Patrick Massa Law

(Original article PDF by David Campbell MDPA)

Background

Maintaining the viability and integrity of the Medicare Trust Fund becomes critical as the Medicare Program matures and the “baby boomer” generation moves toward retirement. Providers, physicians. and other suppliers can contribute to the appropriate use of Medicare by complying with all Medicare requirements, including those applicable to the Medicare Secondary Payer (MSP) provisions. The purpose of this fact sheet is to provide a general overview of the MSP provisions for individuals involved in the admission and billing procedures at provider, physician, and other supplier settings.

What Is Medicare Secondary Payer (MSP)?

Since 1980, the MSP provisions have protected Medicare funds by ensuring that Medicare does not pay for services and items that certain health insurance or coverage has primary responsibilities for paying. The MSP provisions apply to situations when Medicare is not the beneficiary’s primary insurance. It provides the following benefits for both the Medicare Program and providers, physicians, and other suppliers:

• National program savings – Medicare saves more than $6 billion annually on claims processed by insurances that are primary to Medicare.
• Increased provider, physician, and other supplier revenue – Providers, physicians, and other suppliers that bill a primary plan before billing Medicare may receive more favorable payment rates. Providers, physicians, and other suppliers can also reduce administrative costs when health insurance or coverage is properly coordinated.
• Avoidance of Medicare recovery efforts- Providers. physicians, and other suppliers that file claims correctly the first time may prevent future Medicare recovery efforts on that claim.

To realize these benefits, providers. physicians, and other suppliers must have access to accurate, up-to-date information about all health insurance or coverage that Medicare beneficiaries may have. Medicare statute and regulations require that all entities that bill Medicare for services or items rendered to Medicare beneficiaries must determine whether Medicare is the primary payer for those services or items.

When Does Medicare Pay First?

Primary payers are those that have the primary responsibility for paying a claim. Medicare remains the primary payer for beneficiaries who are not covered by other types of health insurance or coverage.

Medicare is also the primary payer in other instances, provided several conditions are met. Table 1 lists some common situations when Medicare may be the primary or secondary payer for a patient’s claims.

Are There Any Exceptions to the MSP Requirements?

Federal law takes precedence over state laws and private contracts. Even if a state law or insurance policy states that they are a secondary payer to Medicare, the MSP provisions should be followed when billing for services.

What Happens if the Primary Payer Denies a Claim?

In the following situations, Medicare may make payment assuming the services are covered and a proper claim has been filed.

• The Group Health Plan (GHP) denies payment for services because the beneficiary is not covered by the health plan;
• The no-fault or liability insurer does not pay, or denies the medical bill;
• The Workers’ Compensation (WC) program denies payment, as in situations where WC is not required to pay for a given medical condition; or
• The WC Medicare Set-aside Arrangement (WCMSA) is exhausted.

In these situations, providers, physicians, and other suppliers should include documentation from the other payer stating that the claim has been denied and/or benefits have been exhausted when submitting the claim to Medicare.

When May Medicare Make a Conditional Payment?

Medicare may make a conditional payment for Medicare covered services in liability, no-fault, and we situations where another payer is responsible for payment and the claim is not expected to be paid within the promptly period. However. Medicare has the right to recover any conditional payments.

How Is Beneficiary Health Insurance or Coverage Information Collected and Coordinated?

The Centers for Medicare & Medicaid Services (CMS) established the Coordination of Benefits Contractor (COBC) to collect. manage, and maintain information on Medicare’s Common Working File (CWF) regarding other health insurance or coverage for Medicare beneficiaries. Providers, physicians. and other suppliers must collect accurate MSP beneficiary information for the COBC to coordinate the information.

To support the goals of the MSP provisions, the COBC manages several data gathering programs. These programs were implemented in three phases, as discussed in the next section.

What Are Some of the Activities Managed by the COBC?

Activities that the COBC performs to collect MSP data include:

• Initial Enrollment Questionnaire (IEQ) -The COBC sends out the IEQ approximately three months before an individual is eligible for Medicare. This questionnaire asks the beneficiary if he or she has other health insurance or coverage (including prescription drug coverage) that may be primary to Medicare.
• Internal Revenue Service/Social Security Administratlon/CMS (IRS/SSA/CMS) Data Match Project Coordination- The Omnibus Budget Reconciliation Act of 1989 requires each of the above agencies to share information they have regarding employment of Medicare beneficiaries or their spouses. This information helps determine whether a beneficiary may be covered by a GHP that pays primary to Medicare. This in formation is sent to the COBC, and is used by the contractor to send the IRS/SSA/CMS Data Match Questionnaire notification to employers. This notification requests the employers to go to the COBC secure website to complete the questionnaire and identify employees and family members where the health plan may be primary to Medicare.
• Data Match Project- The Voluntary Data Sharing Agreemet (VDSA) program allows for the electronic data exchange of GHP eligibility and Medicare information between CMS, employers, and prescription drug plans. Employers, to meet the mandatory reporting requirements, can sign a VDSA in lieu of completing and submitting the IRS/SSA/CMS Data Match Questionnaire. CMS has also developed a new data exchange, similar to the VDSA program, for Supplemental Drug Plans [Non-Qualified State Pharmaceutical Assistance Programs (SPAPs)] to coordinate with Medicare Part D.
• MSP Claims Investigation Process -The COBC is responsible for all initial MSP development activities previously performed by Medicare contractors. The COBC provides a one-stop customer service approach for all MSP-related inquiries. However, the COBC does not process claims, nor does it handle any mistaken payment recoveries or claim-specific inquiries. Each provider, physician, or other supplier should continue to call the Medicare contractor that processes their claims regarding specific claim-based issues.
• MSP Mandatory Reporting Process- Section 111 of the Medicare, Medicaid, State Children’s Health Insurance Program (SCHIP) Extension Act of2007 (MMSEA) adds new mandatory reporting requirements for GHP arrangements and for liability insurance (including self-insurance), no-fault insurance, and WC (Non-Group Health Plans [NGHPs]). Res-ponsible Reporting Entities (RREs) are now mandated to submit GHP and Non-Group Health Plan information to strengthen the MSP coordination of benefits process.

