Payor Can’t Use Alleged Co-Conspirator’s Settlement as Evidence Lab that Engaged in Pass-Through Billing Scheme

Case: Imagine this. Insurers sue you and other labs for conspiring with a hospital to commit a fraudulent pass-through billing scheme for lab tests. You think the case is garbage and are determined to wage a vigorous defense at trial. But the other labs aren’t willing to risk a trial and decide to settle. Question: Can the insurer use the fact that the other labs settled as evidence? A Missouri federal court recently confronting this issue ruled no. Significance: Federal rules of evidence ban the use of settlement offers, agreements and negotiations to “prove or disprove the validity” of a disputed claim at trial. The insurer cited an exception allowing information about a settlement that explains why a party has suddenly disappeared from a trial. But the labs in this case settled way before the case began and were never introduced to the jury. So, the exception didn’t apply. Rightchoice Managed Care, Inc. v. Hosp. Partners, Inc., 2021 U.S. Dist. LEXIS 177176