The MSP has been in effect since 1980, and there has been little effort to enforce its provisions in third-party liability cases. Moreover, there has been no indication from CMS that they would seek to exercise their MSP rights retroactively. Indeed, the workers’ compensation example has shown that CMS is not interested in ‘looking back’ to impose MSP responsibility.
We think that the MSP Act applies to third-party liability cases.
Although Medicare has not traditionally enforced its rights under the MSP with respect to third-party liability cases, it is clear that the Act applies to those cases. Lack of enforcement will likely soon change. All insurers, third-party health plans, self-insured plans, and self-administered plans must identify situations where the Plan is or has been primary to the Medicare program. The requirements of the MMSEA including the carrier/self-insured’s duties to identify claimants and provide “such other information as the Secretary may specify” certainly signal the beginning of an enforcement effort by CMS in third-party liability cases.
It is true that there is not yet a “formal” CMS process in place for reviewing settlements in the liability arena as there is in the workers’ compensation world. However, CMS offices in Dallas and Atlanta have begun reviewing third-party liability settlements and granting approvals of set-aside agreements. At a CMS “town hall” meeting - a dial-in telephone conference call - which took place on March 16, 2010, CMS stated that “the obligation of liability settlements to protect CMS for past-due and future medical bills is exactly the same as the workers’ compensation side.” CMS said “[w]here future medicals are a consideration in arriving at a settlement, then appropriate arrangements should be made for appropriate exhaustion of the settlement before Medicare is billed for related services.”

On December 29, 2007 President Bush signed into law the “Medicare, Medicaid and SCHIP Extension Action of 2007” (‘MMSEA’). The MMSEA made changes to the nation’s three major health programs: Medicare, Medicaid, and the State Children’s Health Insurance Program (SCHIP). Section 111 of the MMSEA imposes complicated reporting obligations on self-insured and insurance carriers who settle claims with plaintiffs who have received, or who are qualified to receive, Medicare benefits for the injuries that are the subject of their claims. Specifically, RREs must identify claimants who are Medicare beneficiaries and report data regarding their identities and claim to Medicare.
Liability insurers, self-insured defendants, and defense attorneys must take all steps necessary to ensure their compliance with the reporting requirements imposed by MMSEA Section 111. The MMSEA imposes substantial fines on ‘Responsible Reporting Entities’ (“RRE”) who fail to report qualifying claims. CMS may seek reimbursement from plaintiffs, defendants, carriers, and both the claimants’ attorneys and defense attorneys.
Mandatory reporting was initially scheduled to begin July 1, 2009. This was pushed back to April 1, 2010 and now is set for January 1, 2011. RREs must register with CMS, and should have already done so.
Triggers for reporting requirements include settling a claim with a payee who received Medicare payments. In addition, CMS has set a ‘declining’ table of reviewable claims values: $5,000 in 2010, $2,000 in 2011, and $600 in 2013. In other words, if a RRE is going to settle a claim for $601 in 2013, and the claimant is Medicare-entitled, the settlement must be reported to CMS. Even if the settlement falls below these “threshold” levels, Medicare’s reimbursement rights exist.


Noncompliance can result in fines of up to $1,000 per day per claimant.

During settlement negotiations, RREs and their representatives must take care to determine whether a claimant is a Medicare beneficiary and find out if there is a Medicare lien. The lien must be paid from settlement proceeds before money is distributed to the claimant and must be paid within 60 days of payment to the claimant.