What Is Section 111 MSP Mandatory Reporting?

Section 111 of MMSEAadds to existing MSP provisions ofthe SocialSecurity Act to provide for mandatory reporting for GHP arrangements, liability insurance (including self-insurance). no-fault insurance, and we· (NGHPs). The provisions were implemented January 1, 2009, for information about GHP arrangements and July 1, 2009. for liability insurance (including self-insurance), no-fault insurance, and WC. The purpose of the reporting process is to enable CMS to correctly pay for the health insurance of Medicare beneficiaries by determining primary versus secondary payer. Under the new Section 111 requirements, enrollment and settlement data will be submitted electronically to the COBC. These requirements do not change or eliminate any existing obligations under the MSP statutory provisions or regulations. The new Section 111 requirements add reporting rules to the existing MSP requirements.

For more information and official instructions for Section 111 MSP reporting, please visit the Mandatory Insurer Reporting web page on the CMS website.

What Is the Provider’s, Physician’s, or Other Supplier’s Role in the MSP Provisions?

Providers, physicians, and other suppliers must aid in the collection and coordination of beneficiary health insurance or coverage information by:

• Asking the patient or his/her representative questions concerning the patient’s MSP status. Providers, physicians, and other suppliers may use a model questionnaire published by CMS to collect patient information. This tool is available online in the MSP Manual in Chapter 3, Section 20.2.1, on the CMS website. A commonly used method is to incorporate an MSP questionnaire into all patient health records.
• Billing the primary payer before billing Medicare, as required by the Social Security Act.

How Do Providers, Physicians, and Other Suppliers Gather Accurate Data from the Beneficiary?

Providers, physicians, and other suppliers can save time and money by collecting patient health insurance or coverage information at each patient visit. Some questions that providers, physicians. and other suppliers should ask include, but are not limited to:

• Is the patient covered by any GHP through his or her current or former employment? If so, how many employees work for the employer providing coverage?
• Is the patient covered by a GHP through his or her spouse or other family member’s current or former employment? If so, how many employees work for the employer providing the GHP?
• Is the patient receiving WC benefits?
• Does the patient have a WCMSA?
• Is the patient filing a claim with the no-fault insurance or liability insurance?
• Is the patient being treated for an injury or Illness for which another party has be.en found responsible?

If the provider, physician, or other supplier does not furnish Medicare with a record of other health insurance or coverage that may be primary to Medicare on any claim and there is an indication of possible MSP considerations, the COBC may request that the provider, physician. or other supplier complete a Development Questionnaire.

Why Gather Additional Beneficiary Health Insurance or Coverage Information?

The goal of MSP information-gathering activities is to quickly identify possible MSP situations, thus ensuring correct primary and secondary payments by the responsible parties.This effort may require that providers, physicians, and other suppliers complete Development Questionnaires to collect accurate beneficiary health insurance or coverage information. Many of the questions on the Development Questionnaires are similar to the questions that providers, physicians, and other suppliers might ask a beneficiary during a routine visit. This similarity provides another good reason to routinely ask patients about their health insurance or coverage. If a provider, physician, or other supplier gathers information about a beneficiary’s other health insurance or coverage and uses that information to complete the claim property, a Development Questionnaire may not be necessary. Accurate submittal of claims may accelerate the processing of the provider’s, physician’s, or other supplier’s claim.

The COBC may submit a Secondary Claim Development (SCO) Questionnaire to providers, physicians, and other suppliers.

What Is a Secondary Claim Development (SCD) Questionnaire?

An SCD Questionnaire may be sent to the provider, physician, or other supplier when a claim is submitted with an Explanation of Benefits (EOB) attached from an insurer other than Medicare, and relevant information was not submitted to properly adjudicate the submitted claim. The COBC provides the names and Health Insurance Claim Number (HICN) of each individualfor which the provider, physician, or other supplier must complete an SCD Questionnaire. The provider, physician, or other supplier must complete and submit the SCD Questionnaire to the COBC.

What Happens if the Provider, Physician, or Other Supplier Submits a Claim to Medicare Without Providing the Other Insurer’s Information?

The claim may be paid if it meets all Medicare requirements, including Medicare coverage and medical necessity guidelines. However, if the beneficiary’s Medicare record indicates that another insurer should have paid primary to Medicare, the claim will be either returned unprocessed to the provider or denied or suspended for development. If the Medicare contractor has enough information, they may forward the information to the COBC and the COBC may send the provider, physician, or other supplier a SCD Questionnaire to complete for additional information if they were the informant. Medicare will review the information on the questionnaire and determine the proper action to take.

What Happens if the Provider, Physician, or Other Supplier Fails to File Correct and Accurate Claims with Medicare?

