Information about PA’s New Third Party Liability Law, Act 2008-44

The law applies to lawsuits filed on or after September 2, 2008.

There are three major changes contained in Act 2008-44. First, the new law extends the statute of limitations and repose applicable to recovery of medical expenses incurred on behalf of minors and paid by Medical Assistance (MA), so that parents can recover those medical expenses for the Department of Human Services (DHS) until the minor turns age 18. Second, the legislation provides a mandatory procedure for informing DHS when a MA client’s lawsuit does not seek recovery of medical expenses paid by MA. DHS refers to this as a "negative election". Finally, fines up to $5,000 may be imposed if certain required notices are not given to DHS by MA clients and by third parties or their insurers.

The legislation overrides the Superior Court’s decision in Bowmaster v. Clair, 933 A.2d 86 (Pa. Super. 2007). The statute of limitations and repose applicable to the recovery of medical expenses paid by MA is now tolled during the minority of a child who received MA.
A negative election occurs when a MA client informs DHS that a lawsuit is not seeking recovery of medical expenses paid by MA. The new law regulates the procedure for making this negative election and allows DHS to impose fines of up to $5,000 per violation if a MA client does not comply with the statutory procedures for making the election. If a negative election is exercised then DHS will work directly with the insurance company to make sure its claim is paid and will intervene into the lawsuit if it is cost effective to do so. DHS will not continue to reduce its claim against a tort recovery if a negative election is exercised. By making a negative election, the MA client forfeits the right to have DHS assume a pro-rata share of attorneys’ fees and costs.

Federal regulations at 42 C.F.R. §433.147 require MA clients to cooperate with DHS in pursuing third party resources even if a negative election is exercised. Cooperation includes consenting to DHS' intervention into the lawsuit, providing testimony on behalf of DHS, providing DHS with copies of discovery documents and other legal papers, and not indemnifying the tort defendant from the legal expenses associated with resisting DHS' claim. If a MA client does not cooperate with DHS after making a negative election, DHS may terminate MA to the client and establish an overpayment. If an overpayment is established, the client is personally liable to repay DHS. If a MA client agrees to pay the legal expenses of a tort defendant or insurer in the event the Department makes a claim, then this will be considered non-cooperation. The client may be determined ineligible for MA and an overpayment may be established. The Department’s claim must be resolved before a MA client may sign an indemnification agreement with a third party or insurer to settle his tort claim.

The law requires that notice of suit, notice of settlement, and notice of any election be given to DHS by the MA client and the insurer. In addition to the information set forth in 62 P.S. §1409(b)(5), the notice should contain the name of the client, the client’s MA identification number if known, the client’s date of birth, the date of injury, the name of the client’s attorney, the insurance carriers and claim numbers if applicable, and the court term and docket number in which the claim is pending. Failure to give any required notice may result in a $5,000 fine. Notices were required under prior law, but the notice requirement only applied to MA clients and the requirement was often ignored. Now both MA clients and insurers must give the notices and the failure to give any notice may result in a $5,000 fine.