• Insurer Successfully Defends Settlement Agreement Despite Plaintiff’s Discovery of Medicare Lien Against Recovery After Negotiation of the Settlement
  • June 11, 2014
  • Law Firm: Fineman Krekstein Harris P.C. - Philadelphia Office
  • In Rhoades v. Beck, 260 Ore. App. 569 (2014), the Court of Appeals of Oregon was faced with determining which party is liable for a Medicare lien discovered after reaching a settlement agreement, and where the lien exceeded the plaintiff’s recovery. Finding the parties entered into a binding settlement agreement, which included an agreement for plaintiff and her husband to hold defendant harmless from all liens aside from the PIP lien, the court affirmed the judgment dismissing the plaintiff’s action to recover damages for personal injuries.

    Following a motor vehicle collision, the plaintiff and her husband each filed a lawsuit against the defendant. The plaintiff alleged she had incurred medical expenses totaling $45,517.69. Prior to trial, the parties reached a settlement, under which the defendant would pay $15,000 to the plaintiff, $5,500 to plaintiff’s husband, and any PIP liens asserted by their auto insurance carrier, in exchange for the plaintiff and her husband holding the defendant harmless from all other liens. The terms of the settlement were confirmed in writing.

    After confirming the terms of the settlement, but before signing the settlement documents and releases, the plaintiff discovered a Medicare lien of $22,970.62 against her recovery. The plaintiff refused to sign the settlement agreement unless Medicare waived its lien, but defendant maintained the agreement was independent of any actions by Medicare. The defendant then sought judicial enforcement of the agreement through a motion for an order requiring the plaintiff to sign the necessary documents to effectuate the settlement. The trial court granted the motion, and entered an order pursuant to the defendant’s request, yet plaintiff still refused to sign the documents. The trial court then entered a general judgment dismissing the plaintiff’s action.

    On appeal, the plaintiff argued because she was unaware of the Medicare lien when the settlement was negotiated, no agreement was reached as to who would be liable for it. The plaintiff further argued liability for the Medicare lien was a material term that remained uncertain, and therefore the parties never formed a binding settlement agreement. According to the plaintiff, because the parties were unaware of any Medicare liens at the time of the settlement discussions, there could be no manifestation of intent to be bound by the terms in the written release concerning those liens. The defendant countered that the terms of the settlement were clear, and that there was evidence in the record that plaintiff was aware of the lien at the time of the agreement.

    The appellate court agreed with the defendant, applying Oregon’s objective theory of contract. While the plaintiff had a subjective understanding that no settlement agreement was reached because the parties did not explicitly address the Medicare lien did not preclude a finding of the existence of an agreement. The court refused to set aside the settlement, and upheld the trial court’s order requiring the plaintiff to sign the settlement agreements.

    This case suggests that where an insurer reaches a settlement with a plaintiff, the plaintiff will not be allowed to go back on that agreement merely because the plaintiff discovers he or she failed to fully evaluate the existence of a Medicare lien against the recovery. Insurers should seek a full understanding of the potential liens and liabilities prior to reaching settlement to avoid subsequent litigation. However, where the plaintiff fails to fully understand his or her obligations outside of the agreement between the parties, the insurer will most likely not be forced to bear the burden of satisfying those obligations or renegotiating the settlement.