Nawas v. State Farm Mutual Automobile Insurance Company
Filing
31
OPINION AND ORDER DENYING 14 Defendant's Motion to Dismiss, or, in the Alternative, for Partial Summary Judgment. Signed by District Judge Terrence G. Berg. (Chubb, A)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
RAYMOND NAWAS,
Plaintiff,
v.
CIV. NO. 13-11158
HON. TERRENCE G. BERG
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY,
HON. MONA K. MAJZOUB
Defendant.
______________________________/
OPINION AND ORDER DENYING DEFENDANT’S
MOTION TO DISMISS OR, IN THE ALTERNATIVE,
FOR PARTIAL SUMMARY JUDGMENT (DKT. 14)
This is a case for no-fault insurance benefits, following a motor vehicle
accident which allegedly occurred on December 5, 2011. Plaintiff Raymond Nawas
(“Plaintiff”) claims that his insurance company – Defendant State Farm Mutual
Automobile Insurance Company (“Defendant”) – refused to pay his medical bills in
the wake of this accident. As a result, Medicare stepped in and conditionally paid
Plaintiff’s medical bills, until Defendant’s responsibility in this matter could be
determined.
Before the Court is Defendant’s motion to dismiss or for partial summary
judgment (Dkt. 14). Defendant seeks dismissal of Count II of Plaintiff’s Complaint,
which brings a claim under the Medicare Secondary Payer Act, 42 U.S.C. § 1395y.
Plaintiff filed a response brief (Dkt. 16) and the Court heard oral argument on April
23, 2014.
Defendant makes two arguments: (1) that Plaintiff has no private cause of
action under the Medicare Secondary Payer Act, because he did not allege that
Defendant denied coverage based on the fact that Plaintiff was eligible for Medicare
(citing Michigan Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co.,
12-11329, 2013 WL 5435284 (E.D. Mich. Sept. 27, 2013); and (2) that Plaintiff’s
claim is premature, because a claim under the Medicare Secondary Payer Act
cannot be pursued until Defendant’s obligation to pay Plaintiff’s underlying no-fault
insurance claim has been established by a judicial determination or settlement.
After the Court heard oral argument on Defendant’s motion, the Sixth Circuit
reversed the Michigan Spine district court decision upon which Defendants relied in
support of its first argument for dismissal. See Michigan Spine & Brain Surgeons,
PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787 (6th Cir. 2014). Defendant
has consequently withdrawn this argument, and is pursuing only its second
argument (Dkt. 30). For the reasons set forth below, Defendant’s motion to dismiss,
or for partial summary judgment on, Plaintiff’s Medicare Secondary Payer Act claim
is DENIED.
DISCUSSION
A. Standard of Review
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“The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a
matter of law, the plaintiff is entitled to legal relief if all the facts and allegations in
the complaint are taken as true.” Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416,
419 (6th Cir. 2001) (citing Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993)).
Under Rule 12(b)(6), the complaint is viewed in the light most favorable to the
plaintiff, the allegations in the complaint are accepted as true, and all reasonable
inferences are drawn in favor of the plaintiff. See Bassett v. Nat’l Collegiate
Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008). “[A] judge may not grant a Rule
12(b)(6) motion based on a disbelief of a complaint’s factual allegations.”
Saglioccolo v. Eagle Ins. Co., 112 F.3d 226, 228–29 (6th Cir. 1997) (quoting
Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995)). “However,
while liberal, this standard of review does require more than the bare assertion of
legal conclusions.” Tatum, 58 F.3d at 1109; Tackett v. M & G Polymers, USA,
L.L.C., 561 F.3d 478, 488 (6th Cir. 2009). “To survive a motion to dismiss, [a
plaintiff] must plead enough factual matter that, when taken as true, state [s] a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 556, 570 (2007) (internal quotations omitted). Plausibility requires showing
more than the “sheer possibility of relief but less than a probab[le] entitlement to
relief.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations omitted);
Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). “Where a
complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it
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‘stops short of the line between possibility and plausibility of entitlement to relief.’”
Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557).
Consideration of a motion to dismiss under Rule 12(b)(6) is confined to the
pleadings. See Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008).
Assessment of the facial sufficiency of the complaint ordinarily must be undertaken
without resort to matters outside the pleadings. See Wysocki v. Int’l Bus. Mach.
Corp., 607 F.3d 1102, 1104 (6th Cir. 2010). However, “documents attached to the
pleadings become part of the pleadings and may be considered on a motion to
dismiss.” Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335
(6th Cir. 2007) (citing Fed. R. Civ. P. 10(c)); see also Koubriti v. Convertino, 593 F.3d
459, 463 n. 1 (6th Cir. 2010). Even if a document is not attached to a complaint or
answer, “when a document is referred to in the pleadings and is integral to the
claims, it may be considered without converting a motion to dismiss into one for
summary judgment.” Commercial Money Ctr., 508 F.3d at 335–36. If the plaintiff
does not directly refer to a document in the pleadings, but that document governs
the plaintiff’s rights and is necessarily incorporated by reference, then the motion
need not be converted to one for summary judgment. See Weiner v. Klais & Co.,
Inc., 108 F.3d 86, 89 (6th Cir. 1997). In addition, “a court may consider matters of
public record in deciding a motion to dismiss without converting the motion to one
for summary judgment.” Northville Downs v. Granholm, 622 F.3d 579 (6th Cir.
