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District Court Grants Summary Judgment after Insurance Company Refuses to Pay Settlement Funds

In Stone v. State Auto Mut. Ins. Co., 2017 U.S. Dist. LEXIS 21737, Billy Ray Stone (“Stone”) filed an action against State Automobile Mutual Insurance Company (“State Auto”) for breach of contract and bad faith after State Auto did not disburse the settlement funds. Stone contended that State Auto refused or failed to pay the amount agreed upon in settlement following a prior automobile accident and acted in bad faith in their refusal to pay. In response, State Auto filed a motion for summary judgment.

After Stone sustained injuries in a prior automobile accident, Medicare paid $80,296.19 for treatment of Stone’s accident-related injuries. Stone then filed a lawsuit against the other motorist, Bradley James Frye, and State Auto, which resulted in Stone agreeing to a $30,000.00 settlement with State Auto. Stone settled separately with Frye. In the Full and Final Release with State Auto, Stone agreed to investigate and pay any current Medicare conditional payment claims and provide State auto with a copy of correspondence from Medicare confirming that the lien was satisfied and/or Medicare’s file was closed. When Stone’s counsel contacted State Auto and inquired about the settlement check, State Auto noted that, although they were aware that Stone had satisfied the liens that existed at the time of his settlement with Frye, they would require updated documentation confirming that no additional Medicare lien existed. State Auto then requested that Stone sign authorization that would allow Statue Auto to communicate with Medicare directly to confirm that Medicare had not asserted any additional liens. Stone did not sign the consent form and did not provide State Auto with documentation from Medicare confirming that their file was closed. As a result, State Auto refused to issue the settlement funds to Stone, which resulted in the present action.

Citing Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229 (11th Cir. 2016), the Court noted that there was a possibility that State Auto would have to pay twice, given the potential that State Auto would have to reimburse Medicare, despite having reimbursed the beneficiary, if the liens were not properly addressed. The Court further noted that State Auto acted reasonably and prudently in withholding the settlement funds until they were presented with documentation from Medicare confirming that the liens had been handled. Because Stone did not produce the documentation requested by State Auto, the Court granted State Auto’s motion for summary judgment. The Court found that Stone had no credible basis to assert that State Auto acted in bad faith and that State Auto’s decision to withhold funds was reasonable in light of the uncertainty regarding any potential Medicare liens.

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