My guide for Complying with MMSEA

Each carrier and self-insured must establish protocols to comply with the Medicare reporting requirements imposed by the “Medicare, Medicaid and SCHIP Extension Action of 2007” (‘MMSEA’). Each carrier and self-insured is left to its own devices to come up with these protocols. We have seen many of our clients turn to vendors to review claims and communicate with Medicare.
My Checklist:
Carriers must determine which claimants are Medicare beneficiaries and those non-Medicare beneficiaries who have a reasonable expectation of entitlement within 30 months of the settlement date.
A claims representative should determine entitlement to Social Security and Medicare as early as possible in the file’s life. Warning flags include: (a) Has the claimant been out of work more than six months (SSD); (b) Has the claimant been off work for 30 months or longer (Medicare); (c) Was it a catastrophic injury?; (d) Is the settlement value over $250,000 (including the cost of medicals paid)?; (e) Does the claimant admit to applying for SSD and getting denied or is the SSD denial on appeal?; (f) Is the claimant aged 62 and six months old or older?; and (g) Does the claimant have end-stage renal disease?
Our rule of thumb is that where the parties negotiate a settlement that terminates the obligation of the self-insured or carrier to pay for future medicals, even if the claimant denies being on Social Security Disability, independent verification should be obtained. A vendor can be used to identify Social Security recipients.
If the claimant is on Medicare but the settlement is less than $25,000 (and forecloses the possibility of the carrier/self-insured being responsible for future medicals) CMS will not review the settlement and either ‘approve’ a proposed set-aside or ‘waive’ Medicare’s set-aside requirement. In such an instance, the carrier/self-insured can prepare their own set aside agreement with the claimant. At settlement, appropriate consent and/or testimony should be obtained from the payee, making sure they understand that the payee must ‘spend down’ the allocable amount with medical bills prior to submitting bills to the compensated injury to Medicare.
One way of verifying that a payee is not on Medicare is to ask for copies of recent pay stubs. If the pay stubs are less than six months old, they cannot be a Medicare beneficiary.

The impact of the Medicare Secondary Payer Act on civil and workers’ compensation litigation is growing. In the next few years we expect that CMS’s enforcement activities will increase. On May 24, 2010, the New Jersey Appellate Court decided a case (Jackson v. Hudson Court) that we believe is the first case in New Jersey focusing on the MSP and a civil claim. In Jackson, the plaintiff sought to have the trial court issue an order allocating the proceeds of her settlement to discharge a Medicare lien. The Court refused to do so - forcing the payee to consider Medicare’s interest in her settlement.

This article (caution - very long!) is a comprehensive guide to handling claims (workers' comepnsation claims and liability matters) in which medicare may have an interest. Read on for my review of this important topic, with flow-charts illustarting the decisions facing the employer/defendant in personal injury/workers' compensation claims. Read More...

A recent New Jersey Appellate Division decision, Campbel v. Shrewsbury Surgicenter, may have a significant impact on commercial premises liability matters within the context of available insurance coverage. The decision was based upon a dispute between the insurer of a commercial tenant and a landlord who was named as an "additional insured" on the tenant's policy. Under the facts, the court found that the landlord was entitled to coverage under the tenant's policy. However, the significant aspect of the decision relates to the court's additional conclusion regarding primacy of coverage. Based upon the types of policies involved and language of the respective policies' "other insurance" clauses, the court also held that the coverage afforded to the landlord as an additional insured under the tenant's policy was only excess to the primary coverage provided under the landlord's own insurance policy. Read More...

The Appellate Division considered in Reyes, et al. v. Egner, et al., etc .,(decided January 8, 2009) whether the lessors of a beach house had a duty to correct or warn about what are claimed to be dangerous conditions of their property, presenting hazards that allegedly were not reasonably apparent to a short-term tenant and her guests. The tenant’s elderly father, who had been vacationing at the house, was injured when he lost his balance while stepping onto an outside wooden platform. The platform was adjacent to the sliding glass door leading from the master bedroom to a rear deck. There was no handrail available to help plaintiff regain his balance, despite building code provisions that appear to mandate one. He and his wife thereafter filed a personal-injury action against the lessors and the real estate broker that had facilitated the two-week lease. Because the trial court erroneously required plaintiffs to prove that the lessors had actively or fraudulently concealed the allegedly dangerous conditions, the court vacated summary judgment entered in the lessors’ favor. The case involved a short-term rental, a context in which a lessee often has only a limited opportunity to discover hazardous conditions on the premises. However, the court affirmed the grant of summary judgment to the real estate broker, declining to extend liability to the broker in this short-term rental context beyond the limits expressed in Hopkins v. Fox Lazo Realtors, 132 N.J. 426 (1993).