2010) (citing Commercial Money Ctr., Inc., 508 F.3d at 335–36).
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Summary judgment is proper “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” See Fed. R. Civ. P. 56. A fact is material only if it might affect the outcome
of the case under the governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 249 (1986). On a motion for summary judgment, the Court must view the
evidence, and any reasonable inferences drawn from the evidence, in the light most
favorable to the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986) (citations omitted); Redding v. St. Edward, 241 F.3d
530, 531 (6th Cir. 2001).
The moving party has the initial burden of demonstrating an absence of a
genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 325
(1986). If the moving party carries this burden, the party opposing the motion
“must come forward with specific facts showing that there is a genuine issue for
trial.” Matsushita, 475 U.S. at 587. The Court must determine whether the
evidence presents a sufficient factual disagreement to require submission of the
challenged claims to a jury or whether the moving party must prevail as a matter of
law. See Anderson, 477 U.S. at 252 (“The mere existence of a scintilla of evidence in
support of the plaintiff’s position will be insufficient; there must be evidence on
which the jury could reasonably find for the plaintiff”).
Moreover, the trial court is not required to “search the entire record to
establish that it is bereft of a genuine issue of material fact.” Street v. J.C. Bradford
& Co., 886 F.2d 1472, 1479–80 (6th Cir. 1989). Rather, the “nonmoving party has
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an affirmative duty to direct the court’s attention to those specific portions of the
record upon which it seeks to rely to create a genuine issue of material fact.” In re
Morris, 260 F.3d 654, 655 (6th Cir. 2001).
B. Plaintiff’s Medicare Secondary Payer Act Claim May Proceed
Medicare is a federal government health insurance program that provides
benefits to individuals who are 65 years of age or older, disabled, or have end-stage
renal disease. See 42 U.S.C. § 1395c. Although Medicare was at one time the
primary payer of health costs for eligible individuals, escalating health care costs
led Congress to enact the Medicare Secondary Payer Act. See Stalley v. Methodist
Healthcare, 517 F.3d 911, 915 (6th Cir. 2008). The Medicare Secondary Payer Act
“designates certain private entities – such as a group health plan, a worker’s
compensation plan, or an automobile or liability insurance plan – as ‘primary
payers’ that have the responsibility to pay for a person’s medical treatment.” Id.
Under this Act, Medicare does not have to pay if payment for covered medical
services has been or is reasonably expected to be made by a primary payer. See id.;
42 U.S.C. § 1395y(b)(2)(A). However, “[i]f the primary payer has not paid and will
not promptly do so,” Medicare is empowered to “conditionally pay the cost of the
treatment.” Stalley, 517 F .3d at 915; see 42 U.S.C. § 1395y(b)(2)(B)(i). Medicare
may then seek reimbursement for any conditional medical payments from the
primary payer. See Stalley, 517 F.3d at 915; 42 U.S.C. § 1395y(b)(2)(B)(iii).
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In addition, “[t]he Medicare Secondary Payer Act also creates a private right
of action, with double recovery, to encourage private parties who are aware of nonpayment by primary plans to bring actions to enforce Medicare’s rights.” Stalley,
517 F.3d at 916 (citing 42 U.S.C. § 1395y(b)(3)(A)). The private cause of action
provision states, “[t]here is established a private cause of action for damages (which
shall be in an amount double the amount otherwise provided) in the case of a
primary plan which fails to provide for primary payment (or appropriate
reimbursement) in accordance with paragraphs (1) and (2)(A).” 42 U.S.C. §
1395y(b)(3)(A). Paragraph (1) imposes certain requirements on group health plans,
including, inter alia, prohibiting them from taking into account whether an
individual covered by the plan is entitled to Medicare benefits. See Bio–Medical
Applications of Tenn., Inc. v. Cent. States Southeast & Southwest Areas Health &
Welfare Fund, 656 F.3d 277, 285 (6th Cir. 2011). Paragraph (2)(A) states that
Medicare “may not pay when a primary plan is reasonably expected to pay under
paragraph (1), ‘except as provided in subparagraph [2](B).’” Id. In turn,
subparagraph (2)(B) provides that Medicare may make conditional payments for
items and services when the primary plan “‘cannot reasonably be expected’ to pay
‘promptly.’” Id. In this case, Plaintiff alleges that, since Defendant refused to pay
his no-fault insurance claim following an automobile accident, Medicare stepped in
and made conditional payments to his medical providers (Dkt. 1, Ex. 1, Compl. ¶
16). Plaintiff thus seeks to recover from Defendant double the amount of these
conditional payments (Id. ¶ 18).
