Addressing conditional payment obligations early and consistently puts you in the best position to manage and settle cases. We always stress this as a best practice, and in a recent ruling from the Oregon Court of Appeals, a plaintiff and her attorney learned the wisdom of this practice the hard way.
Rhoades v. Beck
Unfortunately for the plaintiff in Rhoades v. Beck, 2014 App. LEXIS 82 (filed January 23, 2014), the appellate court upheld the trial court’s order enforcing a settlement agreement that did not take Medicare’s interests into account.
After being injured in a motor vehicle accident, Rhoades and her husband filed personal injury actions against Beck in which Rhoades alleged $45,517.69 in medical expenses. Shortly before trial, the parties discussed settlement options and agreed that the defendant would pay $15,000.00 to Rhoades, $5,500.00 to Rhoades’ husband, and satisfy any PIP liens that might be asserted by the Rhoades’ auto insurance carrier. In exchange, Rhoades and her husband agreed to hold the defendant harmless from all other liens. The parties confirmed the terms of their settlement by exchanging letters to be followed by signed releases.
A Settlement Gone Awry
Shortly after their agreement, Rhoades received notice from the MSPRC that Medicare had a claim of at least $22,970.62. Her husband signed and returned his release, but Rhoades refused to sign her release unless Medicare waived its claim. The defendant filed a motion to enforce the settlement and asserted that the agreement was binding and not contingent on Medicare. Rhoades argued that there was no meeting of the minds because the parties were not aware of Medicare’s claim and therefore never reached an agreement as to who would be liable for satisfying it. Rhoades continued to refuse to sign the settlement documents, and the trial court dismissed her case.
On appeal, the court affirmed the trial court’s conclusion and agreed with the defendant that the parties formed an enforceable contract. In its opinion, the appellate court stated, “[w]e will not set aside a settlement in a personal injury case merely because, in hindsight, it was obtained too soon and for too little.”
What Went Wrong
Based on the opinion, it is difficult to say exactly what went wrong other than Medicare was not given due consideration. However, the appellate court indicated that the record showed Rhoades and her attorney actually knew that Medicare had made conditional payments at the time of settlement negotiations. Rhoades simply did not know the amount of the payments until after the negotiations.
What the record does not indicate is whether Rhoades’ attorney fully understood the obligation to reimburse Medicare or whether the attorney was attempting to gain some tactical advantage over the defendant or Medicare. In either event, the result was to accept less than what Medicare was owed and for Rhoades to receive no settlement at all.
It is difficult to imagine that Rhoades would have settled for less than Medicare’s conditional payments if her attorney had been ahead of the curve on what Medicare was claiming. The obvious lesson is to never settle without knowing what it will take to satisfy Medicare’s claim. However, the larger lesson is to establish a consistent practice of addressing Medicare conditional payment obligations early so you increase the odds of always achieving the best outcome for your clients.