US v. RHODE ISLAND INSURERS'INSOLVENCY FUND

Decision Date06 July 1995
Docket NumberCiv. A. No. 94-0545B.
Citation892 F. Supp. 370
PartiesUNITED STATES of America v. RHODE ISLAND INSURERS' INSOLVENCY FUND.
CourtU.S. District Court — District of Rhode Island

COPYRIGHT MATERIAL OMITTED

Michael P. Iannotti, U.S. Atty.'s Office, Providence, RI, for plaintiff.

Thomas C. Angelone, Hodosh, Spinella & Angelone, Providence, RI, Joseph Tanski, Joseph C. Marrow, and Margaret A. Robbins, Hutchins, Wheeler & Dittmar, Boston, MA, for defendant.

MEMORANDUM AND ORDER

FRANCIS J. BOYLE, Senior District Judge.

The parties have filed cross motions for judgment on the pleadings under Fed. R.Civ.P. 12(c). The Court referred the motions to Magistrate Judge Robert W. Lovegreen pursuant to 28 U.S.C. § 636(b)(1)(B) for proposed findings and recommendations for disposition. Magistrate Judge Lovegreen issued his Report and Recommendation on April 26, 1995, recommending that the Court grant plaintiff's motion and deny defendant's motion. Plaintiff filed an objection to the Report and Recommendation, and a hearing was conducted on July 5, 1995.

After a de novo review of the parties' cross motions and upon consideration of the record and the parties' arguments, the Court is in agreement with the Report and Recommendation of the Magistrate Judge. The Report and Recommendation is adopted in whole as the opinion of this Court.

The motion of the plaintiff for judgment on the pleadings is granted, and the motion of the defendant for judgment on the pleadings is denied.

IT IS SO ORDERED.

REPORT AND RECOMMENDATION

LOVEGREEN, United States Magistrate Judge.

Before me are cross motions for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). The plaintiff, United States of America ("USA"), brought this action pursuant to 42 U.S.C. § 1395y(b), the Medicare secondary payer ("MSP") statute, to compel the defendant, Rhode Island Insurers' Insolvency Fund (the "Fund"), to reimburse the federal Medicare program for certain payments made by Medicare on behalf of three Medicare beneficiaries. These motions have been referred to me for preliminary review, findings and recommended disposition. 28 U.S.C. § 636(b)(1)(B) and Local Rule of Court 32(c). For the following reasons, I recommend that the defendant's motion for judgment on the pleadings be denied, and the plaintiff's motion for judgment on the pleadings be granted.

Facts

The Fund is a non-profit entity established by the Rhode Island Insurers' Insolvency Fund Act, R.I.Gen.Laws § 27-34-1 et seq. (the "Fund Act"), to administer and pay claims against insolvent Rhode Island insurers. During the calendar years of 1989 and 1990, the Medicare program made payments on behalf of three Medicare beneficiaries, Susan McManus, Manuel Phillips and Sarah Mahoney, in the amounts of $8,071.37, $5,826.79 and $202.84, respectively, for medical services arising out of injuries sustained by each beneficiary in an automobile or other type of accident. After these payments were made, each beneficiary asserted a liability claim for his or her injury under policies issued by the American Universal Insurance Company ("AUIC"), a Rhode Island insurance company which had previously become insolvent.

Because AUIC had become insolvent, the Fund made payment pursuant to its statutory mandate, the Fund Act, on the claims asserted by each of the beneficiaries. However, based upon its interpretation of the Fund Act, the Fund reduced the amount paid to each beneficiary by the amounts previously paid by the Medicare program.

Purportedly acting under the authority of the MSP statute, the USA has demanded reimbursement of the amounts paid by the Medicare program for beneficiaries McManus, Phillips and Mahoney. The Fund refused to make such payment, however, because it contends it is prohibited by the Fund Act from doing so. This action followed in which the USA seeks to compel the Fund to reimburse the Medicare program as has been previously demanded. Thus, the specifics of the MSP statute and the Fund Act are relevant to a determination of the parties cross motions for judgment on the pleadings and it is to those statutes and attendant regulations that I now turn.

Statutory Framework
I. The Medicare Secondary Payer Statute, 42 U.S.C. § 1395y(b)(2), and Attendant Regulations

Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., established and delineates the federal program commonly known as Medicare which pays for medical treatment for the aged and disabled. Congress has charged the Secretary of the United States Department of Health and Human Services ("HHS") with responsibility for administering the Medicare program and has authorized her to "prescribe such regulations as may be necessary to carry out its administration." 42 U.S.C. § 1395hh(a)(1).

