Date: November 13, 2009
The Board has been asked about the use of indemnification or hold harmless provisions in Section 32 agreements to protect a carrier or employer from liability for Medicare payments related to the established workers' compensation claim. The Board will not approve agreements containing such indemnification for payments made by Medicare for services provided prior to the execution of the Section 32 agreement.
The employer or insurance carrier has primary responsibility for treatment and care of a condition that is the subject of an established workers' compensation claim. If Medicare pays for any such care or treatment, federal law provides that Medicare may seek reimbursement of such charges from the employer or insurance carrier.
It is reasonable that the insurer assume the risk of liability for any payments for services provided before the execution of the Section 32 agreement. The employer or carrier has the ability to determine whether the injured worker is covered by Medicare, and if so, whether Medicare has made any payments. In fact, workers' compensation payers soon will be required to report their established workers' compensation claims to Medicare in order that it may coordinate benefits. Indemnification can have significant financial ramifications for an injured worker who has executed what he or she believes is a final agreement and who may not be aware that a medical provider billed Medicare instead of the insurance carrier. Therefore, the Board maintains it is unfair and unnecessary to permit an insurer to insert indemnification (or hold harmless) language in an agreement that would require a claimant to pay for expenses incurred as a result of Medicare payments for treatment or care provided before the execution of the Section 32 agreement when the insurer was the primary payer.
Workers' Compensation Law (WCL) §32(b)(1) directs the Board to disapprove unfair agreements. As such, it is the Board's position that a Section 32 agreement that contains hold harmless language that shifts liability to a claimant for Medicare payments for services provided before execution of the Section 32 agreement is unfair.
Pursuant to WCL §23, insurers may seek administrative review and full Board review if a Section 32 agreement containing hold harmless language is disapproved by a workers' compensation law judge.
Robert E. Beloten