LIENS

This case involved a Medicare beneficiary who was injured as a result of medical malpractice. When the plaintiff’s attorney settled the personal injury action, Medicare presented a Final Demand of approximately $91,000. The plaintiff’s attorney paid the Final Demand to avoid interest and then engaged Synergy Lien Resolution Services to appeal the amount of the Final Demand. 

Synergy’s knowledge of both the Medicare Secondary Payer Act and our unrivaled experience with the Medicare appeals process allowed us to reduce the Final Demand by over 47%, securing a refund of over $43,000 for the plaintiff.

This case involved a serious slip and fall accident that happened on a cruise ship while it was at sea. The plaintiff suffered significant injures, incurring medical damages in excess of $540,000. The injured plaintiff engaged a seasoned trial attorney, but due to liability issues the plaintiff only received a fraction of the case value. 

Following that disappointment, the plaintiff was confronted with 2 large subrogation/reimbursement claims, each of which was larger than the total settlement.

When every solution attempted by counsel resulted with the injured plaintiff receiving no portion of the settlement funds, Synergy Lien Resolution Service was engaged. Within a relatively short span the air ambulance service, the largest of the two lienholders which had a claim for over $400,000, agreed to completely waive their claim. The self-funded ERISA plan, being represented by Rawlings & Associates with a claim in excess of $100,000 agreed to reduce their repayment demand by 86%.

Maryland Suspends Attorney for Failure to Repay Healthcare Reimbursement Claim

Failing to deal with the subrogation/reimbursement claims of health insurance carriers has proven to be a possible career ending mistake for one Maryland personal injury attorney.  In the September 2013 Maryland Court of Appeals’ review of the disciplinary ruling of Attorney Grievance Commission of Maryland v. Leonard Sperling, Misc. Docket Number AG 47, the Court sanctioned an attorney who failed to properly resolve a health insurance reimbursement claim. In this case, attorney Leonard Sperling, who had been admitted to practice in Maryland for nearly 46 years, had his license suspended indefinitely, with the suspension duration lasting a minimum of six months.

Despite this being the second time Sperling was sanctioned for failing to resolve third party lien claims, the Court found no intentional malfeasance. Sperling seems to have been overtaken by changes in the practice of personal injury law as he attempted to use antiquated tactics in negotiating the interest of the health plan’s claim. These tactics might have worked a few decades ago, but they backfired in modern day personal injury practice.

For almost five years Sperling proceeded to either forestall the prosecution of the third party claim or negotiate the outstanding balance and followed principles and practices that had been common place in his previous lien negotiations, but which were now obsolete. One such example is the blanket idea that a claim for health insurance reimbursement must be reduced by attorney’s fees and costs.  While this appears to be logical, the ground work required in order to obtain such a reduction requires expert understanding of today’s federal and state health insurance statutes and case law. 

Health insurance companies have spent the last quarter of a century training, growing, and expanding their recovery groups and vendors. They have experts, nearly inexhaustible resources, and case law to help them prosecute their subrogation/reimbursement claims.  As evidenced in the Court’s decision, the playing field has changed. Today’s plaintiff’s attorney must know that in order to significantly reduce or eliminate a health plan’s subrogation/reimbursement claim, an expert is required.  At Synergy we fight these battles daily and our expertise ensures that our clients are not exposed to the aforementioned risks that have jeopardized Mr. Sterling’s legal career. Contact us today and see how we can help preserve the hard fought settlement funds you have obtained for your client, and in a manner that protects you and your firm.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. The United States District Court for the District of Arizona issued an order in Blood Systems, Inc. v. Roesler, et. al. which both time barred the subrogation/reimbursement claim and awarded attorney’s fees against the ERISA plan. This case revolves around the approximately $50,000 in medical benefits paid by the plaintiff’s self-funded ERISA qualified health plan arising from a serious motorcycle accident.

The plaintiff hired counsel and was eventually able to recover a policy limit settlement in the amount of $100,000. The self-funded ERISA plan filed suit against the plan participant and her attorneys seeking to recover the full amount of the medical benefits provided by the plan. The attorneys sought summary judgment and the court agreed finding that the self-funded ERISA plan can only look to the plan participant for repayment. Following that, the attorneys petitioned the Court to award attorney’s fees and costs associated with defending the claim asserted against them by the self-funded ERISA plan.