Video surveillance is often relied upon by the defense in New Jersey Workers’ Compensation cases to either challenge credibility or to demonstrate that a claimant is not as disabled as he appears from his own testimony or his doctor’s examination. A recent case (Gross v. Neptune) has been relied upon by plaintiff’s attorneys to limit the introduction of videotape evidence in contested workers’ compensation trials in New Jersey. Read More...

In a case of first impression, the Appellate Division held that where a public entity settles with an injured plaintiff for an at-work injury, the plaintiff's independent contractor-employer is not entitled to a credit for workers compensation payments in a subsequent indemnity suit by the public entity. In Serpa v. New Jersey Transit, a construction worker was severely injured while working on a train station owned by New Jersey Transit -- a publicly owned concern. He received some $900,000 in workers' compensation payments from his employer, the general contractor for the job. New Jersey Transit paid the plaintiff $1.5 million to settle a personal injury suit, wherein the employer was named as a third-party defendant on an indemnity claim. The employer's attorney agreed on the record that the $1.5 million was a reasonable settlement. However, after being apportioned 85% of the fault at trial on the indemnity issue, the employer sought a credit for its workers compensation payments. The trial court declined the requested relief and the Appellate Division affirmed. The court held that N.J.S.A. 59:9-2(e) precludes reimbursement to an employer from a public entity tortfeasor. Rather, the public entity or public employee receives a credit for the workers compensation payments, if a judgment is entered. Thus, in a settlement, a public entity cannot reasonably be expected to pay full value for a claim, knowing that if the case goes to trial, it will receive a credit against the damage verdict for the workers' compensation payments. This was not accounted for by the employer in consenting to the reasonableness of the settlement.

Ultimately, the lesson taught by Serpa for carriers with insureds who work with public entities is that the public entity's right to a credit for workers compensation payments made to injured employees must be taken into account before conceding as to whether a settlement proposal is reasonable. In this case, counsel for the employer should have argued that a settlement of $600,000 was appropriate.

In the well known Rova Farms decision, the New Jersey Supreme Court held that a liability insurer who in bad faith refuses to accept a plaintiff's reasonable settlement demand, will be liable for the amount of any judgment above and beyond the insured's policy limits. In an opinion approved for publication on June 30, 2008, the Appellate Division held that a UM carrier cannot be exposed to Rova Farms liability in refusing to settle with an insured. The court in Taddei v. State Farm, was faced with a case where the plaintiff/insured made a settlement demand after non-binding UM arbitration of $87,500. A jury eventually awarded the plaintiff $2.6 million. However, the trial judge molded the verdict to the $100,000 policy limit. On appeal , the plaintiff argued that the carrier had acted in bad faith, in light of the refusal to settle. The Appellate Division was un-persuaded, reasoning that the Rova Farms bad faith model is inapplicable in the UM and UIM context because the insured is the claimant and, therefore, not exposed to an award in excess of the policy limit.

In the case of Bolz v. Bolz, a published opinion relapsed in May 2008, the Appellate Division examined the combined effect of the New Jersey Tort Claims Act (TCA), N.J.S.A. 59:1-1 to 12-3; the Joint Tortfeasors Contribution Law (JTCL), N.J.S.A. 2A:53A-1 to -5; and the Comparative Negligence Act (CNA), N.J.S.A. 2A:15-5.1 to -5.17, when there is a collision between a private automobile and an automobile that is owned by a public entity and driven by a public employee. It was held that despite the fact that a public entity is not liable to pay damages unless plaintiff sustained a permanent injury as defined in the TCA, both drivers are deemed “tortfeasors” if they are found to have been negligent and their negligence was a proximate cause of the accident.

