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Medicare Reporting Deadline Extended for Liability Settlements

The deadline to report liability settlements to Medicare has been extended one year. On November 9, 2010, the Centers for Medicare and Medicaid Services issued an Alert extending the deadline so that liability settlements, without ongoing responsibility for medicals, must now be reported by the first calendar quarter of 2012, instead of 2011. The extension does not apply to claims involving ongoing responsibility for medicals, such as worker's compensation claims, no fault insurance claims, and some liability settlements. Responsible reporting entities will be required to report settlements that occur on and after October 1, 2011.

Additionally, the schedule for minimum reporting thresholds has been extended one year. A claim where the total payment to a claimant is $5,000 or less does not need to be reported before January 2013. In 2013, all payments totaling at least $2,000 must be reported, and that limit drops to $600 in 2014. In 2015, all total payments to a claimant must be reported.

Here is the link to the November 9, 2010 Alert:
http://www.cms.gov/MandatoryInsRep/Downloads/RevTimelineTPOC110910.pdf.

How Workers’ Compensation Laws Can Affect Settlement Negotiations

By Diana Fedoroff

Oregon’s workers’ compensation laws, ORS 656.001 et seq., allow for two classes of potential plaintiffs – either the injured worker or the entity paying the workers’ compensation benefits (generally the injured worker’s employer or its insurer). The workers’ compensation statutes structure the disbursement of proceeds recovered from a liable third party such that, depending on which kind of plaintiff pursues the third party claim, the plaintiffs’ incentives and threshold to settle may vary greatly. A defense attorney engaged in settlement negotiations in a case involving workers’ compensation should keep in mind the different pressures and requirements placed on the two classes of plaintiffs. This will help a defense attorney understand and advise her clients on a plaintiff’s willingness to settle the suit at all, how much pressure the plaintiff may be under to arrive at a certain settlement figure, and the calculation of an appropriate settlement figure.

I. How the Statutes Create Two Classes of Potential Plaintiffs

Either the injured worker or the entity paying the workers’ compensation benefits may become a plaintiff in a claim for damages beyond the statutorily prescribed compensation for the injury. The entity paying the workers’ compensation benefits is usually either the employer’s insurance carrier or a self-insured employer. This entity is referred to as the “paying agency.” ORS 656.576.

Generally, the workers’ compensation scheme provides an exclusive remedy for injured workers with regard to their employers. With certain exceptions, if an employer complies with its duties under the workers’ compensation statutes, the employer is exempt from liability claims brought by the injured worker for amounts beyond the statutorily prescribed compensation for the injury. ORS 656.018. If an employer does not comply with its duties, the employer is still liable for injury compensation, but the employer loses the protection of the statute’s exclusive remedy provision and the injured worker may seek to recover damages from the employer. ORS 656.020; ORS 656.054; ORS 656.578.

If a third party causes the compensable injury, the injured worker may also seek to recover damages from that third party. ORS 656.154; ORS 656.578. The injured worker’s election to seek damages from a non-complying employer or from a third party does not affect the worker’s right to receive workers’ compensation benefits from the employer under the statutory scheme for compensable injuries. ORS 656.580. Thus, injured workers may be plaintiffs in cases against both third parties and against non-complying employers.

The statute also provides for the paying agency to seek recovery from a third party when the injured worker does not pursue the claim. The paying agency may force the injured worker to decide whether to pursue a claim against a potentially liable third party by issuing a written demand to the injured worker. ORS 656.583(1). If the worker does not elect to pursue the claim within 60 days of the demand, then the claim is deemed assigned to the paying agency. ORS 656.583(2). If the worker elects to pursue the claim, but fails to initiate the claim within 90 days of electing to pursue the claim, the claim is again deemed assigned to the paying agency. ORS 656.583(2).

II. When the Paying Agency Pursues the Third Party

If the claim is assigned to the paying agency, the paying agency may bring the claim in the name of the injured worker. ORS 656.591(1). If the paying agency recovers from the third party, it may reimburse itself for three categories of expenses: (1) Expenses incurred in obtaining the recovery;

(2) The amount expended for workers’ comp-ensation benefits, first aid or other medical, surgical or hospital service; and (3) The present value of the future monthly payments of compensation to which the injured worker is entitled. ORS 656.591(2).

Any recovery amount in excess of these amounts must be paid to the injured worker. Thus, if the paying agency pursues the third party claim, its only incentive is to recoup its own past and future expenses and it is not obligated to ensure that any recovery goes to the injured worker.

