By Barrye Panepinto Miyagi, JD, CMSPF-S and Shannon A. Shelton, JD, CMSP
The December 5, 1980 policy is well known throughout the asbestos litigation arena. The policy provides that Medicare will not seek reimbursement (of its conditional payments of a plaintiff’s exposure-related medical expenses) and the defendant/insurer is not obligated to submit a mandatory Section 111 report to CMS when all of the plaintiff’s exposures occurred prior to December 5, 1980. In some cases, lawsuits assert post-December 5, 1980 exposure, but it is later revealed in discovery that all exposures occurred pre-December 5, 1980. In Henni v Standard Fuel Eng’g Co, No. 22-11608, 2023 WL 143914 (E.D. Mich. Jan. 10, 2023), the district court was asked to determine whether the defendants were obligated to submit a Section 111 report where the dates of exposure alleged in the operative complaint were inconsistent with the facts developed during discovery.
The relevant facts in Henni are as follows: Seven personal injury lawsuits were filed in Wayne County Circuit Court (Michigan) alleging a causal link between the plaintiffs’ or the plaintiffs’ decedents’ development of asbestosis, lung cancer, or mesothelioma and their exposure to asbestos. The complaints generally alleged both pre- and post-December 5, 1980 exposure. Though it was later revealed through discovery that all exposures occurred prior to December 5, 1980, the operative complaints were never amended to narrow the exposure timeframe to pre-December 5, 1980, nor did the plaintiffs move to dismiss the allegations of post-December 5, 1980 exposures. Following the plaintiffs’ settlements with two of the defendants, plaintiffs learned that the defendants’ insurer intended to report the settlements to the Centers for Medicare & Medicaid Services (“CMS”). The plaintiffs filed a motion for injunctive relief arguing that the defendants had no duty to submit a Section 111 report because the settlement agreement stated that all relevant exposures occurred prior to December 5, 1980. The defendants argued that, notwithstanding the findings in discovery or the provisions of the release, their duty to report the settlement arose from the allegations of post-December 5, 1980 exposure in the operative complaints. Because of the Medicare Secondary Payer Act issues raised in the plaintiff’s motion for injunctive relief, the defendants removed the case to the United States District Court for the Eastern District of Michigan asserting federal question jurisdiction.
Focusing on the operative complaints, rather than the plaintiffs’ joint motion for injunctive relief, the district court determined that it lacked jurisdiction and remanded the case to Wayne County Circuit Court. Absent informal resolution by the parties, the plaintiffs’ motion for injunctive relief seeking to enjoin defendants from reporting will be decided by the state court.
The MMSEA/Section 111
Insurers (including self-insured entities) are required to report settlements with Medicare beneficiaries to CMS pursuant to Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (“MMSEA” or “Section 111”). 42 U.S.C. § 1395y(b)(8). Insurers who fail to comply with their reporting obligations risk civil monetary penalties (“CMPs”) of up to $1,000 per plaintiff for each day of non-compliance. 42 U.S.C. § 1395y(b)(8)(E)(i). There are limited exceptions to the insurers’ Section 111 mandatory reporting requirements, one being exposure cases where all exposure ended before December 5, 1980, and “[e]xposure, ingestion, or an implant on or after December 5, 1980, has not been claimed in the most recently amended operative complaint (or comparable supplemental pleading) and/or specifically released…” 8/19/2014 CMS Directive: Liability Insurance (Including Self-Insurance): Exposure, Ingestion, and Implantation Issues and December 5, 1980 (“CMS’ Directive”).1
Observations and Lessons Learned
Pleadings and discovery are relevant to the application of the December 5, 1980 policy. Where the operative complaint and discovery are inconsistent as to exposure on or after December 5, 1980, the December 5, 1980 policy does not apply. If either the pleadings or discovery indicate post-December 5, 1980 exposure, CMS takes the position that: (1) the settling defendant/insurer is required to Section 111 report the settlement, and (2) CMS is entitled to reimbursement from the settlement. Lawyers handling asbestos cases and related MSPA issues should evaluate their pleadings and discovery to determine whether the December 5, 1980 policy will apply to the settlement.
In asbestos cases, initial complaints often broadly describe exposure dates, especially in cases where a plaintiff worked beyond December 5, 1980, but does not know if the premises where he/she worked or products to which he/she was exposed contained friable asbestos. CMS addresses the challenges in pinpointing exposure dates in initial pleadings in the CMS’ Directive:
Any operative amended complaint (or comparable supplemental pleading) must occur prior to the date of settlement, judgment, award, or other payment and must not have the effect of improperly shifting the burden to Medicare by amending the prior complaint(s) to remove any claim for medical damages, care, items and/or services, etc. Where a complaint is amended by Court Order and that Order limits Medicare’s recovery claim based upon criteria contained in this alert, CMS will defer to the Order. CMS will not defer to Orders that contradict governing MSP policy, law, or regulation.
