Trezza v. Trezza

• Decision Date: 26 December 2012
• Citation: 957 N.Y.S.2d 380,2012 N.Y. Slip Op. 09048,104 A.D.3d 37
• Parties: Janine TREZZA, respondent, v. Dana TREZZA, et al., defendants; Oxford Health Plans, et al., nonparty-appellants.
• Court: New York Supreme Court — Appellate Division

104 A.D.3d 37

957 N.Y.S.2d 380

2012 N.Y. Slip Op. 09048

Janine TREZZA, respondent,

v. Dana TREZZA, et al., defendants;Oxford Health Plans, et al., nonparty-appellants.

Supreme Court, Appellate Division, Second Department, New York.

Dec. 26, 2012.

Preempted

General Obligations Law § 5–335Robinson & Cole LLP, New York, N.Y. (Thomas J. Donlon and Linda L. Morkan of counsel), for nonparty-appellants.

Bruce Montague & Partners, Bayside, N.Y. (Craig I. Gardy of counsel), for respondent.

ANITA R. FLORIO, J.P., THOMAS A. DICKERSON, SANDRA L. SGROI, and ROBERT J. MILLER, JJ.

DICKERSON, J.

In 2009, the Legislature enacted General Obligations Law § 5–335 to protect a plaintiff who settles an action to recover damages for personal injuries from being subject to certain subrogation or reimbursements claims by health benefit providers. The statute provides that “except where there is a statutory right of reimbursement,” no party who enters into a settlement “shall be subject to a subrogation claim or claim for reimbursement by a benefit provider” with respect to those expenses “that have been or are obligated to be paid or reimbursed by said benefit provider”. The issue we are called upon to determine on this appeal is whether General Obligations Law § 5–335 can bar a private insurer that provides health benefits through a Medicare Advantage plan ( see42 USC §§ 1395w–21–1395w–29) from seeking reimbursement for the expenses incurred in affording accident-related medical care to an enrollee who settles a personal injury action. For the reasons which follow, we conclude that General Obligations Law § 5–335, insofar as applied to Medicare Advantage organizations, is preempted by federal law because it restricts the contractual reimbursement rights to which those organizations are entitled pursuant to the provisions of Title XVIII of the Social Security Act, as amended, 42 USC § 1395 et seq., commonly known as the Medicare Act ( see generally Heckler v. Ringer, 466 U.S. 602, 605, 104 S.Ct. 2013, 80 L.Ed.2d 622).

Factual and Procedural Background

On March 20, 2005, the plaintiff was injured in an automobile accident. She was a passenger in a vehicle operated by her husband, the defendant Dana Trezza, when that vehicle collided with a second vehicle. The plaintiff allegedly sustained serious injuries as a result of the accident. The nonparty appellant Oxford Health Plans (hereinafter Oxford), the plaintiff's Medicare secondary payer organization, paid $37,787.64 in medical expenses for treatment of the plaintiff's accident-related injuries.

The plaintiff commenced this personal injury action on or about October 24, 2007, against her husband and the owners and operator of the second vehicle. Ultimately, the plaintiff received a settlement of $75,000, consisting, in effect, of the $25,000 personal injury protection insurance policy limit of the policy covering the vehicle in which she was a passenger, and the $50,000 policy limit of the policy covering the second vehicle.

By letter dated September 10, 2008, the nonparty appellant The Rawlings Company, LLC (hereinafter Rawlings), on behalf of Oxford (hereinafter together the Oxford parties) contacted the plaintiff's attorney to assert a claim for reimbursement for amounts Oxford had paid for the plaintiff's accident-related medical care. As of June 29, 2010, Rawlings claimed that Oxford was entitled to reimbursement of $37,787.64.

By order to show cause dated October 9, 2010, the plaintiff moved to extinguish Oxford's purported lien and/or claim for reimbursement. The plaintiff asserted that, pursuant to General Obligations Law § 5–335, there is no right to reimbursement or subrogation for medical insurance providers such as Oxford. General Obligations Law § 5–335 provides, in pertinent part, “When a plaintiff settles with one or more defendants in an action for personal injuries, medical, dental, or podiatric malpractice, or wrongful death, it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement. By entering into any such settlement, a plaintiff shall not be deemed to have taken an action in derogation of any nonstatutory right of any benefit provider that paid or is obligated to pay those losses or expenses; nor shall a plaintiff's entry into such settlement constitute a violation of any contract between the plaintiff and such benefit provider.

“Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider” (General Obligations Law § 5–335 [a] ).

The plaintiff claimed that any contractual right to reimbursement Oxford may have had was extinguished when General Obligations Law § 5–335 went into effect on November 12, 2009.

The Oxford parties opposed the plaintiff's motion. They reiterated that Oxford had paid $37,787.64 for medical expenses incurred by the plaintiff allegedly arising out of her automobile accident. The Oxford parties asserted that Oxford had a statutory right to reimbursement under 42 USC §§ 1395y and 1395w–22, and that General Obligations Law § 5–335 expressly recognizes that statutory rights of reimbursement, such as those under the federal law governing Medicare, are not subject to extinguishment. The Oxford parties also maintained that it was unnecessary for them to seek a declaration that General Obligations Law § 5–335 is preempted by federal law, because that section provides for reimbursements where a statutory right thereto exists.

In support of their position that they had a statutory right to reimbursement, the Oxford parties relied on language in Oxford's contract with the plaintiff which stated, in pertinent part:

“Who Pays First?

“As a Member, you are always entitled to receive Covered Services through the AARP MedicareComplete plan. Medicare law, however, gives us or our designee the right to recover payments from certain third party insurance companies or from you, if you were paid by a third party. Because of this, we may ask you for information about other insurance you may have. If you have other insurance, you can help us obtain payment from the other insurer by promptly providing the requested information.

“If any no-fault or any liability insurance is available to you, benefits under that plan must be applied to the costs of health care covered by that plan. Where we have provided benefits, and a judgment or settlement is made with a no-fault or liability insurer, you must reimburse us or our designee (entity or person selected for this purpose) to the extent of your medical expenses.”

The Oxford parties asserted that the plaintiff acknowledged that she had the obligation to reimburse Medicare since she conceded that General Obligations Law § 5–335 did not extinguish claims made pursuant to a valid statutory right of reimbursement. The Oxford Parties claimed that the plaintiff had the same obligation as to Oxford, since it was a Medicare+Choice organization, as defined at 42 USC § 1395w–28(a)(1) (“The term ‘Medicare+Choice organization’ means a public or private entity that is certified under section 1395w–26 of this title as meeting the requirements and standards of this part for such an organization”). The Oxford parties asserted that Oxford was entitled to its statutory right of reimbursement pursuant to 42 USC §§ 1395y, 1395w–22, and 1395mm(e)(4).

In reply, the plaintiff first asserted that General Obligations Law § 5–335 was not preempted by federal law. The plaintiff claimed that, while General Obligations Law § 5–335 does specifically recognize that statutory rights of reimbursement are not subject to elimination, Oxford did not have a statutory right to reimbursement. According to the plaintiff, the federal Medicare statute did not confer any affirmative statutory right to reimbursement. Rather, any such right was created by the insurance contract itself, and therefore Oxford had a contractual, not a statutory, right to reimbursement. She argued that contractual rights would be extinguished by General Obligations Law § 5–335.

Further, the plaintiff asserted that there was no evidence that her settlement included compensation for health care services she received, and, pursuant to General Obligations Law § 5–335, her settlement was conclusively presumed not to include compensation for the cost of health care services. Therefore, according to the plaintiff, her settlement did not include compensation to her for health care services from which Oxford could seek reimbursement.

The Order Appealed From

In an order dated June 23, 2011, the Supreme Court, Kings County (Kramer, J.), granted the plaintiff's motion to extinguish the purported lien and/or claim for reimbursement ( Trezza v. Trezza, 32 Misc.3d 1209[A], 2011 N.Y. Slip Op. 51237[U], 2011 WL 2640794 [Sup. Ct., Kings County] ). Relying, in effect, on the language in 42 USC § 1395w–22(a)(4), set forth in the analysis below, the Supreme Court stated that the “Medicare Act permits, but does not require, HMO insurers ‘to contract for subrogation rights' ” ( Trezza v. Trezza, 32 Misc.3d 1209[A], 2011 N.Y. Slip Op. 51237[U], *2, quoting Nott v. Aetna U.S. Healthcare, Inc., 303 F.Supp.2d 565, 571 [E.D.Pa.] ).

The Supreme Court then observed that General Obligations Law § 5–335(a) creates a conclusive presumption that settlements in personal injury actions do not include compensation for the cost of health care...