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Insurtech company Clover Health settles remaining lawsuits

Tennessee-based Clover Health announced it reached an agreement to settle seven lawsuits in Delaware, New York and Tennessee pertaining to allegations the company did not disclose it was under active investigation by the Department of Justice when it went public in 2021. 

Clover Health provides Medicare Advantage insurance plans and offers provider tools, such as its Clover Assistant, which combines health data with machine learning to provide physicians with patient insights at the point of care. It suggests medications, dosages, tests, referrals and others to help physicians improve health outcomes.

According to a press release, the defendants in the lawsuits will receive “customary releases,” and Clover Health will implement “a suite of corporate governance enhancements.” Clover did not admit wrongdoing. 

No monetary payments are included in the recent settlement other than an award of fees and expenses to the plaintiff’s counsel, and the final settlement is pursuant to court approval. 

“The board and the company are happy to have reached this settlement of the outstanding derivative lawsuits. This resolution, along with the previously announced settlement of the securities class action, allows the Clover team to remain mission-driven and mission-focused–to improve the lives of our members and build and maintain our strong business,” Andrew Toy, Clover Health’s CEO, said in a statement. 


In 2020, Clover announced its plans to go public through a merger with special purpose acquisition company (SPAC) Social Capital Hedosophia Holdings Corp. III. The deal closed in January 2021. 

Clover and Social Capital Hedposophia combined through a mix of cash financing and stock, bringing Clover’s valuation to about $3.7 billion. The insurtech company was to receive up to $728 million of the transaction proceeds and up to $500 million of cash proceeds were to go to existing Clover shareholders.

The transaction also included a $400 million private investment in public equity at $10 per share, including $100 million from Chamath Palihapitiya, the founder and CEO of 

Social Capital Hedosophia, $50 million from Hedosophia, and the remainder from other investors. Palihapitiya was to act as a senior advisor when the deal closed in the first quarter of 2021. 

Months later, Hindenburg Research, a short seller that describes itself as a specialist in forensic financial research, published a report criticizing Clover Health’s business and Palihapitiya’s conduct during the run-up to its SPAC

Hindenburg alleged the company did not disclose active investigations by the Department of Justice and argued many of the company’s claims were misleading or outright false.

Per the report, Clover was actively under investigation for “at least 12 issues ranging from kickbacks to marketing practices to undisclosed third-party deals” that were not made public. It also cited multiple former employees alleging that approximately two-thirds of the company’s sales “are fueled by a major undisclosed relationship between Clover and an outside brokerage firm controlled by Clover’s head of sales.”

In April, the company announced it settled a securities class action in which the class would receive $22 million, $19.5 million of which the company’s insurance would pay, and the remaining $2.5 million out-of-pocket.

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