Harold Hackley et al v. James Garofano et al

Transcription

1 Harold Hackley et al v. James Garofano et al Harold Hackley et al v. James Garofano et al CV S -- July 01, 2010 MEMORANDUM OF DECISION RE MOTION FOR DEFAULT The named plaintiff, a minor, brought this action through his father, Michael Hackley, ppa, seeking damages as a result of injuries he alleges that he sustained in a motor vehicle accident that occurred on December 1, The plaintiffs eventually accepted an offer to settle the case for the sum of $7,500, but the defendants' insurer (USAA) has now refused to deliver the funds until the plaintiffs provide USAA with their social security numbers. The plaintiffs have refused to disclose their social security numbers and have filed the instant motion seeking a default judgment and other relief against the defendants. Most of the pertinent facts are not in dispute. On January 5, 2010, Laura Ochs, an adjuster for USAA, telephoned plaintiffs' counsel and made an offer of $7,500 to settle the claim, which offer was accepted by counsel on behalf of her clients. The next day, the plaintiffs executed a general release and withdrawal to be held in escrow pending receipt by plaintiffs' counsel of the settlement funds. The funds have still not been paid, and the plaintiffs now argue that, pursuant to General Statutes c(c), they are entitled to a default judgment in the amount of the settlement and that, pursuant to General Statutes c(d), they are also entitled to statutory interest at the rate of 12 percent per annum commencing one month from the date of the settlement. It is doubtful that the defendants themselves have any interest in this issue other than to know that the case against them has been resolved once and for all. It is USAA, which claims it is statutorily obligated to insist on the plaintiffs' supplying it with their social security numbers, that is pressing the point. It argues that pursuant to Public Law , Sec. 111(8)(A)(i), now codified as 42 U.S.C. 1395y(b)(8)(C), it is required to determine whether a claimant (including an individual whose claim is unresolved) is entitled to benefits under [Medicare] on any basis before disbursing any settlement funds. USAA's position is that in order to satisfy this federal mandate, it may not issue funds to the plaintiffs and/or their attorney until it has made this determination, and the only way it can make the determination definitively is through an inquiry based on the plaintiffs' social security numbers. USAA has assured the plaintiffs that it will comply with its own privacy policy so that the plaintiffs' social security numbers will not fall into the wrong hands.

2 The plaintiffs' attorney contends that pursuant to Connecticut's Public Act , her firm has established its own privacy policy which protects the confidentiality of a client's social security number from being disclosed to a third party. Plaintiffs' counsel also points out that the injured client is just sixteen years old and obviously not Medicare eligible, so that the determination that the insurer needs to make as to him pursuant to federal law can be accomplished on the basis of his age alone. The named plaintiff's father, Michael Hackley, does not claim to have been injured and is a plaintiff solely because his son is a minor. Plaintiffs' counsel therefore argues that the father's social security number is entirely irrelevant. With the plaintiffs' refusal to disclose their social security numbers to the defendants' insurer on the one hand, and, on the other, the insurer's refusal to deliver the settlement funds to the plaintiffs and their attorney until they receive those social security numbers, the parties found themselves at an impasse. In an effort to break the logjam, the plaintiffs therefore filed the instant motion seeking the entry of a judgment plus interest. 1 Some additional factual claims are relevant to a resolution of this motion. In an affidavit accompanying her motion, plaintiffs' counsel states that at no time during the January 5, 2010 discussions with Ochs was there any mention of her requirement that the plaintiffs furnish their social security numbers. Ochs, however, has stated in her own affidavit that although she did not specifically make any reference to social security numbers in that telephone conference, she did advise plaintiffs' counsel to discuss her proposed release and other closing documents and information with defense counsel as part of the settlement. It was her intention that the other closing documents and information should include the plaintiffs' social security numbers. Although there is no claim that this intention was specifically mentioned during this conversation, another USAA employee, Clara Richards, has stated in her affidavit that she requested the plaintiffs' social security numbers from a staff member in the office of the plaintiffs' attorney as early as August of 2009, telling her that USAA needed those numbers in order to settle the matter. According to Richards, the employee staff member refused to provide the social security numbers. The subject of social security numbers seems not to have arisen again until after plaintiffs' counsel had already accepted Ochs' monetary offer and was discussing the release with defendants' counsel. At that time, defense counsel states in his affidavit, he told her that the provision of her clients' social security numbers was a necessary part of the settlement. Ochs and other representatives of USAA have stated in affidavits that it is the policy of USAA to comply with the federal law requiring it to determine whether recipients of settlements are Medicare eligible by obtaining their social security numbers, which are subject to the protection of their own privacy policy. Although the statute does not specifically require this method of assuring an insurer's compliance with the statute, it is USAA's view that absent the provision of social security numbers, the plaintiffs have not complied with the terms of the settlement agreement. To resolve this impasse, this court must first determine whether an insurer may legitimately condition the settlement of a civil case on the provision to it of the plaintiffs' social security numbers. Although this appears to be an issue of first impression in Connecticut, at least one federal court has considered this question and resolved it in favor of the insurer.

