On July 22, 2015, the United States District Court for the Southern District of Florida published its opinion on MSPA Claims, LLC, v. Liberty Mutual Insurance, concluding that a claim for double damages under the MSP private cause of action does not accrue until the primary payer’s responsibility to pay has been demonstrated. The court finds that even where an insurance contract exists between two parties, an insurer should still be able to contest contractual liability without being exposed to double damages. The Florida PIP statute, upon which Plaintiff relies to argue that Defendant is contractually and statutorily obligated to pay, recognizes that an insurer should be able to assert that the claim was unrelated, was not medically necessary, or was unreasonable. Therefore, the court holds that a contractual primary payer, such as a no-fault/PIP insurer, should have the ability to contest payment of claims without facing MSP private cause of action double damages.
Florida Healthcare Plus (FHCP) is a Medicare Advantage Organization (MAO). Defendant Liberty Mutual Insurance provides personal injury protection (PIP) insurance and was the primary insurance provider for Enrollee. On June 6, 2013, Enrollee sustained injuries in a car accident. FHCP conditionally paid for the cost of medical expenses associated with the accident. Notwithstanding that Defendant’s PIP policy is Enrollee’s primary plan, Defendant refused to provide reimbursement.
On March 5, 2015, MSPA Claims, LLC, who was assigned FHCP’s right to reimbursement, filed suit against Defendant in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, to recover double damages under 42 U.S.C. §1395y(b)(3)(A), a private right of action created by the Medical Secondary Payer Act (MSP). Defendant removed the action to federal court on April 15, 2015, and then moved to dismiss. After Plaintiff filed a First Amended Complaint on May 8, 2015, the Court denied Defendant’s initial motion to dismiss.
Plaintiff’s Amended Complaint alleges: (I) declaratory judgment as to Defendant’s obligation to reimburse Medicare benefits; (II) private cause of action for double damages under 42 U.S.C. §1395y(b)(3)(A); (III) accounting; (IV) breach of contract pursuant to Fla. Stat. § 627.736; and (V) equitable subrogation. On May 28, 2015, Defendant filed a Motion seeking dismissal of Plaintiff’s First Amended Complaint.
Defendant moves to dismiss, arguing that: (1) Plaintiff sued the wrong entity; (2) Count I of the Amended Complaint is duplicative of Count II and should be dismissed; (3) Count II should be dismissed because: (a) Plaintiff failed to adequately allege Defendant’s responsibility to pay has been demonstrated; (b) a cause of action under §1395y(b)(3)(A) is not assignable; (c) § 1395y(b)(3)(A) does not create a private cause of action for an MAO; and (4) Counts III through V fail to state claims upon which relief may be granted. Defendant also moves to strike Plaintiff’s request for attorney’s fees and allegations of bad faith.
Regarding the improperly named entity argument, Plaintiff filed its lawsuit against Liberty Mutual Insurance Company, and served Liberty Mutual Insurance Company. However, in the documents referred to and attached to Plaintiff’s Amended Complaint, it is clear that Liberty Mutual Fire Insurance Company underwrote Enrollee’s PIP policy and that Plaintiff sought recovery from Liberty Mutual Fire Insurance Company. As Plaintiff has sued the wrong entity, dismissal of its Amended Complaint is appropriate for failing to state a claim against Liberty Mutual Insurance Company.
The Court however addresses Defendant’s remaining arguments to determine whether Plaintiff’s Amended Complaint would be subject to dismissal if it had named the correct entity, thus determining whether giving Plaintiff leave to amend its Complaint to name the correct party would be futile.
Regarding the duplicative claim for declaratory judgment argument, in Count I, Plaintiff seeks a declaratory judgment that Defendant is obligated to reimburse Plaintiff under the Medicare Secondary Payer Act (MSP) for Enrollee’s medical expenses as the provider of primary no fault coverage. In Count II, Plaintiff seeks money damages from Defendant under the MSP for double the amount of Enrollee’s medical expenses because, it alleges, Defendant did not make the appropriate reimbursement to Plaintiff as the primary payer. The Court finds Counts I and II in Plaintiff’s Amended Complaint are based on the same underlying allegations, and will both be determined based on the same legal standard – whether Defendant is liable under the MSP Act to reimburse Plaintiff for Enrollee’s medical expenses. Accordingly, the Court finds that even if the right entity had been named, Count I would have been dismissed for being duplicative of Count II.