III. When the Worker Pursues a Third Party

An injured worker, on the other hand, who elects to pursue the third party claim has more considerations that bear on how they approach settlement negotiations. First, the paying agency will automatically have a lien against any recovery by the injured worker. ORS 656.580(2). Second, the statute’s disbursement rules create a personal incentive for the worker to hold out for the highest possible settlement. Third, the paying agency controls whether the plaintiff may settle the claim. Finally, the ability of an injured worker to extinguish the paying agency’s lien on the recovery proceeds, if the recovery is high enough, adds further incentive for the plaintiff to hold out for a high settlement figure or take his chances at trial.

A. Disbursement of Damages

The workers’ compensation scheme details how any funds must be disbursed when an injured worker recovers from a third party. The plaintiffs’ attorney receives up to one-third of the total recovery for costs and fees, and the worker receives one-third of the remaining balance of the recovery before the paying agency is reimbursed at all. ORS 656.593(1) (a)-(d). If the balance of the remaining recovery is insufficient to cover the paying agency’s expenses, the paying agency is simply out of luck. If the paying agency’s share exceeds the amount necessary to reimburse the agency for costs paid and for future costs, the agency must turn over the remaining funds to the worker. The paying agency must retain the estimated amount to cover future expenses and payments to the injured worker. If it merely reimburses itself for past costs and then turns over the remaining balance to the injured worker, the paying agency loses its right to seek recovery of those amounts needed for future medical costs.

B. Settlement Requirements

If the injured worker pursues the third party claim, the worker may not settle the claim without the paying agency’s written approval or, in the event of a dispute between the worker and the paying agency, without an order from the Workers’ Compensation Board. ORS 656.587.

If the paying agency approves the settlement, the injured worker must receive the amounts to which he would have been entitled under the previous sections. ORS 656.596(1) and (2), ORS 656.593(3). The paying agency may accept whatever amount is “just and proper.” “Just and proper” means an amount equal to or less than what the paying agency would have received from a judgment in a third party action.

Thus, where the worker pursues the third party claim, the worker has an incentive to recover as much as possible because he stands to receive a large portion of the recovery. Additionally, the worker may be under pressure from the paying agency to settle for an amount that would allow for full reimbursement of the paying agency after the plaintiff and his or her attorney receive their portions of the settlement.

IV. Cancellation of the Paying Agency’s Lien

If the injured worker recovers an amount from which the worker’s portion would total more than one million dollars, the worker may elect to partially cancel the paying agency’s lien on the recovery proceeds. In this situation, if the worker agrees to release the paying agency from all future liability regarding the workers’ compensation claim, the worker extinguishes the paying agency’s lien on the amount of the recovery that represents the value of the paying agency’s future expenditures. ORS 656.593(6)-(7). Any settlement agreement encompassing this situation must still provide for the reimbursement of costs incurred by the paying agency in paying benefits, first aid or other medical, surgical or hospital service. ORS 656.593(6)(b)-(d). Thus, in addition to the worker’s personal share of the recovery, the worker may also have the opportunity to receive up front the value of all his future benefits. Therefore, where the injury warrants such a high recovery, the worker has an incentive to push for an amount that would break the one-million-dollar threshold and allow the worker to increase his total recovery beyond this amount.

V. Conclusion

In many cases, it will be easier to achieve a reasonable settlement where the paying agency has brought the claim on behalf of the injured worker because the paying agency has only the incentive to recover its own costs. Conversely, where the injured worker pursues the claim, settlement may be difficult to achieve because the worker has personal incentives to recover as much as possible. Additionally, in an action brought by the worker, the paying agency has control of whether the plaintiff can settle the case. Because the paying agency is third in line to receive funds from any settlement, it has incentive to withhold its assent and force the plaintiff to hold out for a settlement large enough to provide for attorney fees, the worker’s personal share, and also for full reimbursement of the paying agency’s costs.

Ninth Circuit Expands Definition of “Religious Organization” for Purposes of Permissible Religious Discrimination under Title VII

By Bryana Sack and reprinted with permission from OADC

A corporation interviews an applicant for an accounting position. The corporation, although not associated with any particular church, is faith-based. The employer asks the applicant if she follows the same religious ideology as the corporation. When the applicant says no, the employer informs the applicant that she is no longer a contender for the position. Angered, the applicant files a complaint in the Ninth Circuit federal court for religious discrimination under Title VII. Does she have a valid claim?

