Auto Carrier’s “Legitimate Defense” Sufficient to Convince Medicare, and Protect Against Double Damages When Proven Wrong
In Duncan v. Liberty Mutual Insurance Company, 2019 U.S. Dis. LEXIS 106265, the U.S. District Court for the Eastern District of Michigan found that a decedent’s Estate (“Plaintiff”) did not have standing to seek double damages against Liberty Mutual (“Liberty”), the decedent’s no-fault PIP carrier. Although the Opinion ultimately decided standing issues, its background and discussion regarding the underlying double damages claim is even more noteworthy.
The decedent was injured in an automobile accident in January 2013, suffering a severe brain injury, and ultimately died in December 2014. Plaintiff filed suit in state court to recover under the PIP policy.
Medicare conditionally paid hospital and long-term care expenses related to those injuries, and sought reimbursement from Liberty. Liberty denied liability for medical expenses based upon expert opinions stating that the decedent suffered a fatal heart attack while driving. Medicare agreed with Liberty and issued a letter in June 2015 stating that it reversed its initial determination and Liberty did not owe Medicare anything.
Subsequently, a portion of the personal injury case was tried in state court, and in April 2016, the court entered a judgment based on a jury verdict finding the accident “caused or contributed” to the decedent’s brain injury. Thereafter, Liberty notified Medicare of the verdict, and, in anticipation of reimbursing Medicare upon receipt of a final conditional payment amount (“final bill”), funded an escrow for that purpose.
In July 2016, Plaintiff amended its complaint to assert an MSP double damages claim, and Liberty removed the case to Federal Court. On cross motions for partial summary judgment, the District Court found in favor of Liberty in that Liberty “did not ‘fail to provide for primary payment’ because it had a plausible argument as to why it was not liable under the no-fault policy. That argument . . . was strong enough to convince Medicare” and when Liberty eventually lost that argument in the jury verdict, it immediately informed Medicare and accepted reimbursement.
Plaintiff attempted to argue that Liberty would not have agreed to reimburse Medicare but for their successful jury verdict, and therefore, they essentially forced Liberty into reimbursing Medicare. In rejecting this assertion, the District Court noted that 1) Liberty was allowed to contest its liability under the no-fault policy, 2) they appropriately challenged Medicare’s initial determination pursuant to its administrative procedures, and 3) once its liability was determined, Liberty conceded its responsibility to reimburse Medicare.
Plaintiff appealed to the Sixth Circuit, who remanded the case for a determination of whether Plaintiff had standing. On remand, the District Court held that Plaintiff did not have standing for the MSP double damages claim because Plaintiff failed to establish they suffered any injury in fact from Liberty’s failure to pay decedent’s medical bills, noting that the bills were paid conditionally by Medicare and Liberty has committed to reimbursing Medicare upon receipt of a “final bill.” Although Plaintiff had standing to bring breach of contract claims under the PIP policy, those claims were being litigated in state court, and the “injury in fact” requirement must be satisfied for each claim.
Commentary: This case illustrates the steps a carrier may take to challenge a disputed claim, while still insulating themselves from double damages if they are eventually found liable for the injuries. The District Court highlighted Liberty’s prompt notification to Medicare several times in its opinion, as well as its willingness to reimburse Medicare upon receipt of the final conditional payment amount, as demonstrated by the funding of the escrow. Finally, the fact that Medicare initially agreed with Liberty’s disputes helped bolster the finding that it had a “legitimate defense” prior to the jury’s findings.