Auto Insurer Owes For Medicare Patient Injuries, Suit Says

By Emma Cueto

Law360, New York (March 30, 2017, 5:49 PM EDT) — Three Medicare Advantage organizations hit auto insurer Erie Indemnity Co. with a proposed class action Wednesday in Pennsylvania federal court, alleging it failed to reimburse them for claims arising from auto accidents.

MAO-MSO Recovery LLC, MSP Recovery LLC and MSPA Claims 1 LLC claim Erie and its subsidiaries violated a federal law that holds private auto insurance companies responsible for claims of Medicare enrollees injured in car accidents.

“Defendants have derived substantial profits by placing the burden of financing medical treatments for their policyholders upon the shoulders of MAOs,” the complaint alleges, also stating,”[Erie’s] failure to reimburse plaintiffs and class members runs afoul of the Medicare Act and has directly contributed to the ever-increasing costs of the Medicare system.”

In the complaint, the MAOs state that the Medicare Act and its subsequent amendments in 1997 and 2007 require any company issuing auto insurance policies to determine whether a policyholder is a Medicare beneficiary if the policy includes coverage for injuries sustained in an auto accident. If such a policyholder issues a claim, the company must notify Medicare and MAOs, which might otherwise never know such a policy exists. As federal law also makes these policies a Medicare beneficiary’s primary plan, companies are responsible for reimbursing MAOs or the Centers for Medicare & Medicaid Services for any claims paid out.

Erie, the complaint alleges, failed to act on this obligation, which resulted in MAOs paying for claims that should have been handled by Erie. The suit accuses Erie of violating the Medicare Act and of breach of contract. It seeks to represent all MAOs and similar entities that have paid claims that should have been handled by Erie.

The suit asks for double damages under the Medicare Act and statutory damages, which can be up to $1,000 per day of noncompliance, as well as attorneys’ fees and an injunction against Erie’s allegedly illegal practices.

These three MAOs are also involved in similar suits against other large insurance companies, including class actions filed in February against Progressive and Nationwide Mutual.

Erie did not respond Thursday to a request for comment. The MAOs and their counsel did not respond Thursday to requests for comment.

The MAOs are represented by Cara J. Luther, Michael L. Baum, R. Brent Wisner and Pedram Esfandiary of Baum Hedlund Aristei & Goldman PC, and Christopher L. Coffin, Tracy L. Turner and Courtney L. Stidham of Pendley Baudin & Coffin LLP.

Counsel information for Erie was not available Thursday.

The case is MAO-MSO Recovery II LLC et al. v. Erie Indemnity Co. et al., case number 1:17-cv-00075, in the U.S. District Court for the Western District of Pennsylvania.

–Editing by Richard McVay and Breda Lund.