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Duncan v. McLaren Oakland

United States District Court, E.D. Michigan, Southern Division

June 25, 2019




         This matter is presently before the Court on the Sixth Circuit's opinion and order “remand[ing] the action to the district court to consider whether the Estate has standing.” Duncan v. Liberty Mut. Ins. Co., 745 Fed.Appx. 575, 578 (6th Cir. 2018).


         Plaintiff is the personal representative of the estate of David Duncan who died in December 2014, approximately two years after he was severely injured in an automobile accident in January 2013. Defendant Liberty Mutual Insurance Company (“Liberty Mutual” or “defendant”) is Duncan's no-fault insurer. In her second amended complaint (“SAC”), plaintiff asserts three claims. Count I is a breach of contract claim, in which plaintiff alleges that defendant has failed to pay personal injury protection (“PIP”) benefits that are due under Duncan's insurance policy with defendant and under Michigan's No-Fault Act, [1] plus costs, interest, and attorney fees. Count II seeks a declaration regarding the applicability of the No-Fault Act and the amounts due. And Count III seeks damages under the Medicare Secondary Payer Act (“MSPA”), 42 U.S.C. § 1395y(b)(3), in the amount of twice what Medicare has conditionally paid.[2] As plaintiff alleges that “Medicare has conditionally paid $225, 668.29[3] for medical services and items for Mr. Duncan's care arising out of the accident, ” SAC ¶ 29, she seeks double this amount, i.e., $451, 336.58, on this count.

         In March 2016, shortly before defendant removed the matter to this Court, a portion of the case was tried to a jury in Oakland County Circuit Court. Based on the jury's verdict, the state court entered a judgment in April 2016 to the effect that plaintiff's decedent “suffered an accidental bodily injury that arose out of the use or operation of a motor vehicle . . . that caused or contributed to his anoxic brain injury on January 11, 2013.” Defendant concedes that “[s]tate court causation ha[s] been determined.” Def.'s Mot. ¶ 5.

         McLaren Oakland, where Duncan was hospitalized from January 13 to 28, 2013, has intervened as a plaintiff to obtain no-fault benefits for the medical services it rendered to Duncan. McLaren Oakland alleges that the total bill for these services is $173, 203.10. Intervening Compl. ¶ 6. In response to plaintiff's motion for partial summary judgment, McLaren Oakland states that it seeks “$95, 050.88 in outstanding bills, plus no-fault statutory interest and attorney fees.” McLaren Oakland's Resp. ¶ 17. The difference between the original and the currently outstanding McLaren Oakland bills is $78, 152.22, which is, approximately, the sum of $58, 229.22 conditionally paid by Medicare and $20, 181.00 paid by defendant.

         Prior to the Oakland County jury verdict, defendant denied any liability for David Duncan's medical expenses (or other no-fault benefits) on the theory that his injuries were not caused by the car accident. Based on the opinions of its experts who reviewed the medical records, defendant argued that Duncan suffered a fatal heart attack while driving. After Medicare initially informed defendant that it was responsible for reimbursing Medicare for the “conditional payments” at issue in this case, defendant objected and it eventually succeeded in persuading Medicare to change its mind. In a letter to defendant dated June 19, 2015, Medicare stated that it had reversed its position on reimbursement and that Liberty Mutual owed Medicare “zero.”

         When the jury reached its verdict and the state court entered judgment thereon in April 2016, defendant promptly notified Medicare of this new development. This caused Medicare to reverse its position again. In a letter to defendant dated October 26, 2016, Medicare stated that defendant was, after all, responsible for reimbursing Medicare for its conditional payments. Defendant indicates that it accepts Medicare's position and is simply waiting for Medicare to present a final bill and that it “had set up an escrow into which monies were paid by Liberty Mutual for the direct purpose of providing for appropriate payment to the appropriate payees.” Def.'s Supp. Br. (docket entry 57) at 7.

         As noted, the state court jury returned its verdict in March 2016 and the state court entered judgment in April. On July 1, 2016, plaintiff amended her complaint to assert a MSPA double damages claim, and defendant removed the case based on this federal question.

         Cross Motions for Partial Summary Judgment

         Plaintiff and defendant filed cross motions for partial summary judgment on plaintiff's double damages claim (Count III) raising this issue: Has defendant “fail[ed] to provide for primary payment (or appropriate reimbursement)” under 42 U.S.C. § 1395y(b)(3)(A)? This Court, by denying plaintiff's motion and granting defendant's motion, answered this question in the negative. Defendant 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, based on its experts' opinions, was strong enough to convince Medicare, which informed defendant in June 2015 that it owed Medicare “zero.” Defendant eventually lost that argument when the Oakland County jury returned its verdict in March 2016. Defendant immediately informed Medicare of this development and it has accepted Medicare's position that it must, after all, reimburse Medicare for Medicare's conditional payments. As noted, defendant has said that it will reimburse Medicare as soon as Medicare presents a final bill. Once defendant pays that bill, it will have made “appropriate reimbursement” - appropriate in the sense that it will be made in accordance with the statute and regulations, which permit Medicare to collect conditional payments directly from a “primary payer” such as defendant and for a primary payer to contest liability and the amounts at issue.

         Defendant's behavior saves it from liability for double damages. The double damages provision is intended as an incentive for a beneficiary or a medical care provider or Medicare itself to sue an insurer who wrongfully fails to pay under a healthcare or no-fault or liability policy. A beneficiary who succeeds with such a suit pays half of the recovery back to Medicare (thereby saving the government the time and expense of this collection effort), while the beneficiary keeps the other half as his/her reward for playing the role of “private attorney general.” But the double damages statute may not be used against an insurer, such as defendant in the present case, who has a legitimate defense to liability - particularly when, as here, Medicare itself is persuaded, at least at the outset, that the defense has merit. Double damages are all the more inappropriate against an insurer who, as here, agrees to repay Medicare once its liability has been established.[4]

         For these reasons, the Court concluded - in denying plaintiff's motion for partial summary judgment and granting defendant's motion for partial summary judgment - that defendant did not “fail to provide for primary payment (or appropriate reimbursement)” under 42 U.S.C. § 1395y(b)(3)(A). Defendant had no obligation to pay David Duncan's medical expenses under his no-fault policy because defendant had a legitimate defense, which Medicare initially accepted, namely, that Duncan's injuries were caused by his heart attack, not by the automobile accident. Once the jury decided the liability issue in plaintiff's favor, defendant accepted responsibility to reimburse Medicare for its conditional payments and, moreover, put money aside to make those payments. This is not a case of an insurer who, without a legitimate basis for doing so, has refused to pay a plainly meritorious claim. To the contrary, defendant appears to have acted completely within its rights. When Duncan was injured, defendant promptly notified Medicare. When Medicare informed defendant that it was primarily responsible for Duncan's medical bills, defendant used the administrative appeal procedure and persuaded Medicare to change its mind. When the jury's verdict was returned, defendant again promptly notified Medicare. And when Medicare changed its mind based on that verdict, defendant agreed to pay and requested a final bill.

         Plaintiff claims credit for forcing defendant to accept responsibility for reimbursing Medicare. Plaintiff asserts that defendant never would have agreed to pay if plaintiff had not brought the Oakland County lawsuit. This may be true, but it does not change the fact that (1) defendant was permitted to contest its liability under the no-fault policy; (2) defendant behaved appropriately in challenging administratively Medicare's initial decision to seek reimbursement for ...

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