Along with the motion for attorney’s fees raised by plaintiff’s counsel, a statute of limitations defense was raised by the plaintiff himself against the subrogation/reimbursement claim being asserted by the ERISA plan. It is important to this argument that:

“ERISA itself does not contain a statute of limitations applicable to Plaintiffs’ claims. Therefore, the Court must borrow ‘the most analogous state statute of imitations.’  Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Insurance, 222 F.3d 643, 646 (9th Cir. 2000). When borrowing a state statute of limitations, the task is to apply ‘the local time limitation most analogous to the case at hand.’ Lampf v. Gilberston, 501 U.S. 350, 355 (1991) (emphasis added).” Blood Systems, Inc. v. Roesler, et. al.

As ERISA is a federal law dealing with employer sponsored group welfare benefit plans, there is no perfectly analogous state level statute of limitations. However, the Court in this case well expresses the rule that is applied and the inability of the federal court to interpret a state statute of limitations.

“In other words, the issue is not which state statute of limitations is a “perfect” fit for the federal claim, but which statute of limitations is the 29 U.S.C. § 1002(1) (providing definition for ERISA-governed plans) closest fit. DelCostello v. Int’l Brotherhood of Teamsters, 462 U.S. 151, 171 (1983). And when picking the closest fit, a federal court must ‘accept[ ] the state’s interpretation of its own statutes of limitations.’  Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir. 1994) (quotation and citation omitted).”  Blood Systems, Inc. v. Roesler, et. al.

Typically courts have found that the most analogous state statute of limitations is one that controls written contacts.  (Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir. 1994); Blue Cross & Blue Shield of Alabama v. Sanders, 138 F.3d 1347, 1357 (11th Cir. 1998) ).  In this Arizona case there was choice of which limitations statute to use – either the six year statute that governs general written contracts, or the one year statute that controls certain employment disputes. (See, A.R.S. § 12-548, A.R.S. § 12-541).

For the Court the question was “whether an ERISA plan should be viewed as an ‘employment contract’”.  (Blood Systems, Inc. v. Roesler, et. al.).  Here the Court found that:

“Under the parties’ contract, Blood Systems agreed to provide Pauline Roesler additional compensation in the form of paying for medical care in return for Pauline Roesler’s  continued  employment.  Accordingly, … claims regarding benefits under an ERISA plan qualifies as claims under an “employment contract.”  Blood Systems, Inc. v. Roesler, et. al. 

In deciding to apply the one  year statute of limitations contained in A.R.S. § 12-541 the Court looked to the rationale of the Eight Circuit in Adamson v. Armco, Inc., 44 F.3d 650 (8th Cir. 1995).  In that case, the Eight Circuit “applied the two-year period to ‘all damages arising out of the employment relationship[]’”.  This court also looked to the Third Circuit who decided in Syed v. Hercules Inc., 214 F.3d 155 (3d Cir. 2000) that the appropriate statute of limitations was the one year statute.  In that case the Delaware one year statute of limitations controlled “claim[s] of wages, salary, or overtime for work, labor or personal services performed, . . . or for any other benefits arising from such work, labor or personal services performed.” (Blood Systems, Inc. v. Roesler, et. al.).

Though this is certainly very good news for the plaintiff it should be noted, as with other aspects of ERISA subrogation, plan language controls.  The District Court for Arizona expresses this principle clearly, and relies on previous Ninth Circuit holdings which state “[I]f [the self-funded ERISA plan] believe a one-year limitations period is too short, they likely can contract around it.” Wang Laboratories, Inc. v. Kagan, 990 F.2d 1126 (9th Cir. 1993) (enforcing choice of law provision in ERISA plan resulting in longer statute of limitations).

Having found that the self-funded ERISA plan’s claim for subrogation/reimbursement was time barred, the court moved onto an analysis of whether or not plaintiff’s counsel was entitled to an award of attorney’s fees. 

“ERISA authorizes an award of attorney’s fees to a party who achieves ‘some degree of success on the merits.’  Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149, 2158 (2010). Once a party achieves some success, the court should not ‘favor one side or the other’ when deciding whether to award attorneys’ fees. Estate of Shockley v. Alyeska Pipeline Service Co., 130 F.3d 403, 408 (9^th Cir. 1997).” Blood Systems, Inc. v. Roesler, et. al.

The Court employed a five part test to determine whether an award of fees is appropriate:

“1. [T]he degree of Plaintiffs’ culpability or bad faith,

  2. Plaintiffs’ ability to satisfy an award of fees,

  3. [W]hether an award of fees would deter others from acting in similar           

      circumstances,

  4. [W]hether [the attorneys] sought to benefit all participants and beneficiaries of an   

      ERISA plan or to resolve a significant legal question regarding ERISA, and

  5. [T]he relative merits of the parties’ positions.”

