Nevada Court Confirms that Medicare Conditional Payment Settlement Provisions are “Essential Terms”

Just recently, a Nevada federal district court confirmed that Medicare conditional payment provisions in a settlement agreement are “essential” (i.e., material) terms even if the plaintiff is not a Medicare beneficiary and has not received any payments from Medicare in relation to their underlying claim. Segura v. Zurich Am. Ins. Co., 2022 U.S. Dist. LEXIS 199484. This decision certainly casts a light on the importance of clear Medicare Secondary Payer (MSP) provisions in settlement agreements.

Factual Overview

The plaintiff, Michael Segura, was involved in a motor vehicle accident in 2017. During a mediation later that year, Mr. Segura and the defendant, Zurich American Insurance Company (“Zurich”), agreed on the total settlement amount, payment instructions, and responsibility of any outstanding liens. However, the following terms of the parties’ mediation stipulation were in dispute:

Should it later be determined that Releasor was, in fact, either receiving or entitled to receive Social Security Disability and/or Medicare benefits at the time that this Release is executed, Releasor agrees to reimburse the Releasees and/or their attorneys and/or Medicare for any valid claim or lien asserted by Medicare, and will indemnify, defend, and hold the Releasees and/or their attorneys harmless from any such claims.

Mr. Segura did not agree to the above-quoted provision (hereinafter, “Section 5 provision”) at the time of the mediation; however, Zurich filed a motion requesting the court to order that Mr. Segura sign a settlement agreement which included the Section 5 provision.

Ruling and Sanderson Firm Commentary

In examining Nevada contract law, the court found that the Section 5 provision constituted “new and material” terms to the mediation agreement. Thus, there was no “meeting of the minds” between the two parties, and the court recommended the district judge to deny Zurich’s Motion to Enforce Settlement.

This decision, which ultimately caused the settling parties to go back to the drawing board, serves as an important reminder that conditional payment provisions in settlement agreements should not utilize “boilerplate” provisions. Custom MSP settlement language is HIGHLY recommended.

If such MSP/conditional payment settlement terms are approached as an afterthought, additional issues (i.e., court intervention, an unenforceable settlement, etc.) may arise. Even though the Segura case was resolved under Nevada law, it is likely that many jurisdictions would have reached the same conclusion finding that MSP/conditional payment settlement terms should be negotiated and agreed upon.

Sanderson Firm, a full-service law firm and MSP services provider, offers comprehensive settlement agreement review and drafting services to ensure consistent and clear MSP provisions. If you have any questions regarding this decision or Sanderson Firm’s settlement agreement services, please contact us.