F 139 These in clude: • Conduent engaged in years of litigation with Texas; the litigation included disputes over whether Texas ’ s sui t could be chara cterized as a Medi caid fraud suit rather than a cont ract s uit; and the T exas co urts det ermined Texas was properly pursuing only statutory penalties for Medicaid fraud; 139F 140 • Conduent a dmits it told T exa s it would settle only i f Texa s amended its Pe tition to add b reach of con tract and n egligen ce clai ms, while at th e same t im e Conduent was telling AIG that Texas was threatening to add such claims; 140F 141 136 MSJ at 18, 21 - 23. 137 Jury Inst ructio ns at 22. 138 Id. 139 MSJ Op p ’ n at 35 -38. 140 Id. at 35. 141 Id.

19 • Documents show that Texas re peatedly rejected Conduent ’ s request to amend and allo cate s ettlem ent f unds away from M edicai d fraud; 141F 142 • Condu ent conced es it pro cured T exas ’ s am endment and allocation of the settlemen t to non - fra ud claims as a “quid pro quo” after Conduent set an ultimatum: ame nd and re - a llocate or lose the $2 36 million; 142F 143 • Conduent admits to collaborating with Texas in dra fting its pleading to be filed against Conduent; 143F 144 • Conduent insisted on Texas including a misleading recital in the Settlement Agree ment stating that “ [Texas] advised [Condu ent] that it was p repared to amend the State Action to add cause s of action for breach of contract” ––even though it was Conduent, not Texas, who demanded the amendment; 144F 145 • The amend ment was fil ed the sam e day the S ettl ement was finalized, confirming that Texas never int ended to litigate the new c auses of action but was willing to assist Con duent; 145F 146 and • There is no evidence Conduent inquired with Texas or took steps to address any business or reputational concerns. 146F 147 These sep arate di sput es of m aterial f act s ar e suffic ient for A IG ’s collusion defense to survive summary judgment. 147F 148 Based on AIG’s allegations, a reasonable factfinder could find Conduent structured the Settlement Agreement to receive insurance coverage, and through Texas’s awareness and assistance, Conduent received insurance coverage. As such, Conduent did not meet its burden of establi sh ing t here are n o disp utes of m aterial fact. 148F 149 142 Id. at 35 - 36. 143 Id. at 36. 144 Id. at 36 - 37. 145 Id. at 37. 146 Id. 147 Id. at 37 - 38. 148 Del. Super. Ct. Ci v. R. 56(c). 149 Id.

20 V. CONCLUSIO N For the reasons stated above, the Court DENIES the Moti on. In addition, the parties will contact the Court to schedule a status conference to determining how to address any outstanding motions and to set a new trial date. Dated: F ebruary 18, 2026 Wilmington, De lawa re /s/ Eric M. Davis Eric M. Davis, President Judge cc: File&S erveXp ress