Cline v. Industrial Maintenance Engineering & Contracting Co., 200 F.3d 1223, 1235 (9^th Cir. 2000) (quoting Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980)); Blood Systems, Inc. v. Roesler, et. al.)

In performing this analysis the court is cognizant that “no single . . . factor is necessarily decisive.”  Simonia v.Glendale Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1122 (9th Cir. 2010). 

In this case the District Court for Arizona found that the subrogation/reimbursement claim of the self-funded ERISA plan could have been completely satisfied from the settlement proceeds disbursed to the plaintiff, yet despite this, the ERISA plan included counsel in the repayment demand which indicated a level of culpable conduct.  This along with the fact that awarding attorney’s fees would discourage this kind of behavior in the future, and the lack of merit to the ERISA plan’s claim against plaintiff’s counsel convinced the Court to award $30,700 in fees and $600.42 in costs.

This case, as well as the cases cited by this court, provides a sound basis for the wise plaintiff’s attorney to argue for a shortened statute of limitations period. Additionally, there are a myriad of cases which stand for the proposition that plaintiff’s counsel is not personally liable for repayment to the self-funded ERISA plan. If the ERISA plan or their recovery agent takes an aggressive and meritless approach as was employed here, remind them that they may become subject to a significant claim for attorney’s fees and costs.

Contact Synergy today to learn more about our lien resolution services.

By: Synergy’s Director of Lien Resolution

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. As every plaintiff’s attorney knows, the rights of self-funded ERISA qualified plans are daunting. The strength of their recovery right arises from their ability to preempt state law and enforce the terms of the plan document. ERISA’s preemption clause states that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan….” (29 U.S.C. § 1144(a)).

The Northern District of Mississippi in the Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13) performs an in-depth analysis of the application of ERISA preemption to situations where a probate court has been empowered to oversee the settlement of a minor’s personal injury claim.  In this case, the minor’s parents were appointed guardians and eventually were able to settle the personal injury action for policy limits. They then petitioned the chancery court to approve the settlement adjudicating the alleged subrogation/reimbursement claim of the self-funded ERISA plan that had paid the minor’s medical bills. 

The self-funded ERISA plan moved the matter to federal court where it examined both procedural issues and the application of ERISA preemption over the chancery court’s adjudication of the minor’s issues. 

To determine whether a claim is preempted by ERISA, the Fifth Circuit has directed application of a two-prong test, which asks: “(1) whether the claim addresses areas of exclusive federal concern and not of traditional state authority, such as the right to receive benefits under the terms of an ERISA plan, and (2) whether the claim directly affects the relationship among traditional ERISA entities—the employer, the plan and its fiduciaries, and the participants and beneficiaries.”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13) (quoting Hobson v. Robinson, 75 F. App’x 949, 953, (5th Cir.2003)).

In the case of minors:

“Mississippi Code Section 93–13–59 grants authority to guardians “empowered by the Court” to compromise claims of minors. The Mississippi Constitution further gives full jurisdiction of minor’s business to the chancery courts of the State. See MISS.CODE art. 6, § 159(d).”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13).

In support of their position that despite 29 U.S.C. 1144(a), the chancery court retained the authority to oversee settlements involving minors. They cited previous Northern District of Mississippi cases.  In those cases “the court has affirmatively held that ERISA does not preempt Mississippi law requiring chancery court approval of minor’s settlements. (See, Clardy v. ATS, Inc. Employee Welfare Benefit Plan, 921 F.Supp. 394 (N.D.Miss.1996); Bauhaus USA, Inc. v. Copeland, 2001 WL 1524373 (N.D.Miss. Mar. 9, 2001); Estate of Ashmore v. Healthcare Recoveries, Inc., 1998 WL 211778 (N.D.Miss. Mar. 25, 1998).

“In Clardy the Court examined ERISA’s broad preemption clause, as well as United States Supreme Court precedence, and held that ‘Mississippi law requiring a Chancellor’s approval before a parent may contract away a minor’s legal rights is not preempted by ERISA in this case.’  Id. at 397–99, 401. The Court found that the area of domestic relations was an area traditionally governed by state law, and preemption of state laws concerning domestic relations was uncommon, even under ERISA. Id. at 398.”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13).

