Court Determines Professional Liability Fund Not an RRE under MMSEA

With various types of insurance on the market, it is no surprise that some insurance plans may be confused as to whether they have an obligation to report under the MMSEA. Out of the United States District Court for Oregon (the Portland Division), the Plaintiff State Bar Professional Liability Fund (PLF), which provides non-profit legal malpractice insurance for Oregon attorneys, sought a summary judgment from the court that it was not an entity that was required to report under MMSEA, or an RRE. 1

Before seeking summary judgment in court, on July 28, 2010, PLF wrote to the DHHS to argue that it was not an applicable liability plan under the MMSEA and therefore had no reporting duty. The PLF sought a formal opinion that the MMSEA’s reporting requirement does not apply to the PLF. On August 20th, DHHS responded that applicable plans included liability insurance and, consequently, the PLF was an applicable plan under the MMSEA. Unsatisfied with the DHHS response, the PLF filed an action in the District Court of Oregon on November 12th seeking the following claims: 1) declaratory judgment that PLF is not an applicable plan or RRE under the MMSEA, 2) Secretary Sebelius (of DHHS) acted ultra vires (in an unauthorized manner) in determining that PLF is an RRE, 3) Court review that Secretary Sebelius violated the APA in determining that PLF is an RRE, and 4) the Court review of Secretary Sebelius’ determination concerning PLF.

After the Court took a thorough review of both the MSP as well as the MMSEA, a statutory interpretation of the MMSEA was necessary to determine whether PLF should be an RRE with a duty to report. The Court noted that there was no dispute that PLF is a type of liability insurance. DHHS stated that the plain language of the statute should end the inquiry because liability insurance is included in the definition of applicable plan. PLF asserted they would never be subject to a repayment obligation for conditional payments made by Medicare and therefore, would have no duty to report. However, both parties did agree that the reporting requirement under the MMSEA was intended to assist Medicare recover conditional payments made when the primary plan was actually responsible for the payment.

The question for the Court then became “Would PLF be an applicable plan subject to the reporting requirement under the MMSEA?” The Court noted that PLF provides legal malpractice insurance for all Oregon attorneys, and would cover claims against attorneys who cause economic damage related to the provision of legal services. It went on to state that PLF would not cover claims of tortuous conduct that results in bodily or emotional injuries, and thus, would not ever have primary responsibility for paying items or services claimed by a Medicare beneficiary.

DHHS countered that a malpractice claim involving a personal injury case could involve medical expenses paid conditionally by Medicare (such as emotional stress due to the underlying malpractice issue). The Court conceded that this point was true, but pointed out that it was not convinced that PLF would be an applicable plan subject to reporting requirements for two reasons. First, the Court noted that PLF would not have primary responsibility to pay for a claimant’s medical injuries. This primary payer obligation would fall upon the insurance companies who insure the underlying claim. The Court also noted that PLF’s malpractice coverage exempts bodily or emotional injuries. Second, a significant lag time would exist between any injury or medical payment and a decision concluding that an attorney committed malpractice, which would trigger any payment obligations for the PLF. The Court therefore granted PLF’s motion for summary judgment on claims one and four, and claims two and three were dismissed as moot.

This case was interesting on multiple levels. First, this appears to be the first case wherein a Court was asked to opine on whether an insurance plan should be considered an RRE under the MMSEA. Second, it is curious whether the Court analyzed in detail all situations where PLF’s liability would cover medical expenses in a malpractice situation under the plan. If there was ever a malpractice claim against PLF wherein the attorney’s misconduct/malpractice eventually caused a claim of physical or psychological damage, would PLF ever have primary responsibility to cover those injuries? If so, and Medicare conditionally paid for those medical bills, one could argue that they would be conditional payments subject to reimbursement by PLF (and not the original insurer) and therefore, the claim should be reportable by PLF under MMSEA.

CMS recently addressed whether claims such as these would be reportable in a recent teleconference. On March 22, 2012, CMS was asked: “In a professional liability claim, if there is one line in the release that states there is mental anguish being alleged, is this claim reportable?” CMS responded, “Mental anguish is a medical condition. If any medicals are claimed and/or released, the claim is reportable.”

From CMS’ response, it appears that the distinguishing factor in determining whether the claim is reportable or not is whether any medicals are claimed and/or released. Liability plans such as PLF should ensure to take this very important factor into account when settling claims and analyzing whether they may need to report a claim under MMSEA.
1. [Oregon State Bar Professional Liability Fund v. U.S. Dept. of Health and Human Svcs., 2012 U.S. Dist. LEXIS 43790 (March 29, 2012).]

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