3 A fairly recent slip opinion from the U.S. District Court of Nebraska has concluded that in light of the purposes of the federal legislation and the presence of an easy electronic method of using social security numbers to make the mandated determination, it is permissible for an insurer to condition a settlement on the provision of a plaintiff's social security number. In Seger v. Tank Connection, LLC, Docket No. 8:08CV75 (D.Neb.2010), the court considered the history and purposes of this legislation: In December 2007, the Medicare, Medicaid and SCHIP Extension Act of 2007 (Extension Act) was signed into law. See Pub.L. No ; 42 U.S.C. 1395y(b)(7) and (8). Section 111 of the Extension Act adds new mandatory reporting obligations to the Medicare Secondary Payer Act ( MSPA ) requiring group health plans, liability insurers and self-insurers to provided detailed information regarding all liability settlements or open claims with ongoing responsibility for medical treatment with Medicare beneficiaries to the Centers for Medicare and Medicaid Services ( CMS ) CMS uses this information to identify situations where a plan or program is primary to Medicare under Medicare's Secondary Payer rules. By imposing this mandatory reporting requirement on Responsible Reporting Entities (RREs), Medicare hopes to increase its ability to identify individuals who received Medicare payments. RREs include group health plans, liability insurers, no-fault insurers, workers' compensation insurers and individuals or entities engaged in a business which are self-insured, are responsible for deductibles, or otherwise make direct payments for settlements. The Extension Act creates enhanced reporting requirements, not new ones. The new reporting requirements affect all parties involved in a payment of a settlement, judgment or award with a Medicare beneficiary after January 1, See 42 U.S.C. 1395y(b)(2)(A); 42 C.F.R Until now, insurers wishing to comply with the CMS policy were often at the mercy of a plaintiff or claimant for information concerning Medicare entitlement, usually through a signed consent form from the claimant. Anticipating the burden of the new reporting requirements, CMS has developed a query process whereby an RRE can determine a claimant's Medicare status electronically, and without authorization, as long as the RRE has access to the claimant's name, date of birth, gender and Social Security number or Medicare Health Insurance Claim Number.2 Based on the law, primary payers must notify Medicare of claimants who are entitled to Medicare benefits and have received or will receive payments from the primary payer. The information must be submitted after the claim is resolved through a settlement, judgment, award or other payment (regardless of whether or not there is a determination or admission of liability). See 42 U.S.C. 1395y(b)(8)(C). Entities who fail to report are subject to a $1,000 daily fine for late reporting. See 42 U.S.C. 1395y(b)(7)(B). The court held that the plaintiff had to respond to interrogatories requesting identifying information along with either his Medicare Health Insurance Claim Number or his Social Security Number in order that [the defendant's] insurance company may comply with the Extension Act. Id. While a decision of a federal magistrate is not binding on a Connecticut court, in this case, this court finds its reasoning persuasive. The plaintiff does not dispute the governmental need to prevent abuse of programs such as Medicare and to assure that such programs are reimbursed where appropriate. That there is a simple mechanism to assure that Medicare's interests are

4 protected when a Medicare-eligible person receives a verdict or settlement in a personal injury case-the electronic query process -is apparent, as is the fact that both that process and USAA's confidentiality policy provide reasonable, albeit not foolproof, assurance that this personal identifying information will not be compromised. This court therefore concludes that it is permissible for USAA to condition its disbursement of settlement funds on the plaintiffs' provision of their social security numbers. The fact that plaintiffs' counsel has established its own privacy policy pursuant to Connecticut Public Act does not vitiate 42 U.S.C. 1395y(b)(8)(C) or undermine its applicability to this case. As for the contention that the plaintiff is only sixteen years old and obviously not Medicare-eligible, the Nebraska court pointed out that among the purposes of the statute was avoiding having insurers at the mercy of plaintiffs when the time comes to ascertain Medicare eligibility. Rather than having to rely on plaintiffs' representations, the statute expresses a preference for a standardized procedure based on social security numbers or Medicare Health Insurance Claim Numbers with which the insurer can make the determination itself electronically. As for the asserted irrelevancy of the father's social security number, Seger points out that [t]he new reporting requirements affect all parties involved in a payment of a settlement, judgment or award (Emphasis added.) As the father is involved in a payment of a settlement his social security number is not totally irrelevant. The next question is whether there was an unambiguous agreement to settle this case. This is actually three different questions: a) whether there was an unambiguous agreement to settle the case, one of the terms of which was the provision of social security numbers to USAA; b) whether there was already an unambiguous agreement to settle this case without reference to the provision of social security numbers before USAA stated its requirement that such information be provided; or c) whether the parties never reached an unambiguous settlement agreement at all. The authority of the Superior Court to enforce settlement agreements undertaken with an eye toward ending litigation has been well established by Audubon Parking Associates Ltd. Partnership v. Barclay & Stubbs, Inc., 225 Conn. 804, 626 A.2d 729 (1993), and its progeny. That authority, of course, presumes that the agreement's terms are clear and unambiguous. In order to permit the court to be able to make such a finding, the party seeking enforcement of the purported agreement must be able to establish that the terms of that agreement were clear and that all parties at one point in time had in fact agreed upon them. This court has not been reluctant in the past (nor will it be in the future) to enforce clear and unambiguous settlement agreements. See, e.g., DiLungo v. Angelini Enterprises, Superior Court, judicial district of New Haven, Docket No. CV (August 6, 2001, Silbert, J.); Brockenberry v. Warner, Superior Court, judicial district of New Haven, Docket No. CV (July 2, 2001, Silbert, J.); Centerbank Mortgage Co. v. Maisano Associates, Superior Court, judicial district of New Haven, Docket No. CV (August 12, 1999, Silbert, J.) (25 Conn. L. Rptr. 274); DAP Financial Management, Inc. v. Mor-Fam Electric, Inc., Superior Court, judicial district of New Haven, Docket No. CV (September 4, 1998, Silbert, J.). On the other hand, when confronted with a situation in which the purported settlement may have been clear and unambiguous to some but not all, this court has declined to enforce such