Before Spencer v. World Vision, Inc., (9th Cir August 23, 2010) the answer probably would have been yes. Now, the answer is not so clear.

Title VII of the Civil Rights Act, 42 USC §2000e-2(a), bars religious discrimination in employment. The bar does not apply to a “religious corporation, association . . . or society with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities.”

Historically, the Ninth Circuit Court of Appeals applied a narrow interpretation of the statute. In EEOC v. Townley Eng’g & Mfg. Co., 859 F2d 610 (9th Cir 1988), the Court determined that a for-profit manufacturer of mining equipment did not qualify for the Title VII exemption, even though the company, founded as a “Christian, faith-operated business,” enclosed Gospel tracts in outgoing mail, printed Bible verses on invoices, and conducted weekly prayer meetings for employees.

The Court characterized its inquiry as an effort to determine whether the general picture of an institution is primarily religious or secular, and concluded that the company was primarily secular because it was for-profit, unaffiliated with any church, did not include a religious purpose in its articles of incorporation, and produced a secular product. The Court reasoned that Congress intended only to exempt churches and entities similar to churches.

The Court came to a similar conclusion in EEOC v. Kamehameha Schools, 990 F2d 458 (9th Cir 1993), which involved a group of schools founded pursuant to a bequest that required all teachers be Protestants. The Court considered the fact that the schools were unaffiliated with any particular church and determined that the schools were secular institutions with a historically religious tradition, and were ineligible for the exemption.

Townley and Kamehameha suggest that the hypothetical plaintiff has a valid claim because the exemption, narrowly construed, would not apply to a corporation that is not a church, similar to a church, or affiliated with any particular church or similar entity. Spencer, however, suggests that the Ninth Circuit is expanding the types of qualifying organizations.

In Spencer, World Vision Inc. terminated three employees (“plaintiffs”) after it discovered that plaintiffs disavowed a central doctrine of World Vision’s Statement of Faith. World Vision describes itself as a “Christian humanitarian organization dedicated to working with children, families and their communities worldwide … by tackling the causes of poverty and injustice.”

Plaintiffs filed suit, alleging discrimination in violation of Title VII. The district court held that World Vision was exempt under Title VII and granted summary judgment in its favor. The Ninth Circuit Court of Appeals upheld the decision of the district court on different grounds. While the majority of the Court agreed on certain factors to determine whether a religious organization falls under the exemption, they disagreed on the ultimate test.

The Court agreed upon the following factors:

The organization need not be a church or house of worship. The Court examined the language of Title VII and determined that if Congress intended to restrict the exemption to “[c]hurches, and entities similar to churches,” it would have said so.

The organization need not always discriminate on a religious basis. The Court determined that a religious organization did not need to follow a strict policy of religious discrimination to be entitled to the exemption.

The Court refused to place weight on certain historically applied factors, such as where an organization receives its funding, and whether an organization’s activity, product or service is primarily religious or secular.

Judges O’Scannlain and Kleinfeld, however, disagreed on the ultimate test to determine whether a religious organization qualifies for the exemption. Judge O’Scannlain placed significant weight on an organization’s non-profit status and held: A nonprofit entity qualifies for the Title VII exemption if it establishes that it (1) is organized for a self-identified religious purpose (as evidenced in its articles of incorporation or similar foundational documents), (2) is engaged in activity consistent with, and in furtherance of, those religious purposes, and (3) holds itself out to the public as religious.

Judge Kleinfeld disagreed. Claiming Judge O’Scannlain’s test would also allow people “to advance discriminatory objectives outside the context of religious exercise by means of more corporate paperwork,” Judge Kleinfeld focused on how the corporation charges for its services or products. He stated that looking at how an institution charges sorts out the institutions focused on profit, as opposed to those who provide products or services for little or no money serve a religious purpose.

Judge Kleinfeld reformulated the test as follows: To determine whether an entity falls within the exemption, look at whether the entity: (1) is organized for a religious purpose, (2) is primarily engaged in carrying out that religious purpose, (3) holds itself out as an entity for carrying out that religious purpose, and (4) does not engage primarily or substantially in the exchange of goods or services for money.

Both judges agreed that World Vision, under either test, qualified for the Title VII religious organization exemption. Yet what does the holding of Spencer mean for our hypothetical plaintiff?