Accordingly, if an original complaint alleges pre-and post-December 5, 1980 exposure, but discovery reveals only pre-December 5, 1980 exposure, a plaintiff may amend his/her complaint to conform the pleadings to the evidence and avail himself/herself of the December 5, 1980 policy. Per CMS policy, as long as the amendment precedes settlement, the amendment will suffice to permit application of the December 5, 1980 policy. The issue raised in Henni could have been avoided if plaintiffs amended their complaint prior to settlement.
What constitutes a comparable supplemental pleading? The CMS' Directive provides neither an exhaustive list nor illustrative examples of comparable supplemental pleadings. The only guidance the CMS' Directive provides regarding the nature of the “comparable supplemental pleading” is the inference that the pleading must achieve the same result/effect as a court order amending the operative complaint. Therefore, where the discovery supports a finding that all relevant exposures occurred prior to December 5, 1980, a motion to dismiss post-December 5, 1980 exposure allegations to conform the pleadings to the evidence should suffice as a comparable supplemental pleading. Whether discovery alone (no matter the form—whether written responses, documents or deposition testimony) constitutes a “comparable supplemental pleading” is questionable. Considering discovery is not typically accompanied by a court order, and considering the fact that master discovery is often exchanged early in the litigation and before depositions, relying on discovery as the sole basis for the application of the December 5, 1980 policy presents a risk of CMPs.2
Does Release Language have an effect on the application of the December 5, 1980 policy? It is not likely under any set of circumstances that release language alone would serve as a valid basis for the application of the December 5, 1980 policy, especially in the face of allegations contrary to same in the operative complaint. When the facts alleged in the pleadings and developed in discovery support the irrebuttable presumption that all relevant exposures occurred prior to December 5, 1980, language should be incorporated into the release that succinctly summarizes the relevant facts and the sources of same. Further, when it is clear that the December 5, 1980 policy does not apply to the settlement, the release should address the defendant’s reporting obligations and the plaintiff’s verification of the data to be included in the defendant’s Section 111 report.
We will continue to monitor Henni and update this article when the state court rules.
About the Authors
Barrye Panepinto Miyagi is Partner at Taylor Porter and the Practice Group Leader for Taylor Porter’s Medicare Secondary Payer (MSP) Compliance Group. Barrye has defended asbestos an other toxic tort cases for over 30 years and is often consulted to address the applicability of the December 5, 1980 policy. Barrye is certified by the Louisiana Association of Self Insured Employers (LASIE) as a MSP-Fellow and has worked in the MSP Compliance arena for over 15 years.
Shannon A. Shelton is Special Counsel at Taylor Porter and practices in the MSP Compliance Group. Shannon’s primary practice focus is complex litigation involving compliance with the Medicare Secondary Payer Act and Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007. Shannon has represented and defended Fortune 10 global energy companies in class action and mass joinder cases involving toxic tort exposure and personal injury from Naturally Occurring Radioactive Material (NORM). Shannon is also certified by LASIE as a Certified Medicare Secondary Payer (CMSP) Professional and has worked in the MSP Compliance arena for nearly 10 years.
Taylor Porter’s MSP Compliance Group counsels businesses and lawyers on MSP Best Practices. Their work includes drafting best practices and related documents, identifying and resolving the interests of Medicare and Medicare Advantage Plans in settlements and judgments, global lien resolution in complex, multi-plaintiff cases, Medicare Set Asides, and Section 111 reporting. Barrye and Shannon also provide strategic advice on MSP compliance during all phases of litigation and settlement. If you have questions about the December 5, 1980 Policy or MSP compliance, please contact Barrye and/or Shannon.
Please note this information is accurate as of the January 25, 2023 publication of this article.
 The December 5, 1980 policy is also documented in the CMS MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation USER GUIIDE, Version 7.0, Revised 1/9/2023. ("CMS NGHP User Guide")
 The term "relevant exposure" pertains to the defendant at issue. Where multiple defendants are involved and the claimant meets the policy requirements with respect to any single defendant, that defendant is not required to Section 111 report as long as that defendant has no joint and several liability for the settlement, judgment, award or other payment. (CMS NGHP User Guide)
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