MSP Recovery Claims, Series LLC v. AIG Property Casualty Company

Background

MSP Recovery Claims, Series LLC sued AIG Property Casualty Company, AIG Property Casualty, Inc., and Lexington Insurance Company under the Medicare Secondary Payer Act. The statute can require a primary insurer to reimburse Medicare or a Medicare Advantage Organization (MAO) for medical expenses that the MAO paid when the insurer was responsible for payment. It also permits a private claim for double damages in certain circumstances. MSP Recovery Claims also asserted a direct recovery claim under the Act’s implementing regulations and styled the case as a proposed class action.

The plaintiff alleged that MAOs had assigned reimbursement claims to the plaintiff’s designated Series LLCs. It relied on five example patients, claims listed in Exhibit A, and a broader group of unidentified claims. The defendants moved to dismiss under Rule 12(b)(1) for lack of subject-matter jurisdiction and Rule 12(b)(6) for failure to state a claim. They also moved to strike the class allegations and sought costs under Rule 41(d).

Standing and the Five Example Claims

The court held that the plaintiff had not adequately alleged Article III standing. Standing requires a concrete injury, a connection between that injury and the defendants’ conduct, and a likelihood that a court decision would remedy the injury.

For the five example claims, the plaintiff needed to allege facts showing that each MAO incurred medical expenses because of an accident, paid those expenses without reimbursement, assigned the reimbursement claim to one of the plaintiff’s Series LLCs, and authorized the plaintiff to sue on the Series LLC’s behalf. The court found that the plaintiff barely alleged that the MAOs paid for medical care connected to accidents, and it assumed for purposes of the motion that the plaintiff had the right to sue for the designated Series LLCs. But the plaintiff did not adequately allege that the expenses were reimbursable and remained unpaid.

The court rejected the plaintiff’s theory that an insurer’s report to the Centers for Medicare & Medicaid Services showed that the reported medical expenses were reimbursable. The reporting requirement applies even when there has been no admission or determination of liability, and the plaintiff provided no facts showing that the reported claims involved medical expenses for which the defendants had to reimburse the MAOs.

The court also found assignment and causation problems. The assignments did not cover all of the medical services associated with S.A. and J.F. The plaintiff did not adequately show that claims associated with J.M. and S.A. were not excluded by assignment carveouts. In addition, the plaintiff did not adequately connect several claims to the defendants. The evidence submitted by the defendants indicated that AIG Property Casualty, Inc. did not issue insurance policies and that AIG Property Casualty Company could not be linked to L.F.’s alleged policy. The plaintiff did not provide evidence rebutting those statements.

The court further found that the plaintiff did not adequately allege that the patients’ medical treatment resulted from injuries covered by the defendants’ policies or settlement agreements. The complaint provided little information about the accidents or the treatment, leaving the connection between the accidents and medical expenses speculative.

Exhibit A and the Broader Claims

The court found the allegations about the claims listed in Exhibit A even less specific. The exhibit did not identify the MAOs that allegedly paid the expenses and were not reimbursed, did not provide sufficient information about the assignments, and did not connect particular patients to particular accidents and MAOs. The alleged “greater universe” of claims contained no meaningful information from which the court could evaluate standing. The proposed class-action format did not eliminate the requirement that the named plaintiff show its own injury.

Other Motions and Disposition

The court declined to decide whether Delaware law independently allowed the plaintiff to sue on behalf of its designated Series LLCs because the plaintiff lacked standing for several other reasons. It also denied the plaintiff’s request for jurisdictional discovery, finding that discovery was not a substitute for adequately alleging jurisdiction and that the plaintiff had access to information from its assignors that could have supported its allegations.

The court granted the defendants’ Rule 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction. It denied as moot the defendants’ motions to strike the class allegations and for costs. The court declined to grant the plaintiff leave to amend again. The matter was dismissed without prejudice, and the Clerk was directed to close the case.