Although the Court did not formulate any clear test, the two tests can be combined to determine what organizational requirements must be met. First, the hypothetical corporation must be organized for a religious purpose, and the purpose must be set forth in the articles of incorporation. Second, the actions of the corporation must be consistent with the religious purpose. Third, the corporation must hold itself out to the public to be a religious organization. Fourth, the corporation must be a non-profit. Fifth, the corporation must offer products or services for free, or for a nominal amount.

If the hypothetical corporation does not meet all of the requirements, plaintiff may have a valid claim under Title VII for religious discrimination. It remains to be seen how the Court will rule on an organization that meets the elements of one test but not the other. In the meantime, counsel for employers should advise any entity that wishes to qualify for the exemption to meet the requirements of both tests.

Recent Insurance Coverage Decisions

For further information please feel free to contact Jeffrey V. Hill or Heather A. Bowman

Two significant insurance coverage duty to defend cases were decided recently in Oregon. The cases involve issues relating to Additional Insureds and Environmental Damage.

1. In determining the existence of a duty to defend, extrinsic evidence is allowed to prove a party is an “insured.” Shearer v. Gemini Ins. Co., __ Or App ___, 2010 WL 3768022 (Sept 29, 2010). Oregon law strictly follows “the four corners rule.” This rule requires that an insurer make its decision of whether a duty to defend exists based only on the allegations in the complaint and the language of the policy. If the complaint alleges a claim which, if proven, would require the insurer to indemnify, then the insurer must defend. In Shearer, the complaint did not allege an insured’s status pursuant to a vendor’s endorsement in Gemini’s policy. The court discussed the reasons for the Oregon rule, and distinguished them from the circumstance where the insured’s status as an insured is not alleged, in these terms:

When the question is whether the insured is being held liable for conduct that falls within the scope of a policy, it makes sense to look exclusively to the underlying complaint. That complaint sets the boundaries of the insured’s liability, and, as the court reasoned in [Isenhart v. General Casualty Co., 233 Or 49, 377 P2d 26 (1962)], “if a contrary rule were adopted, requiring the insurer to take note of facts other than those alleged, the insurer frequently would be required to speculate upon whether the facts alleged could be proven.” 233 Or at 54.

The same cannot be said with respect to whether a party seeking coverage is an “insured.” The facts relevant to an insured’s relationship with its insurer may or may not be relevant to the merits of the plaintiff’s case in the underlying litigation. The plaintiff in the underlying case is required to plead facts that establish the defendant’s liability; the plaintiff is often not required to establish the nature of the defendant’s relationship to some other party or to an insurance company in order to prove a claim. In this case, for example, the [plaintiff] had no reason to allege that Shearer sold or distributed [named insured’s] products in the ordinary course of its business; nor did [third-party plaintiff] need to allege that fact in order to make out its third-party claim against Shearer.

The court admitted extrinsic evidence to show that Shearer was an insured pursuant to a vendor’s endorsement. This decision is applicable to other “defined insured” circumstances such as the Additional Insured. The court also held that two exclusions were susceptible to more than one reasonable interpretation and, thus, did not eliminate the duty to defend.

2. An EPA Request for Information pursuant to 104(e) of CERCLA is a “suit” pursuant to a CGL policy. In Ash Grove Cement Co. v. Liberty Mutual Ins. Co., 2010 WL 3894119 (USCD Oregon, Sept 30, 2010), United States District Court Judge King concluded that a 104(e) request is a “suit for damages” which requires a defense, stating in part:

I do not find the insurers' argument persuasive. The § 104(e) letter says that while EPA seeks Ash Grove's "voluntary cooperation," compliance with the request is "required by law," and that if Ash Grove fails to respond fully within a certain time, EPA can commence an action for civil penalties of up to $32,500 per day for noncompliance. The letter is not merely a request that Ash Grove provide information; it contains a threat of legal action and substantial penalties for failure to comply with the request.

We believe that it is likely that both decisions will be appealed. Let us know if you would like a copy of the cases or wish to discuss their affect on Oregon law.

