This was a case of 1st impression, which means the Supreme Court has finally spoken the final answer on how health insurance can interrupt a personal injury settlement.
In the injury world settlements happen far more often than verdicts. The good thing about that is the courts are NOT clogged with personal injury cases (even though people think that is the case, it is false. Corporate litigation clogs the court files far more than injury cases ever will, but that is NOT the point here). The point is that when the Plaintiff gets a verdict everyone knows how much the award attributed to past medical bills, future medical bills, past lost wages, future lost wages, and all other noneconomic damages like pain and suffering. It is set in stone by a jury and easy for a health insurance company to say “Hey, look at that Verdict. It says the Plaintiff was awarded $235,000 in Past medical bills. We paid $235,000 in past medical bills. That is our money. Give it to us.” That is really a fair analysis as long as you deduct from that number a factor which deducts the amount of money the Plaintiff is paying for attorney fees and costs. You must deduct that because it would be extremely unfair to force the Plaintiff to pay for the health insurance company’s collection of that money. But all in all, depending on the insurance contract between the Plaintiff and their health insurance company it is not absolutely unfair to pay back health insurance the money the Plaintiff is awarded and which they already paid.
But what happens when the case settles and the settlement documents do not spell out what amount was applied to past medical bills? For example, what happens when the past medical bills are $328,000 and the settlement is $1,150,000 but the settlement documents don’t specify if any of that $1,150,000 is provided because of the past medical bills. I know, it seems impossible that the numbers are just too big to not be related. What insurance company is going to pay $1,150,000 for a personal injury case and NOT take into consideration the past medical bills for $328,000? There are ways to look at the transaction and see if the past medical bills were a part of the analysis. For example, the health carrier could ask to see the Plaintiff’s Demand Letter for Policy Limits to the Defendant. If the Demand letter sets out in it the past medical bills, then that would be pretty clear evidence that the Plaintiff had it in their head the past medical bills were a part of the settlement. But what happens when the damages are so large that the Plaintiff does not even need to send in a Demand? What is the right answer when the Defendant’s bodily injury policy of $1,100,000 tenders without a demand letter at all? What if the Plaintiff’s own Under Insured motorist coverage of $50,000 also tenders and gives it to the Plaintiff without any information other than the significant medical documentation without the bills attached?
When that happens you have a case called YUKUMOTO v. TAWARAHARA, SCAP-15-0000460, (Supreme Court of Hawai‘i 5/26/17). In the Yukumoto case the Supreme Court of the United States heard the important issue of whether a health insurance company has the right to subrogate against a TPL (third-party liability) Defendant. The Plaintiff in Yukumoto was riding his moped when he was hit by the Defendant in his car. The Plaintiff had very serious injuries. There was a brain injury, and respiratory failure, both legs were fractured, and his spine was fractured.
The Plaintiff got the exact sums listed above. One Million One Hundred Thousand ($1,100,000) from the Defendant’s bodily injury insurance and Fifty Thousand ($50,000) from his own Under Insured Motorist policy.
The Plaintiff only made a claim for damages to himself and his wife for wage loss and “general damages” and valued the total amount of damages at approximately $4,000,000. Since there was NOT $4,000,000 in coverage the settlement of $1,150,000 left him with a self-created (remember the “value” of $4,000,000 was set by the Plaintiff) shortfall of $2,850,000. Once that happened the Plaintiff said that NONE of the $1,150,000 was attributable to the past medical bills. They Plaintiff said that all of the recovered money was for past and future pain and suffering and wage losses. The Plaintiff refused to pay the Plaintiff’s health insurance company any money for the $325,824.33 in past medical bills the Plaintiff’s health insurance company paid for him!
The Hawaii Medical Service Association (HMSA) was NOT happy. They worked to get the Hawaii courts to enforce the Plaintiff’s health insurance company’s right to a lien and for subrogation rights for the full amount of the past paid medical bills ($325,824.33.)
However, when the Judge read over the settlement documentation between the Plaintiff and the Defendant, they just noted that the Defendant paid the money for “general damages only.” That was enough proof for the Judge to find that none of the settlement funds were tendered to the Plaintiff by the Defendant for past medical bills.
Under the Federal laws (HRS § 663-10) a health insurance company is allowed to subrogate against the Plaintiff’s settlement money from a third party Defendant but to prove they have the right to some money the Health Insurance has the burden of proof to show the recovery was partly from past paid medical expenses. It must show that the Plaintiff is getting money from the Defendant which “duplicates medical expenses that were paid by the health insurer.” Due to the fact that the health insurance company could not show any proof that the past due medical bills were included in the Defendant’s payment, the court ruled against the health insurance carrier and against the HMSA.
The challenge then turned to a battle between whether the health insurance contract between the Plaintiff and the health insurer was the controlling document or whether the Federal Statute was the controlling statute. The contract clearly gave the health insurance company the right to a part of the settlement proceeds. But the Federal Statute (HRS § 663-10) was clearly only allowing that reimbursement to occur when the evidence was clear that the Plaintiff was getting money for past paid medical bills. The contract language should never prevail over a Federal Statute which means the health insurer was not going to win that battle.
The Hawaii Supreme Court then asked the United States Supreme Court to hear this case. The US Supremes ruling affirmed the trial court’s ruling and allowed 100% of the settlement funds to be provided to the Plaintiff and the health insurer got zero ($0.00). The most important line in the SCOTUS (Supreme Court of the United States) stated that: For the foregoing reasons, we hold that: (1) a health insurer does not have equitable subrogation rights against a third-party tortfeasor in the context of personal insurance; (2) a health insurer’s subrogation and reimbursement rights are limited by HRS §§ 663-10 and 431-13:103(a)(10); and (3) any contractual provision that conflicts with HRS § 663-10 is invalid. We further hold that HRS § 663-10 takes precedence over HMSA’s contractual subrogation rights.
A clear win for Plaintiffs across the United States of America. A clear win for courts across the country which will now have even more settlements which will be designed to avoid health insurance reimbursement rights under this new case. It is a clear loss for health insurance companies who will now get even less from personal injury settlements. The only good news for the health insurance companies is that they, previous to this decision, were not getting significant reimbursements on Personal Injury settlement already, so hopefully they won’t be badly affected.
If your personal injury attorney is not aware of or keeping up with important Supreme Court decisions like this you could be wasting hundreds of thousands of dollars in unnecessary reimbursements to health insurance. Don’t be fooled. Not all attorneys are the same. Many of us work on a contingency fee, so we don’t get paid till we get money for you. But the amount we can put in your pocket on a case by case basis is very different. Compare your lawyers. Are your lawyers Eagle Members of their trial lawyers association? Are they on Leader’s Forum on the National Association of Justice? Are they committed to getting you every penny you deserve? Call us today for a free consultation. Don’t wait. The call is free.