Whistleblower Case Could Be Financial Win for Lawyer

Whistleblower Case Could Be Financial Win for Lawyer J. Michael Hayes

A Buffalo attorney is taking on more than 50 insurance companies in an unusual whistleblower case that seeks hundreds of millions of dollars for the federal government—and a hefty share for himself.

Attorney J. Michael Hayes’ False Claims Act case came to light this week after the Western District U.S. Attorney declined to intervene, and a judge unsealed his qui tam complaint accusing several dozen insurance companies of failing to repay Medicare after settling personal injury cases on behalf of their clients. With the government on the sidelines, Hayes could collect up to 30 percent of any recovery, plus legal fees and expenses.

Hayes, a litigator and author of several articles and books on medical expense reimbursement, said he knows from his own personal injury practice that insurance companies often fail to reimburse Medicare, as is required when the firm or its insured recovers from a tortfeasor. His action alleges the Medicare system has been shortchanged by hundreds of millions of dollars, perhaps even billions, over the past several years.

The False Claims Act, 31 U.S.C. §§3729-3722, allows the government to obtain treble damages from those who defraud the public. It also allows a private individual, known as a “relator,” to file a qui tam suit for a violation of the act. Under the law, the complaint is sealed for least 60 days, during which the government investigates and decides whether to intervene and take over the case, or leave it in the hands of the relator.

U.S. ex rel J. Michael Hayes v. Allstate, 12-cv-1015, was unsealed by Western District Chief Judge William Skretny (See Profile) on Monday after the government declined to intervene for reasons it did not specify.

In this case, Hayes is the relator, and the government’s decision to let him carry the case means his potential share of the recovery is up to 30 percent. It could have been as low as 15 percent if the government had intervened.

At the root of the case is a provision that requires reimbursement to Medicare when an injured party or insurer recovers medical expenses that were initially paid by the government program.

In the unsealed complaint, Hayes, who has been lecturing insurance companies for years about their obligation and potential liability, alleges that the insurance industry turns a blind eye to the Medicare reimbursement obligation by including vague indemnification provisions in their contracts “in an attempt to place the onus of reimbursement upon the Medicare beneficiary claimant and the claimant’s attorney.”

“The effective result of these liability settlements is the Defendants knowingly and improperly have avoided their statutory obligation to reimburse Medicare the conditional payments it made on behalf of a Medicare beneficiary under the Medicare Secondary Payer Act,” according to the complaint.

Assistant U.S. Attorney Gretchen Wylegala, in a document submitted earlier this month, informed the court that the government does not intend to intervene immediately, but did not say why. However, Wylegala said in court papers that the government remains interested and wants a say in whether the case is settled, dismissed or discontinued. She could not be reached for comment.

There was no immediate reaction from the insurance industry.