 

Satisfying Medicare Requirements in Personal Injury Claims

By: Vicki M. Smith

Medicare law creates pitfalls for claimants, lawyers, and insurers handling claims involving personal injuries. Those pitfalls may turn into liability for significant fines if the parties fail to follow the Medicare requirements. Beginning January 1, 2011, personal injury claims from Medicare-eligible claimants are required to be reported to Medicare. Further, Medicare is entitled to 100% recovery of the benefits it paid during treatment for the injury and will seek reimbursement from any settlement or payment for the claim. Failure to comply with the reporting or reimbursement requirements can result in a $1,000 daily fine per claimant, interest, and double damages. This article discusses the new Medicare law, its role in personal injury litigation, and Bodyfelt Mount LLP's plan to assist our clients and insurers to comply with the law. For further information, see 42 U.S.C. 1395y, 42 CFR § 411.21 et seq. (2009), and the webpage for the Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees Medicare, at http://www.cms.hhs.gov/MandatoryInsRep/.

What claims must be reported?

The Medicare law affects only claims by those who are Medicare-eligible or reasonably expected to be Medicare-eligible within 30 months. It is important to verify whether a claimant received benefits from Medicare beyond just looking at the claimant's age because age is not the only factor to determine whether a claimant is Medicare-eligible. Individuals who are at least 65 years old are eligible for Medicare. An individual who is reasonably expected to be eligible, within the meaning of the reporting requirements, may be 62½ years old. Also eligible are people with certain disabilities who qualify for Social Security Disability Insurance benefits, who have permanent kidney failure and require kidney dialysis or transplant, or who have Amyotrophic Lateral Sclerosis (Lou Gehrig's disease). A claimant must also be a citizen of the United States or a legal permanent resident in order to be eligible for Medicare.

To determine whether a claimant is a Medicare beneficiary, a reporting entity should submit a query to the Centers for Medicare and Medicaid Services through its website. The query must include the claimant's name, social security number, date of birth, Medicare Health Insurance Claim Number, and gender. The CMS has 14 days to respond to the query.

Only claims involving personal injury must be reported to Medicare. Those claims may arise in personal injury actions, toxic tort actions, or employment claims involving medical expenses. There are limited exceptions to the types of claims that must be reported. Claims arising out of exposure to a substance that occurred and ended before December 5, 1980 are excluded from the reporting requirement. Also, there are minimum reporting thresholds that must be met before payments to a claimant need be reported. The thresholds decrease with time. In 2011, the total amount of payments to a claimant of $5,000 or more must be reported. In 2012, all payments totaling at least $2,000 must be reported, and that limit drops to $600 in 2013. In 2014, all total payments to a claimant must be reported.

While the first settlement reporting date is January 1, 2011, reporting entities will be required to report settlements that occur on and after October 1, 2010, as well as cases that are initiated on or after January 1, 2010 where the reporting entity assumes ongoing responsibility to pay medical expenses (these latter cases generally involve workers' compensation claims).

Who must report?

Any entity that makes a payment to a Medicare beneficiary on a settlement, judgment, award, or of items or services included in a personal injury claim must report the claim and may be liable for Medicare's reimbursement. These entities may include insurers, self-insured entities, certain categories of insured entities, and employers administrating workers' compensation plans. The Medicare law's definition of a self-insured entity differs from the definition that is commonly used in litigation. Medicare considers any "entity that engages in a business, trade or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part." 42 U.S.C. 1395y(b)(2)(A).

What to report and when?

If a claimant is entitled to Medicare benefits, the reporting entity must report information about the claim and claimant to Medicare once the claim is resolved. The parties have 60 days after the claim is resolved to reimburse Medicare. There are many categories of information about a claimant that needs to be reported to Medicare. A reporting entity should visit the CMS website to complete the report and electronically submit it to the CMS. Failure to report can result in a $1,000 per day fine per claimant.

If payment is made to a claimant and Medicare is not reimbursed, Medicare can bring a legal action against the claimant and the reporting entity. The reporting entity may be held liable to reimburse Medicare even though it has already paid the claimant for the same expenses that Medicare seeks reimbursement.

Reporting is required even if there is no admission of liability, as is the case with most settlement releases. A disclaimer of liability in a release signed by the claimant does not satisfy the reporting requirement. The law requires reporting if medical expenses are claimed or released. Therefore, the parties must still fulfill the reporting requirements even if they agree that a settlement or payment does not include paying medical expenses.

How does the law affect handling and settling claims?

Changes to the law place the burden of determining whether a claimant is Medicare-eligible on the reporting entity. Although the reporting entity can ask the claimant directly, the reporting entity cannot rely on the claimant's response. To avoid fines and damages, a reporting entity should verify with the CMS whether a claimant is a Medicare beneficiary and continue to check the claimant's status with Medicare. The reporting entity has an ongoing duty to ensure that a claimant does not become a Medicare beneficiary before resolving a claim and a reporting entity can resubmit the claimant's information to CMS once a month. When a claimant is a Medicare beneficiary, the reporting entity should report payments promptly to Medicare.

