Defining Occurrence – When Policy Definitions Do Not Apply To All Coverages
September 24, 2020
The Eleventh Circuit Court of Appeals recently held that a private insurance company/PART C Medicare Advantage Organization (MAO) may sue a Personal Injury Protection (PIP) insurance carrier for reimbursement of medical expenses under the Medicare Secondary Payer (MSP) Act before the PIP carrier’s responsibility to pay has been established through a judgment or settlement agreement. MSP Recovery, LLC v. Allstate Ins. Co., — F.3d —, 2016 WL 4525222 (11th Cir. Aug. 30, 2016). While the Eleventh Circuit had previously held that the responsibility to pay had to be demonstrated through a judgment or settlement agreement as a condition precedent to a claim under the MSP Act, the Eleventh Circuit held that a MAO may satisfy this condition precedent by merely alleging the existence of an insurance contract.
In this case, the assignees of a MAO sought to recover conditional payments under the MSP Act’s private cause of action from four different PIP carriers. Each PIP carrier insured persons enrolled in a Medicare Advantage Plan provided by the MAO. The MAO made conditional payments on behalf of the insured persons to cover medical expenses related to separate automobile accidents. The MAO’s assignees later sued the PIP carriers alleging that the carrier’s responsibility to pay was demonstrated by the insurance contracts each insured person entered into with the PIP carriers.
The PIP carriers moved to dismiss each case based on Glover v. Liggett Group, Inc., a case where the Eleventh Circuit had held that a primary plan’s responsibility to pay had to be demonstrated through a judgment or settlement before a claim under the MSP Act could be filed. Each case was dismissed based on the Glover opinion because the assignees had not obtained a judgment on the insurance contracts before bringing their claims under the MSP Act.
The assignees appealed, and argued that Glover was limited to cases where the responsibility to pay was based on a tort. The Eleventh Circuit agreed, and reversed. The Eleventh Circuit explained that the MSP Act permitted the demonstration of a primary plan’s responsibility to pay through a judgment, a settlement, “or by other means.” The Eleventh Circuit looked at the regulations issued by the Centers for Medicare and Medicaid Services (“CMS”) interpreting the MSP Act that listed the means by which responsibility for payment could be demonstrated to include a judgment or “other means, including but not limited to a settlement, award, or contractual obligation.” The Eleventh Circuit deferred to CMS’s interpretation of “other means” as including a “contractual obligation.” This reference to “contractual obligations” presupposed only the existence of a contract.
The Eleventh Circuit also explained that Glover did not apply because a contract, unlike a tort, immediately imposed obligations on the parties. Each party’s obligations under the contract exist as soon as the contract is executed. By contrast, a tortfeasor has no obligations until he is adjudicated liable. For these reasons, the appellate court held that “a contractual obligation may serve as sufficient demonstration of responsibility for payment to satisfy the condition precedent to suit under the MSP Act.”
The MSP Recovery ruling is significant because it allows MAOs and their assignees to sue under the MSP Act without first litigating a claim for PIP benefits to conclusion, either through a judgment or settlement. This case is also significant because the Eleventh Circuit was clear that the existence of a contractual obligation did not conclusively demonstrate liability under the MSP Act. The MAOs and their assignees still have to prove that the PIP carriers are actually liable under the insurance contract for primary payment of the conditional payments under the MSP Act. And the PIP carriers may still assert any valid contractual or statutory defenses to liability. Because the MSP Recovery opinion is the first appellate decision allowing a claim under the MSP Act based merely on the existence of an insurance contract providing PIP benefits under Florida law, MSP Recovery may be the overture for litigation of PIP issues in federal district court rather than Florida trial courts.