Federal law permits Medicare to recover its conditional payments. Providers, physicians, and other suppliers can be fined up to $2,000 for knowingly, willfully, and repeatedly providing inaccurate information relating to the existence of other health insurance or coverage.

How Does the Provider, Physician, or Other Supplier Contact the COBC?

Providers, physicians, and other suppliers may contact the COBC at 1-800-999-1118 (TTY/TDD: 1-800-318 8782), Monday – Friday, 8 a.m. to 8 p.m. Eastern Time (excluding holidays). Providers, physicians, and other suppliers may contact the COBC to:

• Report potential MSP situations;
• Report incorrect insurance information; or
• Address general MSP questions/concerns.

Specific claim-based issues (including claim processing) should still be addressed to the provider’s, physician’s, or other supplier’s Medicare claims processing contractor.

Where Can I Find More Information on the Provider’s, Physician’s, or Other Supplier’s Role in MSP and Coordination of Benefits (COB)?

CMS offers several online references for information about MSP, COB, and the Medicare Program:

• The Medicare Learning Network® Home Page
  The Medicare Learning Network® (MLN) is the brand name for official CMS educational products and information for Medicare feeMfor-service providers. For additional information visit the Medicare Learning Network’s® web page on the CMS website.
• The Medicare Coordination of Benefits Overview Page
  The Medicare Coordination of Benefits Overview page features materials related to the MSP provisions.
• The Contacting the COBC Web Page
  The Contacting the COBC web page contains the contact information and specific addresses for submitting COBC-requested materials.

This fact sheet was current at the time it was published or uploaded onto the web. Medicare policy changes frequently so links to the source documents have been provided within the document for your reference.

This fact sheet was prepared as a tool to assist providers and is not intended to grant rights or impose obligations. Although every reasonable effort has been made to assure the accuracy of the information within these pages. the ultimate responsibility tor the correct submission of claims and response to any remittance advice lies with the provider of services. The Centers for Medicare & Medicaid Services (CMS) employees, agents, and staff make no representation, warranty, or guarantee that this compilation of Medicare information is error-free and will bear no responsibility or liability for the results or consequences of the use of this guide. This publication is a general summary that explains certain aspects of the Medicare Program, but is not a legal document. The official Medicare Program provisions are contained in the relevant laws, regulations, and rulings.

MSP Provider, Physician, and Other Supplier Billing Requirements

Table of Contents (Rev.57, 10-17-06)

Transmittals for Chapter 3

Crosswalk to Old Manuals

10 – General
10.1 – Limitation on Right to Charge a Beneficiary Where Services Are Covered by a GHP
1 0.1.1 – Right of Providers to Charge Beneficiary Who Has Received Primary Payment from a GHP
10.1.2 – Right of Physicians and Other Suppliers to Charge Beneficiary Who Has Received Primary Payment from a GHP
10.1.3 – Payment When Proper Claim Not Filed
10.2 – Situations in Which MSP Billing Applies
10.3 – Provider, Physician, and Other Supplier Responsibility When a Request is Received From an Insurance Company or Attorney

(Rev.37, Issued: 10-14-05, Effective: N/A, Implementation: N/A)

Contractors are required in professional and public relations activities to inform providers, physicians, other suppliers, and beneficiaries about the MSP provisions and that claims for services to beneficiaries for which Medicare is the secondary payer must be directed first to the primary plan where there is primary coverage for the services involved. The Medicare law and/or provider agreement require the submitter to identify on the claim all known payers obligated to pay primary to Medicare.

10.1 – Limitation on Right to Charge a Beneficiary Where Services Are Covered by a GHP

(Rev.37, Issued: 10-14-05, Effective: N/A, Implementation: N/A)

A provider, physician, or other supplier that receives direct payment from the Medicare program may not charge a beneficiary if the provider, physician, or other supplier has been paid or could have been paid by a GHP an amount which equals or exceeds any applicable deductible or coinsurance amount.

EXAMPLE

A Medicare beneficiary who had GHP coverage was hospitalized for 20 days. The hospital’s charges for covered services were $5000. The inpatient deductible had not been met. The gross amount payable by Medicare (as defined jn Chapter 2, §50.2) for the stay ifthere had been no GHP coverage is $4,000. The GHP paid $4,500 ($840 of which was credited to the Medicare deductible). Medicare will make no payment, since the plan’s payment was greater than Medicare’s gross amount payable of$4,000. No part of the $500 difference between the hospital’s charges and the GHP’s payment can be billed to the beneficiary since the beneficiary’s obligation, the deductible, was met by the GHP payment. The provider submits a bill to Medicare reflecting the appropriate amount paid by the primary payer.

10.1.1 – Right of Providers to Charge Beneficiary Who Has Received Primary Payment from a GHP

(Rev. 37, Issued: 10-14-05, Effective: N/A, Implementation: N/A)

When a primary plan has paid a beneficiary, the amounts the provider (including renal dialysis facilities or facilities that receive direct payment from the Medicare program) may collect for Medicare covered services from the beneficiary are limited to the following:

• The amount paid or payable by the primary plan to the beneficiary. If this amount exceeds the amount which would have been payable by Medicare as primary payer (without regard to deductible or coinsurance), the provider may retain the primary payment in full without violating the terms of the provider agreement;
• The amount, if any, by which the applicable Medicare deductible and coinsurance amounts exceed any primary payment made or due the beneficiary or due the provider for medical services; and
• The amount of any charges made to the beneficiary for the noncovered
  component of a partially covered service, e.g., the charge differential for a private room that is not medically necessary but that is requested by the beneficiary. However, such a charge may not be collected from the beneficiary to the extent that the primary plan pays it directly to the provider.

EXAMPLE

A Medicare beneficiary with GHP coverage was a hospital inpatient for 20 days. The hospital’s charges for Medicare covered services were $16,000. The inpatient deductible had not been met. The gross amount payable by Medicare for the stay in the absence of GHP coverage is $11,500. The GHP paid $14,000, a portion ofwhich was credited to the entire inpatient deductible. Medicare makes no secondary payment, since the GHP’s payment was greater than the gross amount payable by Medicare of $11,500. No part of the $2,000 difference between the hospital’s charges and the GHP’s payment can be billed to the beneficiary, since the beneficiary’s obligation, the deductible, was met by the GHP’s payment. The provider files a nonpayment bill reflecting the applicable deductible for purposes of crediting the deductible.

10.1.2 – Right of Physicians and Other Suppliers to Charge Beneficiary Who Has Received Primary Payment from a GHP

(Rev. 37, Issued: 10-14-05, Effective: N/A, Implementation: N/A)

When a beneficiary has been paid by a primary plan, the amount a physician or other supplier who accepts assignment may collect for Medicare covered services from the beneficiary is limited to the following:

• The amount paid or payable by the primary plan to the beneficiary. (If this amount exceeds the amount that would be payable by Medicare as primary payer (without regard to deductible or coinsurance), the physician or other supplier may retain the primary payment in full without violating the conditions of assignment.); or
• If the primary payment is less than the applicable Medicare deductible and coinsurance amounts, the difference between the fee schedule amount (or the amount the physician is obligated to accept as payment in full, if less) and the sum ofthe primary plan’s payment and the Medicare secondary payment.

EXAMPLE

A physician charges $262 for a service. The GHP allows $262 but pays a primary payment of only $112 because of a $150 plan deductible. The Medicare fee schedule amount is $200. The amount that Medicare pays as secondary payer is $80 since the Medicare secondary payment amount cannot exceed the amount Medicare would pay primary payer ($200 fee schedule amount minus the $100 Part B deductible equals $100 x 80 percent= $80). The combined primary payment and Medicare secondary payment is $192 ($112 + $80).

The physician may charge the beneficiary $8, the difference between the Medicare fee schedule amount ($200) and the sum of the primary payment ($112) plus the Medicare secondary payment ($80). The $8 charge to the beneficiary represents the portion of the Part B deductible and coinsurance amounts in excess of the GHP’s payment. The $100 Part B deductible is credited in full. The remaining $12 of the GHP’s payment is applied to the beneficiary’s Part B coinsurance obligation of $20. leaving the beneficiary responsible for the remaining coinsurance obligation of $8.

In the case of non-inpatient and institutional psychiatric services. the amount the beneficiary can be charged is the difference between the Medicare fee schedule amount and a lesser primary payment amount. (The 50-percent cost-sharing rule applies.) The beneficiary is responsible for that portion of the fee schedule amount not paid by Medicare (i.e., no less than 50 percent). (See Chapter 1, §40.)

10.1.3 – Payment When Proper Claim Not Filed

(Rev. 37, Issued: 10-14-05, Effective: N/A,Implementation: N/A)

If a provider, physician, or other supplier receives from a payer that is primary to Medicare a payment that is reduced because the provider, physician, or other supplier failed to file a proper claim, the provider, physician, or other supplier must include this information on the claim for secondary payment that is submitted to Medicare. Medicare’s secondary payment will be based on the full payment amount (before the reduction for failure to file a proper claim) unless the provider, physician, or other supplier demonstrates that the failure to file a proper claim is attributable to a physical or mental incapacity of the beneficiary that precluded the beneficiary from being able to provide other payer infonnation. For example, a physician’s charges are $1,000. The primary plan’s allowable charges without reduction for failure to file a proper claim are $800.00. The Medicare allowable was $700.00. The primary plan would have paid $640.00 if a proper claim had been filed. The primary plan reduced its payment to $500.00 because the physician had not filed a proper claim. Medicare’s secondary payment would be based on a primary plan payment of$640.00 rather than the reduced amount of$500.00. The beneficiary may not be billed for the reduction in the primary plan’s payment due to the physician’s failure to file a proper claim.

10.2 – Situations in Which MSP Billing Applies

(Rev. 37, Issued:10-14 05, Effective: N/A, Implementation: N/A)

Medicare secondary billing procedures apply in the following situations:

• Where the VA authorized services, Medicare does not make payment for items or services furnished by a non-Federal provider pursuant to such an authorization. Although certain MSP billing procedures apply, VA is not an MSP provision.
• Where services are payable under WC, no-fault, or liability insurance, Medicare does not make payment for otherwise covered items or services to the extent that payment has been made, or can reasonably be expected to be made. Under certain circumstances, Medicare may make conditional payments, subject to reimbursement, if the WC, no-fault, or liability insurer has not paid or will not pay promptly. ty1edicare is secondary to WC, no-fault, and liability insurance even if State law ru:.a private contract of insurance Stfpulat that its benefits are secondary to Medicare benefits or otherwise limits
  Eayments to Medicare beneficiaries.
• Medicare benefits are secondary to benefits payable under a GHP for individuals eligible for or entitled to Medicare based on ESRD during a Medicare coordination period as described in Chapter 1, § 1 0.2.
• Medicare benefits are secondary to benefits payable under a GHP for individuals age 65 or over who have GHP coverage as a result of their own current employment status or the current employment status of a spouse of any age. (See Chapter 1, § l 0.1, for an explanation of this provision.)
• Medicare benefits are secondary to benefits provided by GHPs for certain disabled individuals under age 65 (entitled to Medicare on the basis of disability) who have coverage based on their own current employment status or the current employment status of a family member, e.g., a spouse or other family member of a disabled beneficiary. (See Chapter 1, §10.3, for an explanation of this provision.)