The MSP statute provides that a Medicare payment cannot be made for a medical service to the extent that payment has been or can reasonably be expected to be made promptly under an automobile or liability insurance policy or plan or under no fault insurance except as otherwise described in the statute. 42 U.S.C. § 1395y(b)(2)(A). The statute goes on to provide that a Medicare payment for a medical item or service may be made under the circumstances described in § 1395y(b)(2)(A) but that such payment "shall be conditioned on reimbursement to the Medicare program when notice or other information is received that payment for such item or service has been or could be made" by an automobile or liability insurance policy or plan or under no fault insurance. 42 U.S.C. § 1395y(b)(2)(B)(i). The MSP statute also provides the USA with a direct right of action against "any entity which is required or responsible under the MSP statute to pay with respect to such item or service ... under a primary plan (and may, in accordance with § 1395y(b)(3)(A) collect double damages against that entity)...." 42 U.S.C. § 1395y(b)(2)(B)(ii). Section 1395y(b)(3)(A) establishes "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 § 1395y(b)(2)(A)." The United States is also subrogated to the right of any individual or entity to payments for such item or service under a primary plan. 42 U.S.C. § 1395y(b)(2)(B)(iii). The MSP statute defines a primary plan to include an automobile or liability insurance policy or plan and no fault insurance. 42 U.S.C. § 1395y(b)(2)(A).

Pursuant to her rulemaking authority, the Secretary of HHS has promulgated regulations implementing the MSP statute. 42 C.F.R. § 411.20 et seq. These regulations define a plan as "any arrangement, oral or written, by one or more entities, to provide health benefits or medical care or assume legal liability for injury or illness." 42 C.F.R. § 411.21. The regulations further provide that "Medicare benefits are secondary to benefits payable by a third party payer even if State law or the third party payer states that its benefits are secondary to Medicare benefits or otherwise limits its payments to Medicare beneficiaries." 42 C.F.R. § 411.32(a)(1).

II. The Rhode Island Insurers' Insolvency Fund Act, R.I.Gen.Laws § 27-34-1 et seq.

The Fund Act was enacted to

provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, and to create an entity to assess the cost of the protection and distribute it equitably among member insurers.

R.I.Gen.Laws § 27-34-2. Insurers which write certain types of direct insurance within the State of Rhode Island are required to belong to the Fund and to make contributions thereto in proportion to their respective shares of the state's insurance market. See R.I.Gen.Laws §§ 27-34-3; 27-34-6; 27-34-8(a)(3).

When a member insurer becomes insolvent, the Fund is "deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent." R.I.Gen.Laws § 27-34-8(a)(2); see also R.I.Gen.Laws §§ 27-34-8(a)(1) and (a)(4) (obligating the Fund to pay covered claims). The Fund Act defines a covered claim as "an unpaid claim, including one for unearned premiums, submitted by a claimant, which arises out of and is within the coverage and subject to the applicable limits of an insurance policy to which the Fund Act applies issued by an insurer if the insurer becomes an insolvent insurer on or after July 1, 1988." R.I.Gen.Laws § 27-34-5(8). However, the Fund Act excludes from the definition of covered claim "any amount ... due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise...." R.I.Gen.Laws § 27-34-5(8)(ii)(C). The Act further limits the Fund's obligations to pay covered claims by stating:

Any person having a claim or legal right of recovery under any governmental insurance or guaranty program which is also a covered claim, shall be required to exhaust first his or her right under that program. Any amount payable on a covered claim under this chapter shall be reduced by the amount of any recovery under the program.

R.I.Gen.Laws § 27-34-12(b).

In summary, the MSP statute and the Fund Act conflict in that they both require primary payment to be made under the opposing statute. Consequently, a determination must be made as to which statute overrides the dictate of the other, an issue to which I now turn.

Discussion
I. Fed.R.Civ.P. 12(c) Standard

Fed.R.Civ.P. 12(c) allows a party, "after the pleadings are closed but within such time as not to delay the trial, to move for judgment on the pleadings." In reviewing a motion made pursuant to Rule 12(c), a court must accept all of the nonmovant's well-pleaded factual averments as true and draw all reasonable inferences in his or...

To continue reading

Request your trial
1 cases
  • U.S. v. Rhode Island Insurers' Insolvency Fund, 95-1964
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • January 12, 1996
    ...note 2, forecloses the preemption claim. The district court granted judgment for the United States. United States v. Rhode Island Insurers' Insolvency Fund, 892 F.Supp. 370 (D.R.I.1995). First, the court ruled the McCarran-Ferguson Act's...
1 books & journal articles
  • Avoiding traps for the unwary: understanding U.S. government reimbursement rights.
    • United States
    • Defense Counsel Journal Vol. 66 No. 2, April 1999
    • April 1, 1999
    ...against the recipient or his attorney because neither is a "primary plan." United States v. Rhode Island Insurers' Insolvency Fund, 892 F.Supp. 370 (D. R.I. 1995), aff'd, 80 F. 3d 616 (1st Cir. 1996). MSP penalty provisions apply only to entities within the insurance APPENDIX B--BIBLIOGRAPH......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT