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

A petition to vacate arbitration award originally filed in Kentucky state court was removed to federal court on Thursday by petitioners LifePoint Corporate Services General partnership and Lake Cumberland Regional Hospital, LLC (the LifePoint facilities). The respondent, WellCare Health Insurance Co. of Kentucky, allegedly based a settlement agreement between the two parties on materially incorrect information. The LifePoint facilities filed the motion in an effort to reform the flawed contract and are seeking that the court moves to vacates an arbitration award.

Multiple LifePoint hospitals filed suit against WellCare as a result of its alleged “failure to pay claims for emergency services pursuant to provider agreements between the LifePoint Facilities and WellCare.” A confidential settlement agreement was reached between the two parties in regard to the dispute. The petition explains that the agreement relied on material information about governing rates, which were provided by WellCare. Because the LifePoint facilities did not have access to the rates, they had to rely on and trust WellCare’s information.

However, the complaint then notes that the information provided by WellCare was incorrect. After the agreement was executed, WellCare sought recoupment from a LifePoint facility due to an alleged overpaid claim, which they claimed they were entitled to due to the terms of the aforementioned settlement agreement, which contained incorrect information.

Any disputes regarding the settlement agreement are required to be resolved by binding arbitration, the petition explained; the LifePoint facilities initiated the arbitration process and asserted that WellCare had based the confidential agreement on incorrect information. They sought for both parties to reform the settlement agreement and moved for summary judgment. In their motion for summary judgment, the LifePoint facilities also cited that Kentucky law allows for the reformation of contracts to correct mutual mistakes.

The arbitrator denied the petitioner’s motion for summary judgment and granted WellCare’s motion for summary judgment which was based on the issue of contract liability. The LifePoint facilities contend that by granting WellCare’s motion, “the Arbitrator ignored Petitioners’ material evidence and disregarded well-established Kentucky law.” A motion to revise, submitted by the LifePoint facilities, was denied by the arbitrator.

The action cites vacatur of the arbitration award under the Federal Arbitration Act and the Kentucky Uniform Arbitration Act. The petitioners are seeking a set schedule by which the confidential agreement will be revised, an order vacating the arbitration award, and any other relief deemed proper by the Court.

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