Payment made by any of these primary payers can be used to satisfY unmet deductibles and the individual’s coinsurance. Inpatient, psychiatric hospital, SNF, or Religious Non­ medical Institution care that is paid for by a primary payer is not counted against the number of lifetime psychiatric days available to the beneficiary.

10.3 – Provider, Physician, and Other Supplier Responsibility When a Request is Received From an Insurance Company or Attorney

(Rev.37, Issued:10-14-05, l?.ffective: N/A, lmplelnentation: N/A)

The provider, physician, or other supplier notifies the Coordination of Benefits Contractor (COBC) promptly if a request is received from an attorney or an insurance company for a copy of a medical record or a bill concerning a Medicare patient. The COBC is given a copy of the request or, if it is unavailable, details of the request, including:

• The name and Medicare number of the patient;
• Name and address of the insurance company and/or attorney; and,
• Date(s) of services for which Medicar¥ has been or will be billed.

Contractors receiving MSP information from providers, physicians, and other suppliers should follow the procedures outlined in Chapter 4, “Coordination of Benefits Contractor (COBC) Requirements,” §70.2.

(originally appeared in the Florida Bar Journal Vol 85, No 7, July/August 2011 [PDF w/ citation notes])

by Fred O. Goldberg

Settlements are a common, favored method to resolve litigation. The benefits of an agreed resolu­tion to a dispute are many. A settlement eliminates the uncertainty of result presented by a trial on the merits. Though it requires the parties to compromise their positions, it eliminates the expense of continuing litigation. From the perspective of judicial economy, a settlement puts an end to the court’s labor and eliminates the case from its docket. In an ideal world, a settlement puts an end to the disputes between the parties. However, as a practical matter, the demands of the business world and economic considerations frequently require settlement agreements to include covenants of future performance, including payments by installment, transfers of property, and promises to undertake or refrain from undertaking particular actions. Settlements to be performed over time present the possibility of future disputes and allegations of default among the parties.

When the provisions of a settlement agreement are not fully performed, the parties often seek to return to court to have the agreement enforced in the same proceeding in which the settlement was reached. Reopening a case for the purpose of enforcing a settlement presents jurisdic­tional issues that have troubled the courts of Florida and vexed litigants and their attorneys for decades. Recent decisions, most notably the Florida Supreme Court’s decision in Paulucci u. General Dynamics Corporation, 842 So. 2d 797 (Fla. 2003), have generally clarified a trial court’s authority to enforce a settlement in the same proceeding in which the settlement is reached. However, the trial court’s continuing jurisdiction to enforce a settlement depends on the procedures employed by the parties with respect to the case at the time of settlement.

Following an agreed resolution of the parties’ disputes, litigants typically employ one of four options to halt their litigation: 1) a plaintiff may merely file a notice of voluntary dismissal with prejudice pursuant to Rule 1.420(a)(l)(A), Fla.R.Civ.P.; 2) the parties may enter into a stipulation for dismissal with prejudice pursuant to Rule 1.420(a)(l), and the stipulation of dismissal may contemplate entry of an order of dismissal by the court that may or may not include provisions approving the settlement and retaining jurisdiction to enforce the parties’ agreement; 3) the parties may agree to the entry of a judgment that, again, may or may not contain provisions approving the settlement and reserving jurisdiction to enforce the agreement; or 4) the parties may allow the underlying case to remain pending, either via stay of proceedings or by merely allowing the matter to remain dormant, awaiting performance of all obligations owed pursuant to the settlement. This last method, although somewhat rare, is sometimes employed in cases involving commercial or consumer loans, foreclo­sures or evictions where the parties enter into a forbearance agreement, a restructuring of the indebtedness, or an agreement to allow the obligor to resume payments or cure defaults while reserving to the plaintiff the ability to resume litigation in the event of nonperformance. Which option the parties choose to employ dictates whether the trial cow·t will possess continuing jurisdiction to enforce the settlement. Additionally, even where jurisdiction is reserved, there are circumstances where the trial court will lack authority to enforce such an agreement.

The Legal Principles Governing Settlements

As a general principle, “settlements are highly favored and will be enforced whenever possible.”1A settlement remains a contract subject to the usual rules of contract interpretation.2 As long as a settlement agreement is sufficiently specific and represents the mutual agreement of the parties, it is subject to enforcement.3 The offer and acceptance of the settlement binds the parties to its conditions and terms.4 If the terms and conditions of the settlement are performed, it effects an accord and satisfaction whereby the agreement supersedes and substi­tutes for the original dispute.5 When a settlement agreement is breached , the non-breaching party is presented with the choice of attempting to re­ instate the original claims, asserting that there was no valid accord and satisfaction, or enforcing the agreement. By attempting to enforce the settlement, the non-breaching party effectively concedes that the agree­ment supersedes and substitutes for the original claims that are deemed discharged and extinguished. To en­ force a settlement is to assert a claim upon a new contract-the settlement agreement – which did not exist at the time the court’s jurisdiction was initially invoked when the complaint was filed. The question of whether en­forcement of a settlement agreement required the filing of an independent action, coupled with the effect of dismissal or entry of judgment fol­ lowing the settlement, gave rise to a jurisdictional quandary.

