Alabama Subrogation Laws

State subrogation

Equitable principles apply to all instances of subrogation except when the contract expressly provides otherwise (Int’l Underwriters v. Liao, 548 So 2d. 163 (Ala. 1989))

Alabama recognizes both contractual subrogation and equitable subrogation. HMOs can get reimbursed for benefits they paid for if there is recovery from a third party responsible for the injury. Reimbursement comes not from the policy-holder, but rather from the third-party tortfeasor. State laws don’t apply to ERISA-covered plans.

Made whole doctrine

YES, can contract around (Wolfe v. Alfa Mut. Ins. Co., 880 So.2d 1163, 1166 (Ala. Civ. App. 2003))

A subrogee is not entitled to recover absent full recovery by the insured, unless the contract provides otherwise (Int’l Underwriters v. Liao, 548 So 2d. 163, 165 (Ala. 1989). The insurer has the burden of proving that the insured has been fully compensated (Blue Cross & Blue Shield of Alabama v. Sanders, 138 F.3d 1347 (11^th Cir. 1998)). In considering whether a provision contracts around the made-whole doctrine, it is unnecessary to mention the doctrine explicitly – as long as the wording conveys a scheme contrary to the established equitable principles of the doctrine, it will be accepted (Wolfe v. Alfa Mut. Ins. Co., 880 So.2d 1163, 1167 (Ala. Civ. App. 2003)).

Common fund

Common Fund Is Recognized – case law seems to indicate that you can contract out C.A. § 23-79-146(a)(2)

Subrogating health plan must pay its share of attorney fees. If policy-holder’s attorney actively becomes adversarial to insurer’s subrogation interests, then common fund doctrine and duty to pay attorney fees will not apply. Plaintiff must do more than simply object to intervention by insurer seeking reimbursement. (CNA Ins Co. v. Johnson Galleries, 639 So.2d 1355 (1994)). An insurance company can also avoid the common fund doctrine if it actively assists the insured in the creation, discovery, increase, or preservation of the common fund. (Ex parte State Farm Mut. Auto. Ins. Co., 118 So.3d 699, 709 (Ala. 2012).

Contract out: Mitchell v. State Farm Mut. Auto. Ins. Co., 118 So. 3d 693, 698 (Civ. App. Ala. 2011) states that in absence of language in the State Farm policy demonstrating a clear intent to negate the application of the common-fund doctrine to an insured’s recovery of damages from a third party, summary judgment cannot be awarded in their favor.

Collateral source rules

Code of Alabama §12-21-45 eliminates the collateral source rule in medical expense recovery cases

State statute eliminates common law collateral source rule for evidence. Defendant can bring in evidence that plaintiff’s insurance covered med expenses (Alabama Code §12-21-45). However, plaintiff can bring in evidence that he is obligated to repay insurer after proving it to the court (Id). Collateral source statute doesn’t apply for products liability if plaintiff can prove that he must repay insurer (Alabama Code §6-5-522).

Hospital Lien

• §35-11-370-375 A hospital has a lien for all reasonable charges for hospital care, treatment, and maintenance of an injured person who entered the hospital within one week after receiving such injuries.
  • Attorney lien has priority
• 35-11-371: To perfect, hospital must file in the office of the judge of probate of the county a verified statement, before or within 10 days after the patient has been discharged. Must also mail statement to all interested parties. The date of perfection determines priority
• 35-11-373: Court has full jurisdiction to determine the amount due on the lien
• Guin v. Carraway Methodist Medical Center, 583 So.2d 1317 (Ala. 1991): Perfecting outside of 10 days does not make the lien invalid, just makes the hospital an unsecured creditor until filing. The date is only relevant if there are other creditors.
• No statute or case law on balance billing
• Alabama Administrative Code 560-X-6-.03: hospitals can directly bill Medicaid
• No clear statute or case law on reduction rules and billing

Medicaid Statute/Code

• Code of Alabama §22-6-6(a) (Ala Code 22-6-224): Establishes subrogation right
  • Does not authorize or require 100% recovery of benefits, right of recovery by Medicaid is subject to equitable principles (Smith v. Alabama Medicaid Agency, 461 So.2d 817, 820 (Ala. Civ. App 1984)
  • No statutory auto reduction or cap found
  • Smith v. Alabama Medicaid Agency, 461 So.2d 817 (Ala. Civ. App. 1984): subrogation is not a matter of strict right but is an equitable principle that is dependent on the particular facts of a case. Because of the ordinary meaning of “subrogation,” the court held that §22-6-6 does not require 100% recovery.  In this case, the medical expenses were less than 7% of the settlement, and thus it is reasonable that Medicaid recover all of the expenses
    • Common fund doctrine applies in awarding of attorney fees
• Alabama Administrative Code 560-X-20-.07: Burden on recipient
  • Medicaid recipients are required to notify Alabama Medicaid Agency within 10 days of filing suit against a third party. (Ala Admin Code 560-X-20-.07).
• Alabama Administrative Code 560-X-33-04: A letter will be sent to recipient outlining the reimbursement and allegations. The recipient then has the opportunity to present evidence to rebut the requirement for recoupment or to submit the reimbursement.  If no rebuttal is offered, the original assessment will be presumed correct and the amount is due immediately. (Ala Admin Code 560-X-33-.04).

Cases

• Int’l Underwriters v. Liao 548 So 2d. 163 (1989) – Generally no right to subrogation until insured has been made whole. Equitable principles apply to both kinds of subrogation unless contract expressly says otherwise.
• Ex Parte State Farm Ins. Co. 118 So 3d. 699 (2012) – Plaintiff’s health insurer sought to be reimbursed by the settlement proceeds. Plaintiff’s health insurer did not take an active role in the case but still sought to be reimbursed by the common fund that resulted from the efforts of the plaintiff’s attorney, except the health insurer did not want to pay its share of the attorney fee. Alabama Supreme Court said that simply intervening in the case and doing nothing more wasn’t enough to be actively involved and assisting in the litigation, therefore the health insurer is required by equity and justice to pay its share of the attorney fees for plaintiff since its reimbursement came from the common fund.
• Ex parte State Farm Fire and Casualty Co., 764 So.2d 543 (Ala. 2000) – The Insurance company was allowed to recover even though the insured was not made whole by the settlement.

Statute of Limitations

2 Years – Ala. Stat. § 6-2-38