On May 12, 2021, the Court of Appeals of Iowa published its opinion number 20-1250 in Forbes v. Benton County Agricultural Society and reminded everyone that in order to avoid surprises that lead to bad settlement results, plaintiffs in liability cases or employers in Workers’ Compensation cases, should always perform a lien investigation into the existence of any lien holders, entities, or plans that could assert a claim for reimbursement of paid claim charges (for this article, all simply referred to as liens). The next steps upon identifying any such liens would be to follow up with the lien holder or recovery agent resolution for an audit of claim relatedness, before moving forward to report settlement details and negotiate a final payment to resolve the lien. While the negotiation of the lien is often finalized after settlement, it could easily be a form of legal malpractice for an attorney to move to settlement without first inquiring as to whether liens exist.
In August of 2017, Larry Forbes sustained an injury while on the premises of the Benton County Iowa fairgrounds, and hired an attorney to file a negligence action. After initial discovery, counsel for the Benton County Agricultural Society (Ag. Society), made an offer to Forbes’s counsel to settle for $10,000.
The letter referenced TRICARE but not Medicare and stated: “Based on information you have provided to date, Mr. Forbes had an excellent recovery, and his actual medical bills totaled $2,732, for which Tricare apparently had a subrogation interest.” Burris added, “There is no indication that Mr. Forbes had to pay anything out-of-pocket, or that the medical providers are actually charging anything beyond the $2,732 paid.”
After negotiating, Forbes agreed to settle his suit with the Ag. Society for $12,500. In return, Forbes would dismiss the suit with prejudice. Counsel for the Ag. Society then informed Forbes’ counsel that if Forbes was Medicare eligible, her client would require “final CMS letter, showing the amount owed, if any, in reimbursement to Medicare.” However, after reaching the agreement, Forbes’ attorney learned that Medicare was pursuing a Medicare lien in the amount of $25,482 for reimbursement of conditional payments it made toward Forbes injury related medical expenses. Forbes’ attorney attempted to renegotiate the settlement once the existing Medicare conditional payments came to light. However, the Ag Society pushed back, insisting Forbes accepted the agreed upon terms of the settlement and was aware of his obligations to Medicare. The Ag Society moved to enforce the settlement by filing a motion for summary judgment.
When the case went to court, Forbes argued the agreement was unenforceable and claimed there was a “mutual mistake” because the parties failed to reach a “meeting of the minds.” The Iowa District Court for Benton County disagreed with Forbes and ruled in favor of the Ag. Society granting it summary judgment, based on its position that the settlement contract was enforceable. The Court of Appeals of Iowa affirmed the District Court’s ruling, reaching its affirmation under the theory that settlement agreements are essentially contracts and because the District Court properly applied contract law. The Court of Appeals confirmed that the lower court record showed a “meeting of the minds,” and that Forbes therefore, bore the risk of the mistake.
The Court of Appeals provided a detailed analysis on how a party may be considered to bear the risk of a mistake, such as when:
“(a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or
(c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.”
The court decided that Forbes bears the risk of mistake in two of these exceptions:
“The first of those two exceptions is called “conscious ignorance.” See id. cmt. c. Under that exception, even if Forbes did not agree to bear the risk of mistake, he was aware when he agreed to the settlement that he had limited knowledge about potential Medicare payments. And despite that uncertainty, he “undertook to perform” the bargain. See id. In doing so, he assumed the risk of the mistake. See id. We agree with the district court that Forbes had exclusive access to his medical records and the ability to investigate whether Medicare would seek a recovery claim.
On the second exception, even if Forbes were not consciously ignorant about the possibility of a Medicare recovery claim, the district court was still reasonable in assigning the risk of mistake to him. See Pathology Consultants v. Gratton, 343 N.W.2d 428, 438 (Iowa 1984); see Restatement (Second) of Contracts § 154 cmt. a. As the court noted, Forbes’s fall occurred nearly two years before he sued. In that time, he had the opportunity and the burden to inquire thoroughly into the payment of his medical bills. It made sense for the court to allocate the risk of any mistake to Forbes.”
The full opinion and summary of the case can be read here: https://www.iowacourts.gov/courtcases/12533/embed/CourtAppealsOpinion.
Takeaways
Lien Investigation should be addressed during the pendency of any liability claim to determine which health plan paid for the injured party’s injury related treatment and whether they will be asserting any contractual or statutory claim for reimbursement/lien.
Law firms representing injured parties should request and gather all bills for treatment when they also request copies of medical records. They should determine which health plans paid those bills.
They should ask their clients for copies of the front and back of all insurance cards issued to them, including any plans that begin covering the injured party during the representation. This is especially important for those who are eligible/enrolled in any type of government-issued medical insurance plan such as Medicare, Medicaid, VA/TRICARE/CHAMPVA, or who works/worked for a government entity (Such as FELA or FEHBA), or whose health plan is governed by federal law (such as an employer based self-funded ERISA plan). This is because for many of these plans, little or no steps are required by the plan to perfect their lien to be able to make a claim for reimbursement.
Injured parties almost always want “their money” fast. However, patience is a virtue, and often will protect the injured party and their attorney, especially in Lien Resolution and Lien Investigation. For example, response times for Conditional Payment Letters/Medicare liens from CMS can sometimes take up to 45 days if CMS has no prior notice of the claim and settlement. Responses from VA/TRICARE/CHAMPVA often take longer.
Parties should take this into consideration and be proactive and inquire as to liens early in the case, so that if a settlement opportunity arises, they are able to have an accurate picture of all outstanding liens at the right time. Otherwise, they may be settling prematurely and, as Mr. Forbes learned, at their peril. If all liens are correctly identified but some of the payments claimed for reimbursement are not injury related, or if there may be a pending request to reduce the claim beyond the often standard procurement cost reductions allowed under Medicare Lien Resolution for the pro-rata fees and expenses to obtain the settlement, such as under an equitable principle such as the Made Whole Doctrine, an attorney may maintain the entire amount of the requested lien, while disbursing fees, expenses, and the non-disputed portion to the client, so that their client, and their firm will be protected.
Neglecting to address liens early on or certainly close to the time of settlement is taking an unnecessary risk.
Working with an experienced lien resolution group will often produce faster response times and more money into your injured clients’ pockets. Happier clients are more likely to refer your firm more business. Lien Resolution practitioners have familiarity with the various lien processes, have lien holder contacts on file, use electronic portals and secure email systems of recovery agents, often use proprietary diagnosis review software, and should know which remedies may be available when, and how to best help the attorney analyze facts and factors of cases in favor of the injured party when applicable.
Medivest Can Help
Medivest can help you navigate through the complexities of lien resolution while you work toward a desired settlement outcome. Call us to today to speak to one of our highly trained settlement consultants for a free lien case consultation. For more information about Medivest or to refer a case, please call 877.725.2467 | Monday – Friday 8 am to 5 pm EST.