A Trial Court’s Jurisdiction Following Dismissal or the Entry of Judgment

Following a settlement, litigants most frequently either dismiss the resolved action by notice, stipulation, or motion, or agree to the entry of a judgment. However, both dismissal and judgment have jurisdictional consequences. “When a judgment or decree has once been rendered, the court loses jurisdiction over the subject-matter of the suit, other than to see that proper entry of judgment or decree is made and that the rights de­ termined and fixed by it are properly enforced.”6 The filing of a voluntary dismissal divests the trial court of jurisdiction over a cause. 7 The same applies to an order of dismissal.8 Fol­lowing the entry of judgment, the trial court possesses the inherent power to enforce its decree.9 However, after either dismissal or judgment, the trial court lacks jurisdiction to modify the rights of the parties or alter the judgment except as specifically provided by Florida’s rules governing rehearing or relief from judgment.10

A reservation of jurisdiction incorporated into an order of dismissal or judgment now provides a narrow exception to the general rule that a trial court loses jurisdiction over a cause following the termination of the action. It is unclear when reservation of jurisdiction clauses first came into use in Florida. In 1948, the Supreme Court held that a reservation of juris­ diction provision in a divorce decree only had the effect of permitting the court to issue orders necessary to effectuate or enforce the judgment and did not permit the entry of further orders modifying or expanding the rights set forth in the judgment Y The court noted that to hold other­ wise “would mean that there would be no end to litigation.”12 Subsequent decisions declined to hold that a reservation of jurisdiction provision in a judgment could be used to reopen a proceeding after jurisdiction had been lost as a result of the entry of judgment. In 1970, a Florida court refused to enforce a reservation of jurisdiction provision in a judgment on jurisdictional grounds.14

The authority of trial courts to reserve jurisdiction to decide mat­ ters not disposed of in judgments was first approved in 1975.15 A trial court’s power to reserve jurisdiction over specific matters has since been confirmed by the Florida Supreme Court.16 In the absence of a reservation of jurisdiction, a court’s authority post-judgment remains limited to enforcement of the judgments and the determination of post-judgment motions.17

Enforcement of Settlements Pre-Paulucci

Even after Florida courts estab­lished the parameters of a court’s jurisdiction following dismissal or diction of a cause after its termination by a dismissal or entry of judgment, courts continued to struggle with the jurisdictional implications of enforcing a settlement agreement within the same action rather than requiring the filing of a separate suit for breach of contract. The decisions of Florida’s appellate courts were widely divergent, and conflict was certified on more than one occasion until the matter was finally addressed by the Florida Supreme Court in Paulucci in 2003. A variety of concerns caused the divergence of opinions. These included whether the underlying action had been terminated by dismissal or judgment or instead remained pending; jurisdiction was reserved to enforce the settlement; the relief provided in the settlement went beyond the relief sought in the pleadings; the agreement was approved by the court; or a settlement agreement constituted a contract separate and independent from the jurisdictional basis for the original suit requiring the filing of a separate proceeding.

The first reported decision to address enforcement of settlements post-dismissal was Buckley Towers Condominium, Inc. u. Buchwald, 321 So. 2d 628 (Fla. 3d DCA 1975), cert. dismissed , 330 So. 2d 15 (Fla. 1976). Buckley Towers addressed the propri­ety of an order enforcing a settlement agreement following the entry of an order of dismissal by the trial court in which the settlement was approved and jurisdiction was expressly retained. The Third District held “that even without an express reservation thereof, jurisdiction inherently re­ mains in the trial court to make such orders as may be necessary to enforce its judgment.”18 The court additionally approved the use of a motion brought within the same action to enforce the settlement.19 However, to the extent that Buckley Towers suggested that post-dismissal or post-judgment en­forcement of settlements by motion was proper, even in the absence of a reservation of jurisdiction , that deci­sion ran afoul of the general principles that when an action is terminated, the court loses jurisdiction of the cause other than to enforce the judgment or entertain authorized motions for rehearing or relief from judgment.

After the Buckley Towers decision, the Third District issued two opinions approving the enforcement of the settlement agreements by motion in cases involving court approval of the agreements and express retention of jurisdiction to enforce them. 20 The Fourth District, relying upon Buckley Towers , permitted the enforcement of a court-approved settlement in the apparent absence of a reservation of jurisdiction, noting that a court’s au­thority to entertain such a motion was inherent.21 The Third District also affirmed a decision enforcing a court­ approved settlement without discussing whether jurisdiction had been retained.22 Two additional decisions permitted enforcement of settlements without expressly discussing whether the settlement had been court-ap­proved or whether jurisdiction had been retained .23 The authority of a trial court to enforce a settlement in an action that remained pending after the agreement was reached was also confirmed, in accord with the general principle that a court only loses jurisdiction of a cause after its termination by a dismissal or judgment.24 In such a circumstance, the First District held that a “trial court’s authority to enter such an order in a pending case is clear.”25