5 an agreement. See, e.g., Pelkey v. Andrus, Superior Court, judicial district of New Haven, Docket No. CV (November 17, 2006, Silbert, J.) (42 Conn. L. Rptr. 375); Pitt v. Housing Alternatives for the Retarded Today, LLC, Superior Court, judicial district of New Haven, Docket No. CV (January 29, 2009, Silbert, J.); E & W Construction, Inc. v. Purcell, Superior Court, judicial district of Middlesex, Docket No. CV (January 12, 2005, Silbert, J.). Here, the contours of the monetary portion of the settlement were clear enough as to the parties themselves. The defendants' insurer would pay the plaintiffs the sum of $7,500 as a full and final settlement as to those parties, with the plaintiffs to execute a general release as to both the defendants and USAA. Once the settlement funds had been received, the plaintiffs would withdraw the action. The insurer itself, however, had another condition that it wanted added to the settlement documents, one which may have been alluded to prior to the settlement when a USAA representative asked a staff member of the law firm of plaintiffs' counsel to supply the plaintiffs' social security numbers, which request was refused. Even if that reference was so remote in time that it could not possibly have been considered an unambiguous settlement term on January 5, 2010, however, USAA argues that the plaintiffs were alerted to at least the possibility of additional conditions when, having agreed on the amount, the adjuster instructed plaintiffs' counsel to contact defense counsel to work out the details of the release. It is clear to the court that under these circumstances, the plaintiffs never unambiguously agreed to a settlement that required them to provide their social security numbers. On the other hand, given the earlier request for social security numbers by Richards and Ochs' requirement that plaintiffs' counsel confer with defense counsel to work out the terms of the release and other information, it is also apparent that USAA had not unambiguously agreed to a settlement that did not include such a term. The only conclusion that this court can reach, therefore, is that while the parties had agreed on the amount of the settlement, they had not reached an unambiguous agreement as to all of the terms of the settlement. Although courts favor settlements as a matter of public policy, they cannot enforce purported settlements in which there is ambiguity as to any of the terms of the agreement. Although the amount of the settlement is the principal-and, most often, the only-issue in controversy, with most other elements of the release documents falling within the category of boilerplate language, it is certainly conceivable that, as here, one or the other party will insist on inclusion of a relatively unusual term. When it does, there can be no enforceable agreement until all have unambiguously agreed on the term's inclusion or exclusion. The court also notes that, although this particular issue-the requirement that social security numbers be provided to the insurer-seems to be one of first impression in Connecticut, this is hardly the first settlement to be derailed because of unresolved questions relating to Medicare liens. Rarely, these have led to published decisions. See, e.g., Riccardi v. Strunk, judicial district of New London, Docket No. CV (January 22, 2010, Cosgrove, J.). More frequently, they have simply led to frustration and misunderstanding. Counsel would therefore

6 be well advised to be aware of developments in this area of law and take them into account in fashioning unambiguous settlement agreements. For all of the above reasons, the plaintiffs' motion for default, including the requests for interest and attorneys fees, is denied. Jonathan E. Silbert, Judge FOOTNOTES 1. FN1. Citing no authority for the proposition, the plaintiffs also seek counsel fees for the preparation of the instant motion. 2. FN2. Footnote 3 reads: The Social Security Number or Health Insurance Claim Number is essential to the administration of the Medicare program. Collection of the SSNs for the purpose of coordinating benefits with Medicare is a required, legitimate and necessary use of the SSN under federal law and is thus permitted by HIPAA. See McIntosh Sawran Peltz & Cartaya, P.A., Client Alert: Medicare's Section 111 Mandatory Reporting Program, endnote 5. Seger et al. v. Tank Connection, LLC et al., supra, Docket No. 8:08CV75. Silbert, Jonathan E., J.