Settling cases with Medicare beneficiaries will be more difficult. Medicare is looking for 100% reimbursement of the benefits it paid, regardless of a claimant's comparative fault. That puts the claimant in a difficult position because the claimant cannot expect to recover all damages due to his comparative fault and yet the claimant will seek a settlement amount that will fully reimburse Medicare, pay attorney fees, and leave some amount for the claimant.

Also, Medicare will generally not issue a final demand letter to a claimant setting forth the claimant's payment responsibility until it receives notice that the claim is resolved. However, the claimant can learn an approximation for Medicare's lien on the CMS website. Another pitfall for the claimant is when he asserts that some of the Medicare benefits paid do not relate to the injury for which the claimant received payment from the reporting entity. Negotiating with Medicare will take time.

To finalize the settlement and to protect itself, the reporting entity needs to know precisely how the settlement funds will be disbursed and ensure Medicare's reimbursement. It is imperative that these discussions take place during settlement negotiations and are memorialized in settlement documents. A reporting entity may try to negotiate that the settlement check be issued with Medicare as a co-payee along with the claimant and the claimant's attorney. Claimant's counsel will likely object to this because, again, negotiating and dealing with Medicare can take a significant amount of time. Alternatively, the parties may agree to enter into an enforceable settlement, report that settlement to Medicare, and defer payment on the settlement until the claimant receives Medicare's final demand letter. Then, the reporting entity can issue a check to Medicare directly to satisfy its reimbursement and a separate check to the claimant and the claimant's attorney.

A third option is to set aside funds sufficient to satisfy Medicare's reimbursement in an escrow account. Once the claimant receives the final demand letter, the escrow account will pay Medicare and provide any remaining funds to the claimant. The settlement documents should specifically state who is responsible to satisfy any amount of the Medicare lien that is not satisfied by insufficient funds in the escrow account. The reporting entity needs to ensure it is entitled to a copy of the escrow's payment to Medicare and a copy of the letter from Medicare confirming its lien has been satisfied.

Is a Medicare Set-Aside necessary?

A claimant's future medical needs relating to the claim must also be discussed during settlement negotiations because the parties need to prove to Medicare that Medicare's interest was considered in the settlement. The surest way of showing the parties considered Medicare's interest is by setting up a Medicare Set-Aside ("MSA"). A MSA is a pre-determined amount of money set aside to be used for a claimant's future injury-related medical and drug needs. MSAs are not yet required for liability cases, however, they are required for worker's compensation claims and it may be a matter of time before they are required for liability matters too.

If the claimant and reporting entity decide that a MSA is not necessary for a particular claim but there will be future medical expenses arising out of that claim, the parties should include language in the settlement documents identifying a specific amount of settlement funds to be set aside for paying future injury-related medical expenses. The settlement documents should also clarify the parties' agreement that the claimant is the primary payer of the set aside amount before Medicare has to start paying medical bills. The amount set aside for future medical expenses should be a reasoned amount and may be based on a life care plan, medical cost calculation, or other justifiable calculation.

In summary, reporting entities should have some system in place to confirm whether personal injury claimants are Medicare eligible or are Medicare recipients through the CMS. Settlement negotiations with Medicare recipients should include a discussion of how to reimburse Medicare and specifically identify the funds to be set aside to repay Medicare. Finally, promptly report any payments to a Medicare recipient to avoid any fines.

What Bodyfelt Mount LLP is doing to assist with compliance.

To help determine whether a claimant is a Medicare beneficiary, Bodyfelt Mount LLP will inquire as to a claimant's social security number, birth date, Medicare Health Insurance Claim Number, any information regarding any payments or benefits at any time by Medicare, whether the claimant has a history of kidney disease, and whether the claimant has ever received or applied for Social Security Disability Benefits. These inquiries will be made during discovery requests so as to provide the earliest notice possible to our clients. We will also stringently review a claimant's medical bills and invoices to watch for any indication that Medicare paid those bills.

We will discuss the Medicare issues raised in this article with our insurer and self-insured clients. When we have some indication that a claimant may be Medicare-eligible or a Medicare recipient, we will immediately bring that information to the attention of our clients and follow up with our clients to determine the result of the CMS queries. Upon resolution of a claim, we will also remind our clients to report the claim to Medicare.