Therefore, allocation or apportionment of each driver’s negligence or fault must be assessed, even if there is a possibility that the public entity may not be liable for damages. Put a different way, although no damages can be awarded against a public entity or employee for pain and suffering if the injuries caused by an accident do not meet the threshold set by the TCA, the public employee is, nonetheless, a tortfeasor pursuant to JTCL and the CNA and this affects the judgment against the private tortfeasor.

In Whitten v. Sybron Chemicals, Inc., the defendant Sybron hired the plaintiff's employer to perform maintenance on chemical manufacturing tanks. The plaintiff, a foreman, was injured in a fall from a ladder while repairing a piece of machinery inside one of defendant's sludge tanks. He claimed the fall was caused by sludge the defendant's employees failed to clean. Read More...

On June 11, 2008, the Assembly Judiciary Committee took up a bill that Deputy Majority Leader Joseph Cryan (D-Union) has been pushing for three legislative sessions to cap punitive damage awards in cases where several defendants are determined to share responsibility for a harm.

In such cases, as soon as one defendant reaches a punitive-damages settlement with the plaintiff, that agreed-upon figure will be used to calculate a ceiling on the punitive damages the other defendants may be assessed. For example, should a defendant judged 20 percent liable for a harm agree to pay the plaintiff $100,000 in punitive damages, then the maximum punitive damages the plaintiff could receive would be $500,000, and no defendant would be liable for more than the share of that $500,000 corresponding to his or her comparative liability.

TMWB is monitoring the progress of this important piece of legislation.

In an important decision for E&O carriers for insurance brokers, the Appellate Division has held that even where an insured knows it has a potential malpractice action against its broker, that claim will not be barred by the Entire Controversy Doctrine if it is not brought in connection with a declaratory judgment action to deny coverage procured by the negligent broker. In Media Sciences International v. Beckerman & Co., the court, in keeping with New Jersey's continuing line of cases which limit the Entire Controversy Doctrine, held that the broker is required to establish by specific facts that it was "substantially prejudiced" by the failure of the insured to join it in the underlying coverage action. Prejudice, the court noted, is primarily demonstrated by showing lack of access to relevant information. Delay alone is not sufficient, nor are "faded witness memories." Therefore, E&O carriers should beware that the the resolution of a coverage action does not necessarily indicate preclusion of a suit against a broker for malpractice.

Tompkins McGuire, regularly represents numerous industries as well as their insurers in professional malpractice claims. For more information on this case as well as other developments in this area, please contact us.

Following a series of unfavorable rulings in the Appellate Division over the past few years, New Jersey courts were generally of the view that biomechanical experts could not be called upon by defendants to opine that a minor automobile accident could not have possibly caused a serious medical condition. However, on March 6, 2008, the New Jersey Supreme Court announced its decision on Hisenaj v. Kuehner, ___ N.J. ____ (2008), reversing an appellate court that overstepped its bounds in throwing out the report of Harold Alexander, PhD., based upon the conclusion that it was not supported by reliable scientific methodology. Thus, the defendants were left with the prospect of facing exposure for significant medical treatment, including spinal surgery, for a motor vehicle collision occurring at less than ten miles per hour. However, the Supreme Court found that the studies Dr. Alexander relied upon, as opposed to those used for support in prior cases, included similar accidents and similar victims in terms of age, gender and physical composition. Thus, the opinions offered were sufficiently supported by scientific data for admissibility.

This was an important victory for insurance carriers in New Jersey, as juries will no longer be left to determine whether low impact collisions correlate to serious medical conditions, especially in the spine, which often times are pre-existing. However, it remains important for defense counsel to insist that their biomechanical experts rely upon the most recent and up-to-date empirical evidence.

TMWB maintains an extensive automobile liability defense practice, representing insureds on personal auto, as well as commercial policies.

