Sixth Circuit District Court Denies Insurer’s Motion to Dismiss MSP Private Cause of Action

Last week, in Nawas v. State Farm Mut. Auto. Ins. Co., 2014 U.S. Dist. LEXIS 12365, a U.S. District Court in Michigan, following precedent set by the Sixth Circuit, denied a defendant’s motion to dismiss a private right of action under the Medicare Secondary Payer Act (MSPA). The Plaintiff, Mr. Nawas, sued his insurance company, State Farm, after they declined to pay his medical bills, which caused Medicare to step in and conditionally pay for his treatment.

State Farm put forth two reasons that the complaint against them should be dismissed.  One argument was that the plaintiff has no private cause of action under MSPA because he did not allege that State Farm denied his coverage based on the fact that he was entitled to Medicare. That argument was subsequently withdrawn following the Sixth Circuit’s reversal of the district court’s ruling in Michigan Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787 (6th Cir. 2014).  State Farm then argued that the Plaintiff’s claim was premature, because such a claim under the MSPA cannot be pursued until State Farm’s obligation to pay Plaintiff has been established by a judicial determination or settlement.

State Farm relied heavily on the fact that the MSPA requires a judicial determination or settlement that establishes a defendant’s “responsibility to make payment.” They built their argument on two cases. Relying heavily on the decision in Bio-Medical Applications v. Central States, 656 F. 3d 277(6th Cir. 2011), the court determined that when Congress amended the MSPA in 2003, they did so in order to reinforce the legal responsibility of tortfeasors, not all potential defendants. The court reasoned that the “demonstrated responsibility” language included in the 2003 amendment of the MSPA was not meant to prohibit or delay direct actions against non-tortfeasor defendants, including private insurance companies like State Farm. They agreed with the Bio-Medical Court’s reasoning that the addition to the MSPA regarding demonstration of responsibility is only logical when in the context of the tort and should not be applied to a case involving an insurance contract, where the carriers assume the responsibility of paying by virtue of their contract with the petitioning party. The court went on to say that their decision not to dismiss was implicitly supported by the Sixth Circuit’s recent decision in Michigan Spine, which allowed a claim to proceed against the defendant - State Farm in that case as well - prior to any “demonstrated responsibility” on the part of the defendant to pay an underlying no-fault claim.

Please note that this is not the final decision in this case. Instead, the court’s decision denying dismissal only allows the parties to proceed and litigate their claims based on the merits of the case.