Can a private insurer enforce a lien against my client’s estate, if the insurer failed to provide timely notice of the lien? If so, who has the burden of establishing that the medical costs stem from the underlying accident?
Question: We represent a now deceased client who was injured in a car accident while on-the-job. The Bureau of Workers’ Compensation (BWC) paid many of his treatment bills, and the agency’s lien is more than $100,000. Additionally, a private insurer paid some of my client’s initial emergency room bills, and then, more than a year after the accident, the insurer paid many more bills, including one for a back condition that existed before the accident. After my client’s death, the administrator of his estate substituted as the plaintiff in the workers’ compensation case. We mediated the workers’ compensation case and agreed to the amount of the BWC’s liens. After mediation, the private insurer provides notice of an $85,000 lien for treatment that the BWC never approved and that the defendant argues was for unrelated medical care that does not stem from the underlying accident. Because the private insurer never provided notice to the estate, can its lien be enforced? Is it the insurer’s burden to show the treatment was linked to the injuries at issue?
Answer: When it comes to state -based notice issues and private healthcare liens/reimbursement interests, the biggest factor is what type of private healthcare lien you are dealing with. Under the circumstances described you can certainly argue that the insurer has no interest as it failed to give timely notice to the estate. Assuming that the insurer’s reimbursement argument is rooted in state law, your position should be strong. However, you should be prepared for two possible responses. First, the plan could argue that it has a federally based reimbursement right (self-funded ERISA plan) and therefore ERISA’s preemption clause eliminates the application of estate law. Second, the plan could argue that the basis of its reimbursement right is first priority plan language. Plan officials may argue that such language grants them a priority right and they had an equitable lien by agreement which attached at the moment they first paid the claims. In effect the insurer could argue that a portion of the settlement was earmarked for its interest before it ever passed into the estate. If presented with either position you should require that the insurer substantiate its claims (via proof of self-funded ERISA arrangement, citation to application plan language, etc). Even if the plan’s representatives do substantiate their claim you can still use the estate-based argument to leverage a significant compromise of the insurer’s interest.
While the insurer will not have the burden of proof in terms of third party liability, the plan will need to have a reasonable basis and sufficient evidence for concluding that the injuries it paid for were related to the third party incident. For a good discussion of this issue I would recommend taking a look at Bureau of Nat. Affairs, Inc. v. Chase, 2012 WL 3670440 (D.Md.,2012).
In sum, it appears you have two legitimate arguments which could be used to eliminate or significantly reduce the reimbursement claim being made in your case.