In Koruba v. American Honda Motor Co., Inc., an Appellate court affirmed dismissal on summary judgment the plaintiff's product liability failure-to-warn lawsuit where, despite an ATV manufacturer's warnings in the owner's manual and oral warnings by the retailer seller at the time of sale, the plaintiff attempted an extreme jump and sustained serious injury. The court found that the plaintiff's expert opinion on the need for on-product labeling was a net opinion on neither epidemiological data or empirical research linking such need to the magnitude of risk associated with jumping. The court also found no basis for the expert's other opinion that Honda's promotional marketing of its ATV sent a mixed message to consumers, resulting in their failure to heed warnings actually given.

In American Wrecking Corp. v. Burlington Ins. Co., et al., the fundamental issue was the impact of a "Cross Liability Exclusion" which was added, at the time of renewal, to the liability insurance policy purchased by plaintiff American Wrecking (AW), and provided by defendant Burlington. The question, decided November 29, 2007, was triggered by the filing of certain construction worksite personal injury claims, thus requiring the court to determine whether a fair interpretation of the Exclusion compelled indemnification or supports disclaiming. Read More...

In a case currently being considered for publication, Janela v. Roman Asphalt Co., the issue of dual employment arose in the context of a government construction contract. The employer/paving company, Raebeck Construction won a contract for paving at Newark Liberty International Airport, which called for it to exercise direct control over the project and to certify that it did not share staff with any other company. On the date of the accident, an employee was struck in the head by a compressor and killed. His estate was paid dependency benefits by Raebeck. However, the estate also brought suit against another company, Roman, who actually did the paving work. It was revealed that contrary to the contract, Raebeck had no role in the job and essentially leased all workers from Roman. Raebeck did actually pay all of the workers, however. Roman moved for summary judgment on the exclusivity provisions of the Workers Compensation Act. The Appellate Division upheld the dismissal of Roman using a five part fact sensitive test focusing on the control exercised over the employees, to determine whether Roman was also an employer. It found that even though Raebeck violated specific government contract provisions to avoid this precise employment situation, bidding qualifications and contract requirements did not negate the legal rules governing workers' compensation.

Application:

When analyzing a new claim involving dual employment, an immediate and comprehensive investigation of the employment relationship is essential. Obtaining documentation such as contracts, job descriptions, employment handbooks, payroll records, and even incorporation documents is an essential strategy in evaluating the claim. Also, early identification and interviews of the owners, managers and contractors can further assist in determining the degree of control each entity had over the injured worker.

In an important decision rendered August 23, 2007, the Appellate Division conclude d that where a car rented in New York and driven by a New York resident was involved in an accident in New Jersey with a New Jersey driver, New Jersey law would apply to shield the vehicle's owner, Avis, from liability. Read More...

Governor Jon S. Corzine has signed a bill, supported by both the New Jersey State Bar Association and the Association of Trial Lawyers of America-New Jersey, banning "step-down" clauses in commercial auto insurance policies. The clauses, in effect sanctioned by the New Jersey Supreme Court's 2005 decision Pinto v. New Jersey Manufacturers Insurance Co., said drivers not specifically listed in a commercial policy would be limited to the uninsured and under-insured motorist benefits in their personal policies, not the policy of the company for which they were driving. The practice was argued as unfair to both the business paying premiums for full coverage and to new employees who, through no fault of their own, weren't listed on the policy. The bill, S-1666, was passed unanimously by both houses of the legislature and was sponsored by Senator Nicholas P. Scutari (D-Union), a trial lawyer whose practice includes personal injury.

Upon the occurrence of a workplace injury involving industrial machinery or equipment, it is often the case that an employee will sue the manufacturer of the machine as a companion to his/her Workers’ Compensation petition. At the same time, the employer might seek to effectuate changes in order to make the culpable machine safer for employee operation. However, before any such changes are made, careful consideration must be given to the potential for a claim for “spoliation evidence” against the employer. Read More...