Thursday, September 8, 2016

A summer slump in Miami

Another FHCP / La Ley / MSPR case has been decided by the Federal District Court in Miami, and this time the court has dismissed the case on its finding that the plaintiff, MSPA Claims 1, LLC, does not have standing to pursue a Medicare Secondary Payer recovery action against an alleged primary payer. MSPA Claims 1, LLC v. Infinity Auto Insurance Company, Case No. 16-20320-Civ, decided August 30, 2016.

We have been following this series of lawsuits for some time now. See our September 2015 post.

The court reviewed the language of the assignment agreements. Florida Health Care Plus (FHCP) entered into a written agreement with La Ley Recovery Systems, Inc. assigning its MSP reimbursement rights (including alleged private cause of action and double recovery claims) to La Ley. Under that agreement, La Ley could further assign the rights to another entity, but only on FHCP's approval. There was no averment in the complaint that such approval had been granted, and thus no showing that the condition to a valid sub-assignment had been met.

The court thus concluded that the plaintiff had not demonstrated that it had standing, that is, an established interest that justified its assertion of a legal claim against the defendant. The court cited several other cases involving the same cast of characters, and apparently making the same ruling:

MSPA Claims 1, LLC v. Nat'l Specialty Ins. Co., 16-CV-20401-MGC, ECF No. 61 (S.D. Fla. Aug. 25, 2016);
MSPA Claims 1, LLC v. Tower Hill Prime Ins. Co., No. 16-CV-20459-KMM, ECF No. 42 (S.D. Fla. Aug. 3, 2016);
MSPA Claims 1, LLC v. Tower Hill Prime Ins. Co., 16-CV-20460-KMM, ECF No. 27 (S.D. Fla. Aug. 3, 2016); and
MSPA Claims 1, LLC v. Kingsway Amigo Ins. Co., No. 16-CV-20212-JLK, ECF No. 35 (S.D. Fla. July 27, 2016).

The court made note of a filing that had been made in state courts in Leon County, involving the Florida Department of Financial Services, said to be acting as "receiver" for FHCP, La Ley, and MSPA Claims 1, LLC. No further information about this filing is available at this point.

Monday, September 5, 2016

The 11th Circuit refines its demonstrated responsibility standard

The 11th Circuit Court of Appeals, the court which ten years ago issued its landmark decision in Glover v. Liggett Group, Inc., 459 F. 3d 1304 (11th Cir. 2006), has now handed down an important opinion that defines and limits the scope of that ruling, and does so in a way that is very instructive to those of us who have to deal with the misunderstandings on this subject engendered by the 6th Circuit. The case is MSP Recovery, LLC, et al. v. Allstate Insurance Company, et al.835 F.3d 1351 (11th Cir. 2016).

This is another in a series of cases addressing the question of when a litigant may include a claim under the "private cause of action" provided under the Medicare Secondary Payer statute when a claim for payment of insurance benefits is made. As our clients are aware, the private cause of action includes a provision permitting a claim for double recovery under certain circumstances.

As a quick sketch: In Glover, the 11th Circuit had held that a plaintiff who had sued cigarette manufacturers under the private cause of action and double recovery provisions of the Medicare Secondary Payer statute - but who themselves had not sustained any injuries - did not state a claim under which relief could be granted, because the defendants had not been demonstrated (by a judgment, a settlement, or other means, using the statutory language) to be legally responsible for the medical expenses incurred by Medicare beneficiaries who smoked cigarettes.

As the Federal courts are organized, Michigan is included in the 6th Circuit. In the case of Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast and Southwest Areas Health and Welfare Fund, 656 F. 3d 277 (6th Cir. 2011), that Court stated (in obiter dictum) that the demonstrated responsibility standard established in the statute, and recognized in Glover, applies only to tort cases and has no application to claims based on contractual obligations, in that case a policy of group health insurance. We first analyzed and critiqued this decision in 2012, before this weblog was started, and we have followed the trail of wreckage that that language has created ever since. (See our posts from October 2013, July 2014, and September 2014.)

The primary problem that the Bio-Medical court's language creates for Michigan no-fault insurers is that an auto policy is also a contract. Unlike group health insurers, which have a plenary obligation to pay all medical expenses incurred by the insured (subject to deductibles and copayments), the no-fault insurer has an obligation to pay only medical expenses "arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle." MCL 500.3105.

This new decision arises from a series of lawsuits filed by a company called MSP Recovery, L.L.C. (and a related company) in Federal courts in southern Florida. MSP Recovery purported to be the assignee of Florida Healthcare Plus, a Medicare Advantage plan (Medicare HMO), seeking recovery of payments from liability insurers for medical services provided to their members. (We first discussed this assignee effort here in September 2015.)

The MSPR case involved seven different lawsuits brought by the plaintiff as assignee, against four different liability insurers. In each case, the District Court had dismissed the claim under Glover, for the reason that the obligation of the insurer had not yet been demonstrated. MSPR asserted that the existence of a contractual obligation can be sufficient to demonstrate the insurer's responsibility to pay and thus there is no requirement that the responsibility be established by judgment or settlement. The defendants argued that, even when their obligation to their insureds exist under contract, the obligation must still be established independently in a court proceeding leading to a judgment or settlement.

The Court agreed with MSPR, and unlike the Bio-Medical court, it expressed its analysis and conclusions in a thoughtful manner. It noted:
  • The MSP Act permits demonstration of a primary plan's responsibility to pay "by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means." 42 U.S.C. § 1395y(b)(2)(B)(ii).
  • The position argued by the defendants, it concluded, would render the "or by other means" language superfluous.
  • The regulations adopted by CMS, at 42 C.F.R. § 411.22(a), state that responsibility may be demonstrated by a judgment entered after a verdict or "other means, including but not limited to a settlement, award, or contractual obligation."
The court expressed its ruling thus:
"We hold that a contractual obligation may serve as sufficient demonstration of responsibility for payment to satisfy the condition precedent to suit under the MSP Act. This does not relieve Plaintiffs of their burden to allege in their complaints, and then subsequently prove with evidence, that Defendants' valid insurance contracts actually render Defendants responsible for primary payment of the expenses Plaintiffs seek to recover."
This is a much more reasoned approach. Unlike Bio-Medical, which simply declared (in dictum) that the demonstrated responsibility standard is irrelevant when a claim is based on contract, the MSPR Court said that a contractual obligation may, in a proper case, be sufficient to demonstrate that the insurer has a responsibility to pay the medical expenses in question.

It is a point of interest that the Court in the new MSPR case made no mention of the 6th Circuit's decision in Bio-Medical.