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If you a purchase a $200 sweater for $100, you have incurred a $100 charge on your credit card bill; it doesn’t matter what the sweater originally cost.
The Second Circuit Court of Appeals says that same reasoning applies to a catastrophic care insurance policy: “Incurred” refers to the amount spent, not the value received.
In 1995, Florence Metz took out a catastrophic care insurance policy from U.S. Life. Metz's policy carries a $25,000 deductible. The policy's coverage and benefits go into effect once the insured has satisfied the deductible, which in turn requires the insured to have "incurred" at least $25,000 in "reasonable and customary" charges for certain medical treatments listed in the policy.
In September 2007, Metz, believing that she had incurred the requisite $25,000 in charges, filed a claim with U.S. Life for medical benefits under the policy. U.S. Life denied the claim.
Metz sued, and U.S. Life moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that it denied Metz's claim because she had not incurred the requisite charges as defined under New York law.
The district court granted summary judgment for U.S. Life, and the Second Circuit Court of Appeals affirmed that decision this week.
Metz is a Medicare beneficiary. Physicians treating Medicare beneficiaries agree prior to treatment that they will not seek amounts exceeding the Medicare-approved fee.
To incur a charge under New York law, an insured person must be legally liable to pay that charge at some point, even if liability is later extinguished prior to payment. As a Medicare beneficiary, Metz was never liable for the full amount of the services her physicians rendered, so she did not incur the charges under New York law.
If you're arguing the terms of a catastrophic care insurance policy claim before the Second Circuit Court of Appeals, make sure that your client has been charged the deductible amount, or you won't survive a 12(b)(6) motion.