SUBROGATION: WHOSE MONEY IS IT?

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SUBROGATION WHOSE MONEY IS IT?

• Daniel L. Clayton
• KINNARD CLAYTON BEVERIDGE
• 127 Woodmont Blvd
• Nashville, TN 37205
• Dclayton_at_KCBattys.com
• Board Certified Civil Trial and Medical
  Malpractice Specialist
• Past President Tennessee Association for Justice
• 2012- Best Lawyers, Lawyer of the Year, Medical
  Malpractice, Nashville

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Outline of Seminar

• Made Whole
• ERISA
• Hospital Liens
• Attorney Fees

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Made Whole

• Abbott v. Blount County, 207 S.W.3d 732 (2006)
• Health Cost Controls, Inc. v. Gifford, 239 S.W.3d
  728 (2007)

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Abbott

• Key Points
• Made-whole doctrine applies regardless of the
  language found in the insurance contract
• Insurance Company can not require consent
• Insured has the burden of proof

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Health Cost Controls

• Key Points
• Trial Court must consider all sources of
  insureds recovery when determining whether
  person is made whole
• Reimbursement should be awarded only to the
  extent that the injured partys total recovery
  exceeds total damages
• Party may present evidence of non-economic
  damages that is as certain as the nature of the
  case permits

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Practice Points

• Get agreement with health insurance company
• Get agreement with liability/UM carrier that
  person is not made whole
• Conduct mini trial and put on proof of all
  damages
• Provide Judge with extensive Findings of Fact

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ERISA

• ERISA does not apply to
• Government plan
• Church plan
• Plan maintained solely for purpose of complying
  with workers comp or unemployment compensation
  or disability insurance laws
• Plan maintained outside of U.S. for benefit of
  nonresident aliens or
• Plan that is an excess benefit plan and is
  unfunded
• 29 U.S.C. 1003(b)

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ERISA and MADE WHOLE

• Made Whole is the default rule in the 6th
  Circuit. Marshall v. Employers Health Insurance
  Co., 1997 WL 809997 (6th Cir. 1997)
• Which means the insurer does not have a right
  of subrogation until the insured has been fully
  compensated, unless the agreement itself
  provides to the contrary.

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Significance

• Plan language must conclusively disavow the
  default rule Copeland v. Haupt, 209 F.3D 811
  (6th Cir. 2000)
• Plan must be specific and clear in establishing
  both a priority to the funds recovered and a
  right to any full or partial recovery.
• However, an attorney has no implied or common law
  right to be paid fees unless Plan language allows
  such. Smith v. Wal-Mart, 2000 WL 1909387 (6th
  Cir. 2000)

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Practice Points

• Consider the following ERISA plan language
• This plan collects from a third party any
  amount that the plan pays due to an injury or
  sickness caused by the actions of that third
  party
• you will pay back to (x) any amounts which you
  or your dependent collect from the third party or
  the partys insurance.
• The only purpose of the program is to provide
  reimbursement to (x) for expenses recovered from
  a third party.
• 250,000 medical claim 25,000 liability
  insurance 100,000 UM coverage and 1,000,000
  umbrella

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• RECOVERY LIMITED TO LIABILITY INSURANCE COVERAGE
  OF 25,000
• UM/UIM carrier is not a third party

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UNCONSCIONABLE PLAN LANGUAGE

• COMPANY DEMANDED CLIENT SIGN DOCUMENT
  CONTAINING FOLLOWING
• Amounts recovered in excess of (Plans)
  reimbursement and costs shall be paid to me, but
  such excess shall apply as a credit against any
  liability of (Plan) for further payments to or
  on behalf of my claim under the plan.

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PLAN REFUSES TO PAY ATTYS FEES

• Suggested paragraph
• Please be advised the (client) will work with
  any attorney you hire to protect your interest.
  There are multiple depositions which will likely
  need to be taken in order to prove the
  reasonableness and necessity of the medical
  treatment. I will not advance those costs on
  your companys behalf. Therefore, please advise
  me as to the attorney you are hiring to protect
  your interest in this matter. If you wish to
  employ me to do this, then I will provided no
  conflict of interest arises for a fee of 33
  1/3.

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Plan wont pay fees and wont hire attorney
what next?

• A party only has a subrogation/right of
  reimbursement to the extent that there is a
  recovery. If there is no recovery for the
  medical bills, then there is no right of
  reimbursement.
• Let me be very clear. Because of your companys
  refusal to pay the costs associated with proving
  the medical bills (either through hiring me in
  accordance with my earlier letter, or by hiring
  other counsel) I will not prove any medical
  bills. I will specifically ask the Judge to put
  a separate line on the verdict form for medical
  expenses. Since I will not prove any medical
  expenses in this case, I fully anticipate that a
  directed verdict will be granted on that issue
  and there will be a zero recovery for medical
  expenses.

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Plan attempts to recover from any monies received

• The language in your plan states that your plan
  has a right to reimbursement, even if the monies
  are not related to medical expenses. Clearly,
  this phrase is invalid, and, to be blunt, does
  not make any sense.
• Jurors are frequently asked to determine whether
  certain medical expenses are reasonable. They
  are also asked to determine if the expenses are
  related to the injuries sustained in the wreck.
  If a jury determines the expenses are not
  reasonable and/or not related to the wreck, then
  there is no compensation. How can your company
  claim rights to reimbursement when the jury has
  determined that it is not related to the injury?
  The bottom line is you can not.

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Hospital Liens No attorney Fees

• Breazeale v. Hensley 2009 WL 196026
  (Tenn.Ct.App. 2009)
• Hospital Lien is not reduced by one-third
  attorney fees

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LOOK OUT!
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THANK YOU!

• Daniel L. Clayton
• Kinnard Clayton Beveridge
• 127 Woodmont Blvd
• Nashville, TN 37205
• 615.297.1007
• DClayton_at_KCBattys.com
• Board Certified Civil Trial and Medical
  Malpractice Specialist
• Past President Tennessee Association for Justice