Subrogation rights are again in danger in Colorado with the introduction of H.B. 10-1168. This bill essentially undoes healthcare subrogation while codifying the “made whole” and “common fund” doctrines into law. The proposed bill will certainly have a devastating effect on healthcare, workers compensation and UM insurance subrogation, but other auto and property subrogation rights will also be greatly impacted whenever there is a personal injury suffered in the same loss. The most dramatic aspect of the proposed bill is that carriers cannot bring direct subrogation actions in such instances.

The intended healthcare aspects of the Colorado legislation seek to impose “full compensation” for an injured party onto all rights of reimbursement and subrogation when a personal injury is involved. The proposed bill compels insurance carriers to litigate this issue of “full compensation” in the same court where the underlying tort claim is pending. If no case is pending and a settlement has occurred, then the injured party may give notice of not having receiving “full compensation” to the insurer. If the insurer wants to challenge the insured and obtain a reimbursement, then the carrier has 60 days in which to file a costly declaratory judgment action. If they do not file such an action, they are barred from seeking any repayment.

Another troubling provision of the proposed bill is the elimination of a subrogated insurer’s right to directly pursue a third party who caused the loss – even if the injured party fails to do so. Auto and property carriers arguably will not be able to employ their own counsel to bring direct actions whenever an insured has suffered a personal injury in the loss. Such a prohibition favors only responsible tortfeasors, and would not only limit recoveries for every carrier writing in Colorado, but would also impact every subrogation attorney handling matters there as well. UM subrogation (which is almost entirely driven by independent direct carrier actions) will be all but eliminated. Auto and property carriers will be limited in the counsel available to them to assert their subrogation claims in such instances.

NASP urges its membership to review and address this bill as it appears it will affect numerous lines of business. Insurance subrogation professionals need to make sure their government affairs individuals are alerted to this bill and its true and broad impact on their subrogation rights. Local attorneys may want to make their voices heard to their state legislators as to the impact this will have on their subrogation practices. NASP will keep you informed as this bill moves through the Colorado legislature. It presently has bipartisan support, and without input from concerned constituents, it will probably be enacted as written.

The complete text of the bill is on the NASP website and can be reached here.

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This entry was posted by Adam V. Russo on Thursday, February 4th, 2010 at 9:38 am and is filed under Colorado, Subrogation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.