To the contrary, a number of deci­sions rejected enforcement of settle­ment by motion brought in the settled action for a variety of reasons. The absence of a reservation of jurisdiction was found to be a basis for refusing to permit enforcement of a settlement.26 Settlements reached post-judgment, and necessarily in the absence of ei­ ther court approval or a reservation of of jurisdcition, were deemed not subject to enforcement by motion. 27 In MCR Funding u. CMG Funding Corp., 771 So. 2d 32 (Fla. 4th DCA 2000), the Fourth District addressed the circumstance where, following a settlement, the parties simply filed a voluntary dismissal without an order of the court. The Fourth District found that the “voluntary dismissal terminated the trial court’s ‘case’ jurisdiction,” which is the “power of the court over a particular case that is within its subject matter jurisdiction.”28 However, because case jurisdiction differs from subject matter jurisdiction, the Fourth District found that the failure to ob­ject to enforcement of the settlement by motion constituted a waiver of such an objection.29 The First District also held that the filing by the parties of a stipulation of dismissal with prejudice precluded any exercise of jurisdiction to enforce the settlement.30

Unlike the Fourth District in MCR Funding , the Fifth District in Wallace u. Townsell, 471 So. 2d 662 (Fla. 5th DCA 1985), addressed the enforce­ ability of a settlement in terms of subject matter jurisdiction. In Wallace, the plaintiff filed an action to cancel a deed and the defendant contested the action on the basis that improvements had been made to the land at issue.31 The trial court entered a judgment canceling the deed and reserving jurisdiction to determine the value of the improvements.32 Following entry of final judgment, the parties achieved a settlement with terms going well be­yond the scope of the pleadings.33 The Fifth District held that the pleadings determined the extent of the court’s subject matter jurisdiction and because the terms of the settlement were not framed by the pleadings, any breach of the settlement must be redressed in a separate action.34 In a similar decision rendered one year later, the Fifth District again rejected enforcement of a settlement by motion where the settlement terms went beyond the issues and claims framed by the pleadings.35 The Fifth District went on to comment that the settlement agreement affected an accord and satisfaction of the origi­nal claims, and, therefore, required a separate action to enforce the agreement.36 In a contrary decision, the First District rejected the idea that a settlement granting rights beyond the scope of the pleadings was not enforce­ able by motion based, in part, upon the trial court’s inher­ent jurisdiction and authority to enforce a court-approved agreement.37 It was clear by this time that numerous conflicts had arisen between the circuits regarding juris­diction to enforce a settlement.

Matters came to a head at last in 2001 and 2002 with decisions issued by the First and Fifth districts, both certifying conflict to the Florida Supreme Court.38 In General Dynamics Corp. u. Paulucci , 797 So. 2d 18 (Fla. 5th DCA 2001), the trial court approved a settlement agree­ment between the parties that was incorporated into a final judgment that reserved jurisdiction to enforce the agreement.39 Relying its prior decision in Wallace , the Fifth District reluctantly “held that a court has only the subject matter jurisdiction which is invoked by the initial plead­ings” and that enforcement of the settlement agreement “would have to be brought in a separate action, by complaint and not motion, giving the defendant the opportunity to plead his defenses and request a jury trial if appropriate.”40 However, the Fifth District queried whether “the court approving the settlement is authorized” to determine disputes regarding the agreement which, in effect, amended the pleadings?41 The court certified conflict with Buckley Towers and additionally certified an issue of great public importance: “Does a court which approves a settlement agreement retain jurisdiction to enforce the terms thereof even if the remedy sought is outside the scope of the original pleadings?”42

In Kinser u. Crum, 823 So. 2d 826 (Fla. 1st DCA 2002), the trial court entered an order of dismissal based upon a settlement that specifically retained jurisdiction to enforce its terms. 43 The First District, noting that multiple decisions of the various districts were in disagreement regarding enforce­ment of settlements by motion, held the trial court possessed jurisdiction over the agreement and also certified conflict to the Supreme Court.44

Paulucci: The Supreme Court Addresses the Conflicts

The Supreme Court granted review of the Fifth District’s decision in General Dynamics Corp. u. Paulucci and, on March 20, 2003, rendered a comprehensive decision that attempted to make sense of the jurisdictional morass that had troubled the district courts for decades.45 As an initial matter, the Supreme Court rephrased the question certified by the Fifth District as: “Does a court have jurisdiction to enforce a settlement agreement where the court has either incorporated the settlement agreement into a final judgment or approved the settlement agreement by order and retained jurisdiction to enforce its terms?”46

The court went on to reaffirm its prior precedent, holding that following the entry of a final judgment or decree, the trial court loses ju­risdiction over the cause other than to enforce the judgment.47 Eliminating a concern which had troubled some of the dis­trict courts, the Supreme Court clarified that a trial court’s authority to enforce a settlement was not an issue of subject matter jurisdiction that “concerns the power of the trial court to deal with a class of cases to which a particular case belongs,”48 but rather was a question of “continuing jurisdiction.” 49 The court approved the analysis set forth in the Fourth District’s decision in MCR Funding, holding that when an action is volun­tarily dismissed without an order of the trial court reserving jurisdiction following the negotiation of settlement, the trial court lacks continuing jurisdiction over the matter. 50 The court held “that when a court incor­porates a settlement agreement into a final judgment or approves a settlement agreement by order and retains jurisdiction to enforce its terms, the court has the jurisdiction to enforce the terms ofthe settlement agreement even if the terms are outside the scope of the remedy sought in the original pleadings.”51 However, the court limited the scope of a trial court’s continuing jurisdiction to the circumstances where a party is seeking to enforce specific terms of the settlement agreement and determined that “if a party is claiming a breach of the agreement and is seeking general damages not specified in the agreement, the appropriate action would be to file a separate lawsuit.”52

