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MSP Recovery Claims, Series LLC v. Technology Insurance Company, Inc.

United States District Court, S.D. New York

January 8, 2020

MSP RECOVERY CLAIMS, SERIES LLC, a Delaware limited liability company, and Series 16-08-483, a designated series of MSP Recovery Claims, Series LLC, Plaintiffs,
v.
TECHNOLOGY INSURANCE COMPANY, INC., a Delaware corporation; AMTRUST FINANCIAL SERVICES, INC., a Delaware corporation, Defendants.

          ORDER

          ANALISA TORRES UNITED STATES DISTRICT JUDGE

         Plaintiffs, MSP Recovery Claims, Series LLC and Series 16-08-483 (a designated series of MSP Recovery Claims, Series LLC), bring this putative class action under 42 U.S.C. § l395y, otherwise known as the Medicare Secondary Payer Act ("MSPA"), to recover conditional Medicare payments against Defendants Technology Insurance Company, Inc. ("TIC"), Amtrust Financial Services, Inc. ("AMFSI''), and Amtrust North America, Inc. ("Amtrust"). Compl., ECF No. 33. Defendants move to dismiss this action for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim under Rule 12(b)(6). ECF No. 46. For the reasons stated below, Defendants' motion to dismiss for lack of subject matter jurisdiction is GRANTED.

         BACKGROUND

         I. Legal Background

         Under Part C of the Medicare Act, "Medicare enrollees may elect to receive their benefits from private insurers, called [Medicare Advantage] organizations, rather than from the government." Potts v. Rawlings Co., LLC, 897 F.Supp.2d 185, 189 (S.D.N.Y. 2012). The MSPA “requires that entities known as ‘primary payers,' such as insurance companies, must reimburse Medicare (or, as in this case, a Medicare Advantage Organization . . . for payments for medical items and services that were covered by the insurance company's policy.” MSP Recovery Claims, Series LLC v. QBE Holdings, Inc., No. 18 Civ. 1458, 2019 WL 1490531, *1 (M.D. Fla. Apr. 4, 2019). “Medicare generally may not pay for any item or service if ‘payment has been made, or can reasonably be expected to be made, with respect to the item or service' under a primary plan.” Woods v. Empire Health Choice, Inc., 574 F.3d 92, 95 (2d Cir. 2009) (quoting 42 U.S.C. § 1395y(b)(2)(A)(i)). Where “the relevant primary plan ‘has not made or cannot reasonably be expected to make payment with respect to such item or service promptly,' Medicare may make the necessary payment, ” also known as a conditional payment. Id. (quoting 42 U.S.C. § 1395y(b)(2)(B)(i)). The primary plan must, however, reimburse the Medicare Advantage Organization (“MAO”) for such a payment “if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” 42 USC § 1395y(b)(2)(B)(ii).

         II. Facts

         “When standing is challenged on the basis of the pleadings, we ‘accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.'” United States v. Vazquez, 145 F.3d 74, 81 (2d Cir. 1998) (quoting Warth v. Seldin, 422 U.S. 490, 501 (1975)). Plaintiffs bring this suit under the MSPA alleging “Defendants' systematic and uniform failure to reimburse conditional Medicare payments.” Compl. ¶ 1. According to the complaint, Defendants, insurance companies, [1] have repeatedly failed to reimburse payments made on behalf of enrollees “for medical expenses resulting from injuries sustained in an accident.” Id. ¶ 2; see also Id. ¶¶ 129-130. Defendants are “primary plan[s]” under § 1395y(b)(2)(A) because “[they] are [] liability insurer[s].” Compl. ¶ 115.

         Plaintiffs have designed and developed a software system (the “MSP System”), that allows Plaintiffs to “capture, compile, synthesize, and funnel large amounts of data to identify claims class-wide.” Id. ¶ 122. “The MSP System captures data from different sources to identify the [c]lass [m]ember enrollees' medical expenses incurred as a result of an accident and which should have been reimbursed for by Defendants after they entered into a settlement.” Id. Plaintiffs then “merge the Defendants' data with the information available on the MSP System to discover and identify a Medicare eligible person for whom reimbursement of secondary medical payments should have been made, along with any information stored as to potential class members.” Id. ¶ 123. The MSP System utilizes medical diagnosis and procedure codes “to identify and obtain any information regarding an enrollee's claim, such as the type of injury suffered, the circumstances that caused the injury, whether the listed primary insurance provider made payment, and whether the insurance carrier was a liability provider.” Id. ¶ 124.

         The complaint sets forth 16 representative claims that “demonstrate Plaintiffs' right to recover for Defendants' failure to meet its reimbursement obligations under the” MSPA. Compl. at 6; see also Id. ¶¶ 7-98. Plaintiffs describe “Defendants' failure to reimburse conditional payments” with respect to a number of individuals enrolled in a Medicare Advantage plan issued and administered by MAO Health Insurance Plan of Greater New York (“HIP”), id. ¶ 7, and “how that failure caused an injury in fact to an MAO, which subsequently assigned its recovery rights to Plaintiffs.” Id. ¶ 6. The Court highlights two representative claims for discussion purposes:

• The M.P.1. claim: Between December 8, 2015, and April 11, 2018, M.P.1. was injured in an accident and the tortfeasor was insured by Defendant Amtrust, which did not pay for M.P.1.'s accident-related injuries. Id. at ¶¶ 14, 18.
• The D.P. claim: On September 26, 2017, D.P. was injured in an accident and the tortfeasor was insured by Defendant Amtrust, which did not pay for D.P.'s accident-related injuries. Id. at ¶¶ 74, 77.

         Plaintiffs are not MAOs. Rather, they are assignees of HIP, an MAO. See Compl. ¶¶ 100-101; see also Assignment Agreement, ECF No. 33-56. The assignment agreement attached as Exhibit Q to the complaint provides in part:

W[hereas], [a]ssignor has certain legal and equitable rights to seek reimbursement and/or recover payments from primary payers . . . [a]ssignor hereby irrevocably assigns, transfers, conveys, sets over and delivers to [a]ssignee, and any of its successors and assigns, any and all of [a]ssignor's right, title, ownership and interest in and to all [a]ssigned Medicare [r]ecovery [c]laims . . . .

         Assignment Agreement at 2-3. The assignment agreement assigns only those rights concerning “Medicare [h]ealth [c]are [s]ervices that were rendered and paid for by [HIP] during the six . . . year period beginning September 29, 2011 and ending September 29, 2017.” Id. No assignment is made for claims ...


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