At the beginning of settlement discussions, we will inquire as to whether the claimant is willing to sign a consent form allowing us to obtain the conditional payment estimate from the CMS. If so, we will obtain the conditional payment estimate. Also during settlement discussions, we will explicitly discuss with the claimant's counsel how Medicare will be reimbursed, whether any amount should be set aside to pay future medical expenses, and that the claimant is responsible for any outstanding amounts owed to Medicare. When we reach an agreement with the claimant's counsel about reimbursement and set-aside amounts, we will include that information in the final settlement agreement or release.

The settlement agreement or release will also indicate that any disbursement of settlements funds is conditioned on satisfying Medicare's lien. We will further include in the settlement agreement or release an indemnity provision requiring the claimant to indemnify the released parties (our clients) for any failure to satisfy Medicare's lien. Although, we should note this latter provision provides no protection against Medicare's remedies but may provide a cause of action against the claimant.

 

“Proof of Loss” Expanded to Include Verbal Notice of Loss

By: Heather Bowman

The Oregon Supreme Court’s interpretation of “proof of loss” broadened dramatically with the decision in Parks v. Farmers Ins. Co. of Oregon, 347 Or 374, ___ P3d ____ (December 24, 2009) (available at http://www.publications.ojd.state.or.us/S055403.htm).  In Parks, the court held that telephone conversations between insureds and their agent constituted a proof of loss for purposes of starting the six month period for claiming attorney fees pursuant to ORS 742.061.

ORS 742.061 permits an insured to recover attorney fees if the insured files suit to recover under an insurance policy and the insured’s recovery exceeds the amount of any tender by the insurer “if settlement is not made within six months from the date proof of loss is filed with the insurer.” An insured can also recover attorney fees under this statute when seeking personal injury protection (PIP) benefits if the insurer has not, within six months of the date of filing a proof of loss, accepted coverage and consented to submit the case to binding arbitration on the issue of benefits due the insured. The statute also allows attorney fees to an insured seeking uninsured or underinsured motorist (UM/UIM) benefits if the insurer has not, within six months of the date of filing a proof of loss, accepted coverage and consented to submit the case to binding arbitration on the issues of the liability of the insured and the damages due the insured.

In Parks, the insureds contacted a Farmers agent twice by telephone to report damage to a rental home caused by a methamphetamine lab. Ms. Parks initially called to ask if Farmers could assist with the costs of decontamination of the property. Ms. Parks told the agent about a police seizure and quarantine of the house, the address of the house, and contact information for the decontamination contractor hired to repair the house. The Farmers agent instructed Ms. Parks to call back if she got more information. A month later, Mr. Parks called the same agent and reported his current repair costs and future estimates. The agent did not refer Mr. Parks to the Farmers’ claims hotline or tell him how to file a claim. There was no further contact between insurer and insured until almost one month later, when the Parkses filed suit against Farmers for breach of their duties under the insurance policy. The case settled just short of six months from the date the Parkses filed suit and the Parkses filed a petition for attorney fees pursuant to ORS 742.061, arguing that the dates of the telephone calls with the Farmers agent served as filing proof of loss.

The term “proof of loss” is not defined under the statutory scheme. Farmers argued that the term requires a writing, noting particularly that ORS 742.053 requires an insurer to provide forms of proof of loss at an insured’s written request. The court instead looked to the “functional interpretation” of the term. In previous decisions, the court held that the purpose of proof of loss was to permit an insurer to estimate its obligations, taking into account an insurer’s obligation to investigate and clarify uncertain claims. Proof of loss can be “any event or submission which places the insurer on notice.” In Parks, the court held that the insureds' telephone calls to the agent were sufficient to provide Farmers with adequate notice to allow it to ascertain its obligations regarding the claim.

Although Parks does not specifically examine proof of loss in the PIP or UM/UIM context, the holding will apply in that context. Accordingly, in first party, PIP, or UM/UIM claims, insurers should treat the initial contact from an insured reporting a claim as starting the six month time period for attorney fees. If settlement is desired, an offer should be made within six months of initial contact from the insured to avoid the risk of attorney fees. Given the court’s recent trend favoring plaintiffs in these disputes, treating an insured’s initial contact regarding a claim as the proof of loss would not be overly cautious.