Regarding Count II, Section 1395y(b)(3) of Chapter 42 of the U.S. Code establishes “private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” Paragraph (2)(A) “prohibits Medicare from paying for items or services for which payment can reasonably be expected to be made under a primary plan, except as provided in subparagraph (B).” Subparagraph (B) authorizes Medicare to make conditional payments, but requires that “a primary plan, and any entity that receives payment from a primary plan, shall reimburse Medicare with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” Glover v. Liggett Grp., Inc., 459 F.3rd 1304, 1308 (11th Cir. 2006) (quoting 42 U.S.C. § 1395y(b)(2)(B)(ii).
In Glover, the Eleventh Circuit held that a claim for double damages does not accrue until the primary payer’s responsibility to pay has been demonstrated, for example, by a judgment. Although this was decided in a case involving demonstrating a tortfeasor’s responsibility to pay for items or services, the Court here finds that the language used by the Eleventh Circuit, and the rationale underpinning its holding, “sweeps broadly.” As explained in Glover, “the demonstration of responsibility is a condition precedent to bringing a claim.” The reasons for reaching this result included the following: (1) without this condition precedent, a federal court’s jurisdiction would be drastically expanded; and (2) the alleged primary payer could not contest liability without risking the penalty of double damages.
Therefore the Court indicates that “even where an insurance contract exists between two parties, an insurer should still be able to contest contractual liability without being exposed to double damages.” The Court points out that the Florida PIP statute, upon which Plaintiff relies to argue that Defendant is contractually and statutorily obligated to pay, recognizes that an insurer should be able to “assert that the claim was unrelated, was not medically necessary, or was unreasonable.” Fla. Stat. § 627.736(4)(b). Thus, even as a no-fault/PIP insurer, “Defendant should have the ability to contest payment of claims without facing double damages.”
The court explains that this holding does not contravene 42 C.F.R. § 411.22(b)(3), which provides that a primary payer’s responsibility for payment may be demonstrated by other means, including a contractual obligation. The Court rules that the regulation still requires that the responsibility for a payment be demonstrated, and simply alleging the existence of a contractual or statutory obligation does not mean that a responsibility to pay has been demonstrated. Thus, Plaintiff’s Amended Complaint is dismissed without prejudice with leave to re-file once Plaintiff can establish the necessary prerequisite by pursuing a subrogation or breach of contract claim in state court.
Having found that Count II fails to state a claim, the Court does not address Defendant’s arguments that a claim under § 1395y(b)(3)(A) is not assignable and that the statute does not create a private cause of action for an MAO. Count II gave this Court federal question subject matter jurisdiction over this action. Since this claim is now being dismissed, the remainder of Plaintiff’s Amended Complaint is also dismissed for lack of subject matter jurisdiction over Plaintiff’s state law claims.
This decision follows the April 2, 2015, United States District Court for the Southern District of Florida opinion on MSP Recovery, LLC v. Progressive Select Insurance Company, in which the court found that since Plaintiff did not allege that Defendant’s responsibility to pay had been demonstrated by settlement, judgment, award, or any other means, the court granted Defendant’s motion to dismiss. As the court does here, these cases follow the findings of the 11th Circuit in Glover v. Liggett Group and Phillip Morris, USA, in which that court concluded that a primary plan has a duty to reimburse a secondary payer MAO for conditional payments only “if it is demonstrated that such primary plan has or had a responsibility to make payment.”
As in Glover and MSP Recovery, the court here further expands on the notion that demonstrating responsibility for such payments is not just proving the existence of an insurance contract between the parties. The court makes it clear that, even in no-fault situations, there must be evidence of responsibility for payment of such expenses for MSP private cause of action to apply. Such evidence may include a settlement, judgment, or award, or may also include proof that the insurer has accepted responsibility of the claim, made voluntary payments on the claim, or has been found responsible for such expenses by the appropriate court or administrative body. Short of these, at least in Florida’s southern district, a primary payer’s obligation to reimburse Medicare does not exist under the MSP private cause of action provisions. It will be interesting to see whether these decisions will renew any attempts by corporate defendants and insurers to test such findings in jurisdictions which have held no such proof of responsibility is necessary in MSP private causes of action such as the 3rd (Delaware, New Jersey, Pennsylvania, Virgin Islands) and 6th (Kentucky, Michigan, Ohio, Tennessee) Circuit Court of Appeals. As always, Helios Settlement Solutions will continue to report on any new cases or matters regarding same.