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Vermont Supreme Court Dismisses Claim that AIG and NuQuest Underfunded WCMSAOn August 25, 2016, the Supreme Court of Vermont published its opinion on Bindrum v. American Home Assurance Company, Chartis Insurance Company, and NuQuest Bridge Pointe, concluding that although plaintiff’s Medicare consultant projected a much higher Medicare Set Aside (MSA) funding amount than defendant’s Medicare consultant and the Centers for Medicare & Medicaid Services (CMS) rejected defendant’s MSA amount, but ultimately approved a higher valued MSA, AIG and NuQuest did not underfund the MSA arrangement that was ultimately approved by CMS and incorporated into a stipulated settlement approved by the Commissioner of the State of Vermont Department of Labor.

Facts Leading Up to Settlement of Claim

Plaintiff Bindrum was injured in 2003 while working in the course and scope of his employment. Following the injury, plaintiff received benefits under Vermont’s Worker’s Compensation Act from his employer’s worker’s compensation insurer, American Home Assurance Company/Chartis Insurance Company (AIG).

In 2005, plaintiff filed a medical malpractice lawsuit against the doctor who treated him for his claim related injury. That case settled in 2008. In 2007, plaintiff sued AIG in federal court for allegedly acting in bad faith by failing to timely handle and settle his worker’s compensation claim.

In 2008, plaintiff participated in a three-way mediation that included AIG and addressed both his medical malpractice and worker’s compensation actions. The mediation led to a settlement agreement with AIG, prepared on a Vermont Department of Labor (DOL) form, providing that: “(1) plaintiff would retain his full medical malpractice settlement, with AIG waiving any worker’s compensation lien on the recovery; (2) plaintiff would receive a $225,000 lump sum from AIG, and AIG would start advancing him $7000 per month credited against the lump sum; and (3) AIG would create an MSA to pay for plaintiff’s undetermined future medical expenses, to be funded only to the amount required for CMS approval up to a limit of $750,000.00.” The parties further agreed that “AIG would have the choice of vendor to set up and administer the MSA, and that their agreement would not be submitted to the DOL commissioner until CMS had approved the MSA.”

The Creation, Submission, and Ultimate Approval of the Medicare Set Aside

AIG contracted with NuQuest Bridge Point (NuQuest) to set up and administer the MSA. Although plaintiff’s Medicare consultant had produced a significantly higher MSA in March 2008, NuQuest produced and submitted to CMS an MSA with a value of $223,693. CMS responded with a December 8, 2008 letter, which was copied to plaintiff and his counsel, rejecting NuQuest’s recommended MSA amount, and instead indicating, among other things, that: “(1) an MSA with a value of $282,179 would adequately consider Medicare’s interests; and (2) when MSA funds have been depleted in a year, Medicare will pay for services that are related to the work injury or disease for the remainder of that year until the scheduled date for the subsequent year’s deposit into the WCMSA account.”

AIG agreed to the additional amount requested by CMS, and NuQuest modified the MSA accordingly. On March 11, 2009, AIG and plaintiff, who was represented by two attorneys and in possession of the much higher MSA done by their own Medicare consultant in March 2008, signed the settlement agreement, which recited the terms of the MSA, and submitted it to the DOL for approval. The DOL approved the agreement a week later.

Plaintiff’s Federal and State Suit Alleging Undervaluation of the MSA

In 2010, plaintiff sued AIG in federal court, alleging that AIG undervalued the MSA and unnecessarily delayed sending it to the DOL. The federal district court dismissed plaintiff’s complaint without prejudice, concluding that: “(1) the difference between AIG’s MSA valuation and a much higher valuation done by plaintiff’s consultant in March 2008 had no bearing on the actual damages plaintiff alleged; and (2) any damages caused by AIG’s alleged delay in sending the MSA to the DOL did not meet the federal jurisdictional threshold amount.” In 2011, the Second Circuit United States Court of Appeals affirmed the district court’s decision. See Bindrum v. Am. Home Assurance Co., 441 Fed. Appx. 780 (2d Cir. 2011).

Plaintiff then filed the instant action in Vermont superior court, raising similar allegations, but adding NuQuest as a defendant. NuQuest moved for judgment on the pleadings and joined in AIG’s motion to dismiss. The superior court dismissed several counts of the complaint, but allowed plaintiff’s third-party-beneficiary claim against NuQuest to go forward.  NuQuest moved for summary judgment in July 2015, raising a dozen bases for granting the motion.