The Paulucci opinion resolved virtually all of the conflicts that had previously plagued the lower courts. To be enforced via motion in the same proceeding post-judgment or post-dis­ missal, a settlement must be approved by the trial court or incorporated into an order or judgment and jurisdiction to enforce the agreement must be re­tained. However, enforcement of such a settlement in the same proceeding is limited to the specified terms set forth in the agreement; a claim for general damages resulting from a breach of the settlement contract requires a separate action. If, after the settlement, the parties merely voluntarily dismiss the case without an order, the trial court is divested of jurisdiction and a separate case is required to enforce the terms of the settlement. These general principles have been diligently followed in various decisions entered subsequent to Paulucci.53

The Supreme Court did not clearly address the circumstance where an action is allowed to remain pending following a settlement, and enforcement of the agreement is later sought in the still-pending action. However, this issue appears to be addressed in a footnote found in Paulucci when the court concluded “that in cases where the approval of the settlement agreement is by order rather than by incorporating the terms into a final judgment, the statement in the order that the trial court expressly retains jurisdiction to enforce its terms makes it clear that all parties and the court contemplated an express retention of jurisdiction rather than the necessity of an independent lawsuit.”54 Such a conclusion conforms to the general principle that a court loses jurisdiction only after entry of a final judgment or the dismissal of the matter. Conversely, if a case remains pending, the court continues to possess jurisdiction to act in that proceeding.

Boca Petroco, Inc. v. Petroleum Realty I, LLC: A Step Backward

The Fourth District revisited the issue of enforcement of settlements by motion in its 2008 opinion in Boca Petraea, Inc. v. Petroleum Realty I, LLC., 993 So. 2d 1092 (Fla. 4th DCA 2008). Boca Petraea involved a commercial landlord-tenant dispute for breach of lease.55 Immediately before trial, the parties achieved a settlement that was read into the record before the trial court that required the tenant to undertake certain financial obligations and permitted the landlord, in the event of default, to obtain an “automatic writ of possession” and judgment based upon an “affidavit prove up of damages.” 56 Although not expressly stated in the Fourth District’s opinion, the settlement did not contemplate dismissal of the action and a judgment was to be entered only following a default on the settlement agreement; the action was to remain pending.

Following tenant’s default, the trial court awarded $14,230,990.47 in damages to the landlord due to the tenant’s failure to perform its financial obligations under the settlement, including payment of”pre- and post-settlement rent, taxes and insurance,” and continued to reserve jurisdiction to enforce the settlement’s provisions.57 Prior to this award of damages, the land­ lord also gave notice to the tenant of defaults of environmental provisions contained in the underlying leases and the settlement agreement.58 Fol­lowing an evidentiary hearing on this issue, the trial court awarded an additional $1,901,000 in damages based upon the environmental defaults.59

The Fourth District affirmed the first award of damages based upon defaults on the financial obligations provided in the settlement agree­ment, but reversed the second award of damages, reasoning that there existed a “distinction between enforce­ment of the terms of the agreement and a general claim for breach of an agreement” and that the “settlement agreement did not include payment of these damages as one of its terms.”60
In rendering its decision, the Fourth District seemingly sidestepped the fact that the case remained pending post-settlement and chose not to address the dicta found in note five of the Paulucci opinion, which provided that, in the absence of entry of a judgment, a settlement approved by order with jurisdiction retained may be enforced by motion without requiring the filing of a separate action.61 This decision also appears to misapply the general jurisdictional principles holding that a court only loses jurisdiction over a cause following judgment or dismissal.62 However, when a matter remains pending following settlement, the trial court does not lose jurisdiction.63

Conclusion

The Paulucci decision resolved most, but not all, aspects of the ju­risdictional quandary presented by the enforcement of settlements by motion within the same proceeding. If the trial court expressly approves or incorporates the settlement and reserves jurisdiction to enforce the agreement in its order of dismissal or judgment, the settlement may be enforced through a motion brought in the same action unless the breach of the settlement gives rise only to a claim for general, unspecified dam­ ages.64 However, the filing of a stipulation for dismissal without an order expressly reserving jurisdiction to en­ force the agreement is insufficient and will require the filing of a separate action for breach of settlement.65

Unfortunately, the Supreme Court did not clearly address the circumstance where a matter is permit­ ted to remain pending following a settlement, although a footnote in the opinion seems to address this situation and approve of enforcement by motion in the same proceeding.66 The Fourth District was the first post-Paulucci court to have an op­portunity to address this scenario but declined to permit enforcement of the settlement by motion without directly discussing this issue.67 Nonetheless, where following a settlement a case is not dismissed and no judgment is entered by the trial court, both subject matter jurisdiction and case jurisdiction are present, and a trial court should be permitted not only to enforce the specific terms of the settlement agreement but also award general damages for its breach, rather than requiring the filing of a separate action. This approach would not only better effectuate the intent of the parties but also would be consonant with caselaw holding that a trial court loses jurisdiction only after an unqualified dismissal or entry of a judgment but does not lose jurisdiction if the case remains pending following a settlement.68