Cigna is looking for nearly $2 billion in a 'breakup fee' and an additional $13 billion in damages. (Photo: AP)

Simmering tensions between Anthem Inc. and Cigna Corp. exploded Tuesday as Cigna sued to end their $48 billion deal, and Anthem moments later said the smaller health insurer had no right to do so and that it would fight to keep the merger alive.

As part of its lawsuit, Cigna is seeking a $1.85 billion breakup fee, plus $13 billion in additional damages it says are owed after “the path for regulatory approval of the transaction was fatally compromised” by Anthem.

Anthem called the move “invalid” and said that it had already extended the time the two companies will have to complete the takeover to April 30. The merger was blocked by a federal judge last week, though Anthem has said it would seek an expedited appeal of the ruling.

The clash came just hours after the other U.S. health insurance megadeal, between Aetna Inc. and Humana Inc., ended peacefully when the companies mutually decided to walk away from their agreement. Aetna agreed to pay Humana a $1 billion breakup fee, or about $630 million after taxes.

‘Contentiousness’

Tensions between Indianapolis-based Anthem and Cigna have been evident since before the Justice Department sued in July to stop the merger, which the government said would reduce competition and reduce choice for consumers. At a court hearing in August, an Anthem lawyer said there was “ contentiousness” with Cigna and that the smaller insurer intended to walk away after the deadline rather than extend the effort. 

In her ruling last week rejecting the tie-up, U.S. District Judge Amy Berman Jackson cited the discord between the insurers as “the elephant in the courtroom.” Cigna didn’t join in Anthem’s appeals court filing.

The bad rapport between the insurers stems from even before the deal was struck in July 2015. Cigna had rejected Anthem’s initial overtures, in part over a dispute about what role Cigna Chief Executive Officer David Cordani would have at a combined firm.

Cigna, based in Bloomfield, Connecticut, rose 0.4 percent to $146.44 at 3:39 p.m. in New York. Anthem’s shares declined 0.4 percent to $162.84.

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