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As noted earlier, Defendant’s sole remaining argument is that Plaintiff’s
Medicare Secondary Payer Act claim is premature, because there has been no
judicial determination or settlement establishing Defendant’s responsibility to pay
Plaintiff’s underlying no-fault claim. This argument turns on the interpretation of
the Medicare Secondary Payer Act’s “demonstrated responsibility” provision, which
states in pertinent part: “A primary plan ... shall reimburse [Medicare] for any
payment made by [Medicare] ... with respect to an item or service if it is
demonstrated that such primary plan has or had a responsibility to make payment
with respect to such item or service. A primary plan’s responsibility for such
payment may be demonstrated by a judgment, a payment conditioned upon the
recipient’s compromise, waiver, or release (whether or not there is a determination
or admission of liability) of payment for items or services included in a claim
against the primary plan or the primary plan’s insured, or by other means.” 42
U.S.C. § 1395y(b)(2)(B)(ii).
In support of this argument, Defendant cites two cases: Geer v. Amex Assurance
Co., 09-11917, 2010 WL 2681160 (E.D. Mich. July 6, 2010) and Glover v. Liggett
Group, Inc., 459 F.3d 1304, 1309 (11th Cir. 2006). Geer accepted this argument,
and dismissed a plaintiff’s Medicare Secondary Payer Act claim in the insurance
context, as the plaintiff had not yet “established” a claim against the defendant
insurance company through a judgment, settlement, or the like. In so doing, Geer
adopted the reasoning of Glover, which arose in the context of a tort claim brought
by a plaintiff against a cigarette manufacturer.
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Having considered the reasoning of these cases, the Court concludes that
Defendant’s argument is not well-taken. First, the Sixth Circuit disavowed the
position taken by the Eleventh Circuit in Glover, and limited this argument to
tortfeasor liability only. In Bio-Medical Applications v Central States, 656 F 3d 277
(6th Cir. 2011) the Sixth Circuit conducted an extensive analysis of the Medicare
Secondary Payer Act’s “demonstrated responsibility” provision. The Court reviewed
the Glover case – which is at the core of Defendant’s argument – and disagreed with
its rationale. Ultimately, the Sixth Circuit in Bio-Medical held that the
“demonstrated responsibility” language does not prohibit (or delay) direct actions
against insurance companies by policy holders seeking to enforce Medicare’s
Secondary Payer Act rights:
We believe that Congress added the “demonstrated responsibility” provision
as a limiting principle only for tortfeasor liability under the Act. Although
the text of that provision is addressed to all “primary plans” – the Act’s
broadest category of private insurer, see id. § 1395y(b) (2)(A), which includes
“selfinsured plans,” and therefore (after the 2003 amendments) tortfeasors –
the context of its inclusion strongly suggests that Congress intended it only
as a condition precedent to tortfeasor liability. As discussed above, Congress
added the provision in the Medicare Modernization Act, in direct response to
cases that prevented tortfeasor liability, as part of an effort to amend the Act
to permit tortfeasor liability. The Medicare Modernization Act made no other
major changes to the Medicare Secondary Payer Act, so there is no reason to
believe that Congress intended to affect the liability of primary plans other
than tortfeasors – that is, traditional primary plans, like private insurers.
Moreover, the concept of demonstrated responsibility makes sense only in the
context of tort (where no evidence of responsibility exists until it is
adjudicated ex post), rather than in the context of an insurance contract
(where insurers assume the responsibility of paying for enumerated
contingencies ex ante). See Mason [v. Am. Tobacco Co., 346 F.3d 36, 42 (2nd
Cir. 2003)] (discussing, in one of the very cases that precipitated Congress’
amendments to the Act, this problem with tortfeasor liability under the Act:
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“alleged tortfeasors ... have yet to assume the medical costs of any
identifiable group of individuals”).
Accordingly, we hold that the “demonstrated responsibility” provision limits
only lawsuits against tortfeasors, not lawsuits against private insurers.
Bio-Medical, 656 F 3d at 290-291. Thus, Defendant’s position is not tenable
under controlling Sixth Circuit precedent. To the extent that Geer relied on the
Eleventh Circuit’s holding in Glover, it appears to have done so in contravention
of the Sixth Circuit’s holding in Bio-Medical, to which this Court must adhere.
Second, the Sixth Circuit’s recent holding in Michigan Spine & Brain
Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787 (6th Cir. 2014)
implicitly supports this conclusion.
Michigan Spine permitted a Medicare
Secondary Payer Act claim to proceed against the defendant – also State Farm –
prior to any judicial determination or settlement against State Farm; in other
words, prior to any “demonstrated responsibility” on the part of State Farm to
pay an underlying no-fault claim. Accordingly, Defendant’s motion to dismiss or
for summary judgment must be, and is hereby, denied.
CONCLUSION
For the reasons set forth above, Defendant’s motion to dismiss or for
summary judgment (Dkt. 14) is DENIED.
SO ORDERED.
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
Dated: September 15, 2014
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Certificate of Service
I hereby certify that this Order was electronically submitted on September
15, 2014, using the CM/ECF system, which will send notification to each party.
By: s/A. Chubb
Case Manager
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