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Can a Third Party Hold Settlement Funds Until Medicare Issues a Final Demand?

Can a Third Party Hold Settlement Funds Until Medicare Issues a Final Demand?

By: David L. Place, J.D. Vice President, Director of Lien Resolution Services

The Northern District of Indiana thinks it is a jury question as to whether or not the third party carrier acted reasonably in holding settlement funds until Medicare’s Final Demand had been issued (Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013)). In the subject case, the plaintiff was injured in a slip and fall, retained counsel, and was able to obtain a settlement in the amount of $20,000from the tortfeasor, who was insured by Liberty Mutual.  Despite a settlement being reached, and releases executed, Liberty Mutual refused to disburse funds until the Medicare conditional payment issue had been fully resolved. The plaintiff sued Liberty Mutual for breach of the settlement contract claiming this was an unreasonable delay to which Liberty Mutual responded with a motion of summary judgment.  

Liberty Mutual argues that despite having executed settlement releases on January 19, 2012, they acted reasonably by not issuing the settlement funds until December 10, 2012.

“Liberty Mutual argues that it acted reasonably in postponing release of the settlement proceeds until after receipt of Medicare’s final determination letter.

If the beneficiary receives a primary payment and does not reimburse Medicare within 60 days, the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party. See 42 C.F.R. § 411.24.

Liberty Mutual asserts that, if it had paid Lucille Dolgos the agreed upon settlement amount and later learned that Medicare had already paid her, Liberty Mutual would have had to reimburse Medicare the $403.33”

Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013) 

Though every party to a settlement which involves Medicare conditional payment issues can sympathize with the apprehension of Liberty Mutual, their all or nothing approach appears unreasonable.  The plaintiff’s argument is a common sense one:

“whether it was reasonable for Liberty Mutual to withhold all of the $20,000 settlement payment pending confirmation from Medicare rather than paying most of the settlement payment and withholding only the $403.33 at issue”

Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013)  (emphasis added)

The Court agreed that the question of whether the actions of Liberty Mutual were reasonable is one of material fact and should be decided by a jury.  While all parties, including the plaintiff’s attorney himself, understand that liability to repay Medicare attaches to everyone who is involved in the personal injury settlement, that does not mean that the entire settlement can be or should be withheld until the Medicare conditional payment issue is fully resolved.  This is an excellent ruling for the plaintiff’s bar to use in confronting what is an increasingly common practice of insurance carriers. 

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