Subrogation Legislation in 2009 and the Forecast for 2010
By Daran Keifer and Kammy Poff
2009 was a banner year for those forces which seek to reduce, restrict or eliminate subrogation recoveries across all lines of business. NASP has been a flurry of legislative proposals effecting subrogation, most notably anti-subrogation bills, which affect our livelihood. Going into 2010, we need to understand the types of attacks and bills attempted this past year so we can prepare for new legislative activity regarding subrogation rights.
For the first time ever, we have watched the Ohio State Bar Association (OSBA) research the issue of subrogation in connection with personal injury and wrongful death claims. The bar association, which represents NASP member subrogation attorneys, actually proposed elimination of all subrogation rights. The OSBA’s screening committee actually recommended passage of the anti-subrogation proposed legislation in October 2009. On November 6, 2009 the OSBA Council of Delegates came to its senses and voted against recommending the bill for presentation to the Ohio statehouse. The OSBA voted to create a new committee to further study and review subrogation law. The new Committee will be formed by early 2010 and will report back to the Council of Delegates in May of 2010. There is still much more to come in Ohio but this is the first time a bar association was used to promote anti-subrogation legislation.
New York has been toying with anti-subrogation for nearly five years. Finally, this year the Empire State achieved enough votes in the Senate to pass the bill. At the time this article was written, the bill was waiting to be signed by Governor Paterson. This bill eliminates subrogation claims in personal injury and wrongful death actions when the injured party settles with the responsible party. The bill’s language is less than precise and lacks clarity for how it will apply. However, if you are pursing a subrogation or a non-statutory right of reimbursement claim and a plaintiff settles a personal injury or wrongful death claim, do not be surprised by the argument that your claim is completely barred.
The site of our next Annual Conference in 2010 saw its first attempt at “made-whole” legislation in response to a court ruling by the Supreme Court of Texas. The Texas House bill 4095 sought to limit group health and accident plan subrogation rights. Specifically, the bill would:
1. subordinate an insurer’s subrogation rights to its insured’s right to recover;
2. mandate an insurer share in the legal expenses to the same extent the insurer shared in the insured’s recovery; and
3. deny an insurer’s right to recover against its insured’s first party recovery.
The Texas bill did not pass. We anticipate seeing the bill again in 2011 when the Texas legislature reconvenes.
Nevada also presented a bill seeking to prohibit subrogation rights for health plans until the injured party is fully compensated or made-whole. Nevada’s bill did not make it out of Committee.
Hawaii introduced several medical malpractice tort reform bills this year, which sought to eliminate subrogation rights for Workers’ Compensation, Health and Disability claims. The most stringently worded bill was House Bill 804. The bill allowed the introduction into evidence of collateral source benefits. If a party chose to introduce collateral source benefits, the opposing party was given the opportunity to introduce evidence of premium payments. The bill also disallowed a lien or credit against any recovery the plaintiff secured and barred equitable or legal subrogation rights. The bill not only applies to any case that is tried, but also to any medical malpractice case that settles. House Bill 804 did not pass this year, as well as any of the Hawaii medical malpractice tort reform bills. But, Hawaii is another state where a continued push to eliminate subrogation rights is expected to continue into 2010.
Kentucky, Connecticut and Wyoming presented Workers; Compensation bills this year that would pro-rate subrogation recoveries to pay the injured party’s attorney a fee. Wyoming House Bill 54 actually won passage in both houses of the legislature and became law. Estimates suggest that Wyoming’s bill will cost the state approximately one million dollars a year in revenue. Kentucky House Bill 167 did not pass. Connecticut also introduced a bill seeking to reduce the subrogation recovery for a pro rata share of attorney’s fees and expenses. The bill was amended to ensure an employee’s attorney recover a proportionate share of his or hers fees and costs.
The Governor of Maine signed into law an anti-subrogation bill in May of 2009 pertaining to medical payments coverage in a casualty policy. The bill states that an insurance policy may not provide for subrogation or give priority to an insurer for payments made “for any hospital, nursing, medical or surgical services” or for any payments made under the med pay coverage when an insured is entitled to reimbursement from a third party. Maine’s law carves out an exception by allowing for subrogation in cases where the injured party recovers over $20,000.00 and the insured gives written approval for such rights.
Oregon considered a bill that would have reduced PIP subrogation recoveries. The bill would only allow an insurer to recover on a PIP subrogation claim when the injured parties’ settlement or verdict exceeded “damages” as opposed to “Economic damages.” This would allow for the injured party to claim he/she must be ‘made-whole’ for all damages, including pain and suffering, before an insurer is entitled to recover any PIP subrogation dollars.
A review of the 2009 bills evidences several trends in anti-subrogation activity. First, the bills seek to impose on subrogation rights the concept of “made-whole” in favor of the injured party. As with any bill, the devil is in the details as to what makes a party “whole” and the ability of insurers to contract it away. Second, we have seen a push to reduce subrogation rights for a “pro-rata” share of attorney fees to pay the insured’s own attorney fee. This concept of “common fund” forces subrogated carriers to pay injured parties’ attorneys fees without actually having them represent the subrogation claim. Third, we see the push to simply eliminate subrogation for the legal arena allegedly to encourage more settlement of cases.
Looking at our crystal ball for 2010, the forecast for the anti-subrogation legislation is that even more activity will be seen this year. Our subrogation industry, however, can have the greatest impact by taking a positive stand against legislation eroding away subrogation rights. We all need to help educate the public about the vital role subrogation plays in protecting important public policies, including taking responsibility for one’s actions, keeping insurance rates stable and deterring driving without insurance, just to name a few. There are legislative fact sheets available on the NASP website to assist the industry with this gal. Let’s continue our efforts to create a more favorable legislative environment for the subrogation industry.
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