The Northern District of Mississippi continued to rely on the rationale of their previous decision in Clardy quoting that:

“’[t]he administration of a minor’s estate is entirely a matter of state law, and is law of general application which affects a broad range of matters entirely unrelated to ERISA plans….’ [Clardy] at 399. Therefore, the statute is but a ‘state law of general application which has only an incidental effect upon an ERISA plan.” 

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13).

Even in the face of specific plan language providing for a contractual right of subrogation, the court continued to stand by its previous rulings that chancery court approval of a minor’s settlement was not subject to ERISA preemption.

“[I]n Estate of Ashmore v. Healthcare Recoveries, Inc., 1998 WL 211778 (N.D. Mar. 25, 1998). , the court further opined that ‘[e]ven if the parties’ ERISA plan contained an express subrogation clause, Mississippi law requiring prior chancery court approval of assignment of a minor’s rights to insurance proceeds would not be preempted by ERISA.’ Id. (citing Methodist Hosp. of Memphis v. Marsh, 518 So.2d 1227, 1228 (Miss.1988)(written agreement executed by minor’s mother not enforceable without prior chancery court approval); Clardy, 921 F.Supp. at 399 (domestic relations are traditionally matters of state law)”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13).

It is clear from this string of rulings that the courts, empowered to oversee settlement of minors’ claims, retain their authority even when faced with attempts by self-funded ERISA plans to overcome them with preemption. It is not uncommon for the plaintiff’s attorney, who is often responsible for protecting the rights of minors and those under incapacity, to seek authority from a chancery or probate court to settle personal injury action. The wise plaintiff’s counsel should petition this court to adjudicate the recovery rights of the self-funded ERISA plan. This case, as well as its predecessors, provide compelling arguments supporting that court’s overarching authority and ability to determine if, and how much an ERISA plan should be repaid.

– See more at: file:///Volumes/Design/Source%20Files/Synergy%20Settlement%20Services/Website%20Development/Site%20Backup%20Feb%202015/www.synergysettlements.com/blog/14238/index.html#sthash.dHShUEXB.dpuf

On March 17, 2014 the trial court in the infamous U.S. Airways v McCutchen entered an order allowing Mr. McCutchen to amend his answer to include affirmative defenses and a counter-claim.  The court allowed this unusually late amendment to pleadings as result of U.S. Airways’s failure to produce the Master Plan Document (MPD) until just before oral arguments at the U.S. Supreme Court. 

“[T]he Court [was] troubled by US Airways’ untimely production of the Plan documents and its disingenuous contention that Defendants failed to request the Plan document”

This is an example of how making a proper 29 U.S.C 1024(b)(4) request could have made a monumental difference. In this  seminal case, the plaintiff’s failed to properly and timely make their document request under 29 U.S.C. 1024(b)(4).  This failure allowed the ERISA plan to, at least temporarily, avoid producing the unfavorable Master Plan Document (MPD).  Just as in Cigna v. Amara, 131 S. Ct. 1866 (U.S. 2011), the benefits enumerated in the Summary Plan Description (SPD) were strikingly different from the plan participants benefits as defined in the MPD. 

In the McCutchen case the only recovery for the injured plaintiff was $10,000 from the tortfeasors Bodily Injury (BI) coverage and $100,000 from Mr. McCutchen’s own Under Insured Motorist (UIM) coverage.  After appeals to the 3^rd Circuit and the U.S. Supreme Court, Mr. McCutchen was required to repay the U.S. Airways ERISA plan over $66,866. This resulted in (after attorney fees and costs) Mr. McCutchen being $867.00 out of pocket.  What is significant is that the MPD in this instance does not allow for U.S. Airways to make a recovery from the UIM coverage, meaning that they should have only been able to look to the $10,000 in BI as a repayment source. 

Had Mr. McCutchen’s attorneys made a proper 29 U.S.C. 1024(b)(4) request this would have been discovered immediately and it is likely that U.S. Airways would have agreed with their own plan language avoiding the Supreme Court’s unfavorable decision.  ERISA plans are only able to enforce “the terms of the plan” (29 U.S. Code § 1132) and thus it is incumbent upon the plaintiff’s attorney to obtain the “terms of the plan.” 

This action by the trial court hopefully will result in Mr. McCutchen being able to retain at least some portion of the settlement proceeds.  However, the bad law of U.S. Airways v. McCutchen, 569 U.S. (2013) remains as a result of the failure to demand what every ERISA plan participant is allowed to review and every ERISA plan is required to produce.