Settlement Agreement Dispute Between Hospital and Insurance Company Heads to Court After Arbitration

A motion to set aside the arbitration award originally filed in Kentucky state court was returned to federal court Thursday by petitioners LifePoint Corporate Services General Partnership and Lake Cumberland Regional Hospital, LLC (LifePoint’s facilities ). The respondent, WellCare Health Insurance Co. of Kentucky, allegedly based a settlement agreement between the two parties on materially incorrect information. LifePoint Facilities filed the motion seeking to reform the faulty contract and is asking the court to set aside an arbitration award.

Several LifePoint hospitals have filed a lawsuit against WellCare over its “alleged failure to pay claims for emergency services in accordance with provider agreements between LifePoint facilities and WellCare.” A confidential settlement agreement has been reached between the two parties regarding the dispute. The petition explains that the agreement was based on important information on key rates, which was provided by WellCare. Since LifePoint facilities did not have access to rates, they had to rely on and trust WellCare’s information.

However, the complaint goes on to note that the information provided by WellCare was incorrect. After the execution of the agreement, WellCare requested to be recovered from a LifePoint facility due to an alleged overpayment claim, to which they claimed to be entitled due to the terms of the aforementioned settlement agreement, which contained incorrect information.

Any dispute regarding the settlement agreement shall be resolved by binding arbitration, the petition explained; LifePoint’s facilities initiated the arbitration process and claimed that WellCare had based the confidentiality agreement on incorrect information. They asked both parties to reform the settlement agreement and sought summary judgment. In their motion for summary judgment, the LifePoint facilities also indicated that Kentucky law permits contract reform to correct mutual errors.

The arbitrator denied the plaintiff’s motion for summary judgment and granted WellCare’s motion for summary judgment which was based on the issue of contractual liability. LifePoint’s facilities argue that in granting WellCare’s motion, “the arbitrator ignored the plaintiffs’ physical evidence and disregarded well-established Kentucky law.” A motion for review, brought by LifePoint facilities, was denied by the arbitrator.

The action alleges vacatur of the arbitration award under the Federal Arbitration Act and the Kentucky Uniform Arbitration Act. The plaintiffs seek a fixed schedule under which the confidential agreement will be reviewed, an order quashing the arbitration award, and any other relief deemed appropriate by the Court.

The plaintiffs are represented by Bradley Arant Boult Cummings LLP, while the respondents are represented by Squire Patton Boggs.