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Vermont Supreme Court Upholds Finding that MSA Vendor’s Undervaluation of MSA Caused No Economic Har

In Bindrum v. Am. Home Assur. Co., 2016 Vt. Unpub. LEXIS 150 (Vt. Aug. 19, 2016), the Supreme Court of Vermont recently affirmed the superior court’s granting of summary judgment to Defendant NuQuest Bridge Pointe with respect to Plaintiff’s lawsuit alleging that defendant NuQuest and the workers’ compensation carrier, AIG, undervalued the MSA and unnecessarily delayed sending it to the Vermont Department of Labor for approval.

Plaintiff, who was injured in a work-related accident in 2003, reached an agreement with Defendant AIG to settle his workers’ compensation claim. According to the terms of the agreement, AIG would create a Medicare Set-aside to pay for Plaintiff’s future medical expenses to be funded “only to the amount required for CMS approval up to a limit of $750,000.” The parties further agreed that the agreement would be submitted for approval once the MSA had been approved by CMS. AIG contracted with Defendant NuQuest to set up the MSA. After considering NuQuest’s proposed MSA of $223,693.00, CMS issued approval of an MSA in the amount of $282,179.00. AIG agreed to fund the MSA as approved by CMS and the Department of Labor subsequently approved the settlement agreement.

Plaintiff filed an action against AIG alleging that AIG undervalued the MSA and delayed sending it to the DOL. In dismissing the action, the federal district court noted: 1) the difference between AIG’s MSA valuation and the valuation done by the Plaintiff’s consultant had no bearing on the actual damages that Plaintiff alleged, and 2) any damages caused by AIG’s delay in sending the MSA to the DOL did not meet the federal jurisdictional threshold amount.

After the dismissal, Plaintiff filed an action against both AIG and NuQuest. The superior court dismissed several counts of the complaint, but allowed Plaintiff’s third party beneficiary claim against NuQuest to move forward. NuQuest responded by filing a motion for summary judgment. In granting NuQuest’s motion, the court found that Plaintiff had no cause of action with respect to the agreement between AIG and NuQuest as long as the MSA was approved by CMS. According to the court, the Plaintiff couldn’t point to any economic damage sustained due to the alleged undervaluation of the MSA because any inadequacy in the MSA would harm only Medicare, as Medicare would be the one to cover any shortfall. Plaintiff appealed to the Vermont Supreme Court, who, in affirming the superior court’s ruling, pointed to Federal regulations, the Form 15 settlement agreement approved by the Department of Labor, and Plaintiff’s own acknowledgment as evidence that Plaintiff’s interest as a thirty party beneficiary of the agreement between AIG and NuQuest was limited to his interest in an MSA that met with CMS approval. AIG’s obligation was to submit an MSA that would be approved by CMS and they fulfilled that obligation through NuQuest.

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