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Managed care provider Concentra Integrated Services Inc. met its obligation to indemnify third-party administrator Cambridge Integrated Services Group Inc. a but did not meet its duty to defend the TPA, according to a U.S. appeals court decision that partially affirmed a lower court's ruling in a dispute between the two companies.
Concentra provided Cambridge with medical bill review and preferred provider organization services, and each company agreed to defend and indemnify the other for errors and omissions claims stemming from their own acts, according to the ruling Wednesday in Cambridge v. Concentra by the 5th U.S. Circuit Court of Appeals in New Orleans.
In 2004, Cambridge and a unit of Concentra were among parties named in a Louisiana district court lawsuit in which medical providers alleged that the defendants imposed PPO reductions on workers comp payments without complying with state “any willing provider” notice requirements.
In 2007, Concentra settled with the plaintiffs for $12 million. Cambridge was not a party to the settlement, although Concentra's settlement agreement with the plaintiffs released Cambridge from certain, but not all, liabilities.
Cambridge eventually took the position that it had contractually delegated the state-law notice requirement to Concentra. Cambridge also demanded defense and indemnification from Concentra.
After Concentra refused to provide a defense or indemnification, Cambridge sued.
But the state court eventually granted a Concentra motion for summary judgment, holding that Concentra had satisfied its defense and indemnification duties to Cambridge under its settlement agreement with the medical provider plaintiffs. It did so by negotiating a settlement agreement that also benefitted Cambridge, the court said.
After Cambridge appealed, the 5th Circuit agreed with the state court's holding that Concentra met its duty to indemnify Cambridge. But it disagreed that Concentra met its duty to defend because Concentra's agreement did not release Cambridge from all liabilities.
“Accordingly, the district court erred as a matter of law when it granted summary judgment to Concentra with respect to its duty to defend Cambridge,” the appeals court said. Therefore, the appeals court affirmed in part, reversed in part, and remanded the case back to the lower court.