In what may be considered one of the largest whistleblower lawsuits in US history, a complaint has been filed which names 315 auto insurance companies as defendants. The lawsuit seeks to recover billions of dollars for the federal and certain state governments from the insurers for claims they allege the firms should have paid but didn’t because they deliberately filed false reports that failed to acknowledge their obligations as required by federal law.
The qui tam complaint has been under seal until now, after being filed two years ago in US District Court for the Eastern District of Michigan, Southern Division (US District Court) on behalf of the US government and multiple states (subject jurisdictions). The action was filed by MSP Recovery Law Firm (MSP Law), and Akeel & Valentine, PLC on behalf of MSP WB, LLC (MSP WB), a subsidiary of MSP Recovery. MSP Law is a separate legal entity from MSP Recovery.
On August 12, 2021, the US District Court finally unsealed the complaint, allowing MSP WB to proceed with the lawsuit against the auto insurers on behalf of the US and the subject jurisdictions.
According to the complaint, auto insurers are required by law – Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) – to report certain information to Centers of Medicare & Medicaid Services (CMS) to prevent the wrongful payment of specific expenses which must be covered by auto insurers. Such additional expenses would have to be taken out of the Medicare Trust Fund, which is funded by taxpayers.
MSP Recovery alleged that the 315 auto insurers deliberately developed a scheme through the filing of knowingly false reports with CMS. Said scheme involves the intentional and systemic filing of reports that failed to detail insurers’ real responsibilities regarding when debts were owed to the Medicare Trust Fund as well as the subject jurisdictions.
The lawsuit maintains that under MMSEA, auto insurers are obligated to pay or reimburse Medicare and the subject jurisdictions in their role as “primary payers.”
“This case is based on what MSP Recovery has seen over the last seven years as auto insurers knowingly and willfully turn a blind eye and evade their obligations to Medicare,” said MSP Recovery and MSP Law founder John H. Ruiz in a statement.
“They do so despite having knowledge that they are reporting falsely to CMS.”
Insurers named in the lawsuit include Auto Club Enterprises Insurance Group, Auto Owners Group, Berkshire Hathaway Group, CSAA Insurance Group, Erie Insurance Group, Farmers Insurance Group, Kemper Corporation Group, Liberty Mutual Group, National General Group, Nationwide Corporation Group, Progressive Group, State Farm Group, Travelers Group and United Services Automobile Association Group.
The complaint also alleges that the auto insurers have been unable to satisfy the federally mandated reporting requirements because the procedures they have in place are “intentionally set up to fail.” The defendants did nothing to obtain information from insureds which is necessary to accurately produce the reports, the lawsuit said. It added that the insurers omitted critical data fields such as insureds’ Social Security numbers – without such information, the defendants cannot fulfill their reporting obligations.
MSP Recovery additionally accused the defendants of having known for years that they were reporting falsely, and that even after it had advised the insurers they still failed to do anything to report properly.
“Considering that CMS spends more than $1.4 trillion annually, years of such behavior by the auto insurance industry is an enormous financial drain upon CMS and taxpayers,” said lawyer Shereef Akeel of Akeel & Valentine.
In a release, MSP Recovery said that any amounts recoverable in the case are in addition to the amounts recoverable in connection to the over $50 billion MSP owns in billed amounts against insurers that have primary payment responsibility.