In January 2016, the superior court granted the motion, concluding that, “with respect to the contract between AIG and NuQuest, plaintiff was a third-party beneficiary only to the extent that AIG was required to create an MSA that would be acceptable to CMS, but not as to any particular level of funding.” As the court noted, “plaintiff had acknowledged in his deposition that CMS agreed that Medicare would cover any shortfall in the approved MSA.” The court further noted that plaintiff “had produced no evidence of any economic damage sustained due to the alleged undervaluation of the MSA.” Nor could he because “any inadequacy in the MSA would harm only Medicare, which had indicated that it would cover any shortfall–not plaintiff.” According to the court, “as long as the MSA was approved by CMS, plaintiff had no cause of action with respect to the agreement between AIG and NuQuest.”

Citing the same rationale applied by the United States Court of Appeals, the court stated that “the mere existence of the approved MSA, whether funded with ten dollars or ten million dollars, protected plaintiff’s interest in having his future medical expenses paid for.” See Bindrum v. Am. Home Assurance Co., 441 Fed. Appx. 780, 781-82 (2d Cir. 2011). (rejecting plaintiff’s argument that defendants undervalued his MSA based on following reasoning: (1) settlement agreement obligated defendants “only to fund the MSA up to the amount required for CMS approval”; and (2) to extent that MSA was underfunded, “only Medicare, not plaintiff” would be harmed because “the amount of the set aside has no bearing on plaintiff’s ability to obtain reimbursement for his work-injury-related medical expenses”).

On appeal, plaintiff argues that the superior court abused its discretion in denying his motion to compel discovery, and that the court erred by granting defendant summary judgment.

The Supreme Court of Vermont’s Decision

The Supreme Court of Vermont here concludes it need not address the discovery issue because it rejects defendant’s argument that the court erred in granting summary judgment. The court upholds that decision for the same reasons cited by the superior court and the United States Court of Appeals. “Federal regulations, the Form 15 settlement agreement approved by the Department of Labor, and plaintiff’s own acknowledgement in his deposition establish that plaintiff’s interest as a third party beneficiary of the agreement between AIG and Nuquest was limited to his interest in an MSA that met with CMS approval, thereby assuring that additional Medicare-eligible medical expenses beyond those funded through the MSA would be covered by Medicare.”

The court finds that although plaintiff’s hired Medicare consultant projected a much higher MSA funding amount and the settlement agreement permitted funding up to $750,000, “AIG’s obligation was to submit an MSA that would be approved by CMS. AIG fulfilled that obligation through NuQuest, and CMS accepted the revised MSA, as did plaintiff with the advice of counsel, based on CMS’s statement that Medicare would cover any shortfall in a given year.”

Plaintiff points to an alleged ambiguity in the effective date of the settlement agreement between him and AIG, but the court finds that “any such ambiguity is immaterial because the effective date of the agreement has no bearing on whether the MSA was undervalued or whether plaintiff suffered any damages because of it. The issue concerning the effective date may have been relevant at the motion-to-dismiss stage as to whether defendant could have breached the settlement agreement before it became effective or whether the release language would apply, but neither of those issues played any part in the superior court’s decision.” Accordingly, the court finds no basis to disturb the superior court’s grant of summary judgment to defendant.


This may be one of the most important Medicare set aside decisions ever published by any court in the US. It highlights the significance of and the value of doing the right thing. As one of the largest and most respected insurers in the US, AIG is committed to making sure plaintiffs’ and Medicare’s interests are properly taken care of when settling entitlement to future medical care related to any claimed injuries. It also highlights the importance of and the protection that comes with having a Medicare compliance partner that knows, understands, and provides sound and dependable advice. As one of the largest and most respected MSP vendors in the US, NuQuest is also committed to making sure plaintiffs’ and Medicare’s interests are properly taken care of when settling entitlement to future medical care related to any claimed injuries.

The case also reminds us of the nightmares such issues can cause. Can you imagine what the results may have been if AIG had not produced an MSA in this case? Medicare denying benefits. Plaintiff seeking to re-open his settled case, or even worse filing private causes of action. Can you fathom what the court’s conclusions may have been had AIG decided not to submit the MSA to CMS for their review and approval? CMS refusing to accept the terms of settlement and therefore seeking reimbursement of any conditional payments made after date of settlement. Can any of us begin to understand or process the ramifications of such a case had NuQuest created a “minimal” or “conservative” MSA to allegedly protect Medicare’s future interests, without CMS approval of same? CMS legally seeking a finding of purposeful shifting of future responsibility of medical care related to the claim to Medicare as a violation of the MSP Act in order to prove False Claims Act allegations.

Any of these results would have been horrible for plaintiffs, corporate defendants and insurers. All of these could be costly and time consuming and could open corporate defendants and insurers to further investigations, past financial liability, and future fines and penalties. As the Medicare and Medicaid compliance industry evolves, more vendors enter the market, compliance becomes more burdensome, complex, and expensive and more seemingly “sexier,” “aggressive,” “creative,” and “innovative” MSP compliance products come about and become available, hope we all remember that there is no substitute for doing the right thing, as it will always withstand the test of time and prove to be the less costly, more efficient, and truly compliant alternative.


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