Subsequent to $2.4M Pay Out, Progressive Continues to face NJ State False Claims Act Litigation

Over the last several years, we have been providing updates regarding False Claims Act (FCA) litigation, filed both in Federal and NJ court, against Progressive Insurance Company, wherein a whistleblower, a private citizen, asserted that Progressive was not checking Medicare and Medicaid status of its members prior to enrolling them in their health first automobile insurance policies. By not checking the Medicare and Medicaid status, Progressive was alleged to be violating the Medicare Secondary Payer Act (MSP) by forcing Medicare and Medicaid to pay for items and services which should have been covered under Progressive’s health first automobile insurance policies.

In November of 2017, we blogged that Progressive settled the Federal MSP FCA action with the whistleblower for $2.4 million. This lawsuit was the first case to hold an auto insurer liable under the FCA. It appears that the Federal FCA litigation was not the end of Progressive’s liability for its alleged MSP violations. Now, an opinion entitled Lopez-Negron v. Progressive Cas. Ins. Co., 2019 N.J. Super (June 18, 2019) has surfaced determining that the New Jersey FCA Action may continue on, despite the Court’s recognition that the Federal and State court actions may be duplicative in nature. The Court conducted an analysis into the “entire controversy doctrine” as to whether the state action should continue on. Ultimately, the court determined that Progressive should have included a clause in its settlement agreement at the Federal level for the Plaintiff to dismiss the state court action. Further, Progressive could have attempted to forestall the duplicative actions by asking the Federal court to bar the state case with an early motion.

Commentary: Progressive continuing to face False Claims Act litigation at both the state level, despite its prior settlement of $2.4M for the Federal case, regarding substantively the same complaint that Progressive was improperly diverting payments to Medicare and Medicaid should set off alarm bells for primary payers. Clearly, the whistleblower here is motivated to continue her claim. In the Federal settlement, she received approximately $600k in whistleblower fees. New Jersey FCA laws also allow for whistleblowers to receive anywhere from 15-30% of recovery in the case.

This continued litigation should remind primary plans that in order to avoid litigation like this, which can be lodged at both the Federal and state level by private citizens, they should: 1) Check the Medicare and Medicaid status of claimants prior to allowing enrollment into a no-fault or liability policy and 2) Proactively identify Medicare beneficiaries so as to ensure that Medicare does not pay conditionally- in other words, Medicare should not have to “pay and chase.”

We will continue to monitor this litigation at the state level, and in the meantime, we continue to strongly recommend carriers/primary plans have a proactive strategy in place to avoid Medicare paying as a primary payer, despite the ability to reimburse Medicare for these conditional payments, so as to not be subject to future MSP FCA claims.

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