Dallas insurance lawyers know to be aware of liens and subrogation interests related to insurance claims. As these relate to Medicare, a 2006, Beaumont Court of Appeals case is a must read. The style of the case is, Tom Lewis v. Allstate Insurance Company. Here is what it tells us.
Lewis, who was insured under an automobile liability policy issued by Allstate Indemnity Company (“AIC”), made a claim for uninsured motorist benefits after being injured in an automobile accident. After corresponding for several months with AIC about his claim, Lewis retained counsel. Lewis’s counsel sent a demand letter to AIC for full uninsured motorist benefits under the policy. A representative of AIC responded, indicating she would be responsible for handling the claim and requesting additional information. Allstate’s representative subsequently sent a letter to counsel which stated, in pertinent part:
You have asked us to make payment to you and your client without protecting the federal government’s right of subrogation in this claim. We have information that Medicare has made payments for treatment rendered as a result of this accident and we do not feel that we can safely send a check to you and your client without protecting their interest.
. . . .
If you are convinced in your belief that the government has no valid subrogation right, we ask that you write to the federal agency involved and get a written response from them that tells us that they are not going to seek subrogation in this particular case so that we may safely pay you and your client without the possibility of having later to reimburse them for their interest.
AIC proposed to pay $20,000 to settle Lewis’s claim and forwarded a check for that amount naming Lewis, Lewis’s counsel, and Medicare as co-payees. Lewis’s counsel rejected the check, and Lewis subsequently sued AIC. In his lawsuit, Lewis alleged Allstate breached its contract by naming Medicare as a co-payee on the settlement check, and he also sought damages under the Texas Prompt Payment of Claims Act.
Allstate filed a motion for summary judgment, in which it alleged it did not breach its contract with Lewis because no express agreement existed as to how the settlement check would be issued, and it was not liable to Lewis under the Prompt Pay Act because AIC, not Allstate, issued Lewis’s insurance policy. Allstate also filed a motion for summary judgment, in which it asserted it properly included Medicare as a co-payee on the settlement check because it was obligated to protect Medicare’s interest. The trial court entered an order granting Allstate’s motion. In its order, the trial court found that the inclusion of Medicare as a payee on a check tendered to pay policy benefits is proper in this matter. At the time the check was issued the amount of the Medicare claim was unknown by Lewis and remains unknown today. There is no requirement pursuant to law for an insurance company to independently obtain the amount of Medicare’s lien prior to issuing a draft for policy benefits.
Lewis asserts the summary judgments are erroneous because (1) Allstate breached its contract by including Medicare as a co-payee on the settlement check issued to Lewis and (2) Allstate has a duty to investigate the amount of Medicare’s interest. As Lewis concedes, Medicare, pursuant to 42 U.S.C.A. 1395y(b)(B)(ii), may seek reimbursement from an insurance company that knew or should have known about payments made by Medicare but failed to protect Medicare’s rights. Lewis correctly asserts “that it is a breach of contract for an insurer to include Medicare on a benefit check where the insurer had no reason to suspect that Medicare had any entitlement to a portion of the benefits paid.”
Lewis argued that Allstate breached its contract and its alleged duty to determine the amount paid by Medicare. Lewis maintains that this Court “clearly placed the burden of determining Medicare’s right of recovery . . . with the insurer obligated to Medicare.” In this case, although the precise amount of the payments made by Medicare was unknown during settlement negotiations, both parties knew Medicare had issued payments for Lewis’s medical treatment. Furthermore, Lewis produced no evidence raising a genuine issue of material fact as to any agreement regarding how the settlement check was to be issued. Therefore, Allstate did not breach its contract with Lewis by including Medicare as a co-payee on the settlement check.
The judgment of the trial court was affirmed.
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