Arizona Subrogation Laws

NO SUBROGATION

Subrogation provisions in insurance contracts amount to an assignment, which is unenforceable under Arizona law – Allstate v. Druke, 118 Ariz. 301 (Ariz. 1978).

Made Whole Doctrine

9^th Circuit has applied Made Whole Rule unless there is a clear provision stating Made Whole shall not apply. At a state level, Arizona is a anti-subrogation state and there is no need for a Made-Whole Doctrine.

• 20-259.01(J) requires insurer to compromise its Med Pay lien “in a fair and equitable manner.
• Barnes v Indep. Auto Dealers Ass’n of Cal. H & W Ben. Plan, 64 F.3d 1389 (9^th 1995) – 9^th Circuit case that adopted the Made Whole Doctrine into federal common law as the default rule regarding health insurance subrogation. Under the federal common law in the 9^th Circuit, absent language to contrary in the Plan, a health Plan cannot enforce its subrogation rights unless the Plan beneficiary is fully compensated and made whole for his or her injuries.

Common Fund

Common Fund is usually inapplicable, however it is recognized in Arizona. Except for state agencies paying for medical care, they retain subrogation rights and may have to follow the common fund doctrine. LaBombard v. Samaritan Health Sys., 195 Ariz. 543, 548, 991 P.2d 246, 251 (Ct. App. 1998).

• • Required a hospital lien be reduced by its pro rata share of attorneys’ fees because the lien statute in question there (ARS sec. 36-931(A)) attaches the hospital lien to a person’s entire damage award and is not limited to what the person actually “received.

Collateral Source Rule

Collateral source evidence is not admissible in general bodily injury claims, but it is admissible in medical malpractice claims.

• Payments made to plaintiff from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable. Lopez v. Safeway Stores, Inc., 129 P.3d 487 (Ariz. App. 2006)
• Plaintiff may not use CSR in medical negligence case. Defendant can introduce collateral sources and jury can offset any verdict. Plaintiff can then show that recovery is subject to subrogation or lien. Although statute allows the admission of such evidence, there is no guarantee that the jury will necessarily use that evidence in deciding an award of damages. A.R.S. § 12-565(A)
• In first-party Med Pay claims, the Med Pay carrier is responsible for paying only the “reasonable expenses incurred for necessary medical services”, and not the original billed amounts. Jimenez v. Progressive Preferred Ins. Co., 2020 WL 2037113 (D. Ariz. 2020).

Hospital Lien Statute

ARS §33-931-936 Establishes a lien for health care provider on damages recovered by injured person for the claimant’s customary charges for care and treatment

• Perfection § 33-932: The executive officer, licensed health care provider or agent of a health care provider shall record required information within 30 days of discharge. A hospital lien that is not recorded within this time is still effective if it is recorded 30 days before the settlement is agreed to or the judgment is paid (except if the lien is recorded in a county where liens are accessible on the internet). If the lien is not recorded or is not accessible on the internet, the lien is invalid and may not be enforced. (Blankenbaker v. Jonovich, 71 P.3d 910 (Ariz. 2003)). Holds that a lien must be properly filed and perfected to enforceable.
• The claimant must mail, within five days of recording the lien, a copy of the lien to the injured party.
• State statute preempted by Federal Medicaid statute to the extent it permits health care provider to bill an entity for the difference between their customary charge and the amount paid by Medicaid (Lizer Eagle Air Med Corp., 308 F.Supp.2d 1006, 1009 (D. Ariz. 2004).
• ARS §33-934 – A release of claims on which an assignment or lien is given is not valid or effective unless the lienholder executes a release of that lien.
• ARS § 33-936. Once a lien has been satisfied, the lienholder must issue a release of lien or be subject to liability of $100 plus actual damages. § 33-936.
• Case law recognizes that there is nothing preventing a health care provider from proceeding in an action against the patient for the value of the services rendered, even in the absence of a statutory lien, if they have a contractual agreement. No restriction on provider’s ability to enter into contracts with the patient and hold the patient liable for damages. Blankenbaker v. Jonovich, 71 P.3d 910 (Ariz. 2003).
• Hospital Lien will be reduced by pro rata share of patient’s legal expenses where hospital could not have pursued patient directly for its charges and hospital recovered money without expending its legal resources – LaBombard v. Samaritan Health System, 991 P.2d 246 (Ariz. 1998).

Medicaid Statute – Arizona Health Care Cost Containment System

• The AHCCCS has three theories of recovery: (1) a statutory lien under Ariz. Rev. Stat. § 36- 2915(A), (2) subrogation rights under Ariz. Rev. Stat. § 12-961 – 12-964, and (3) assignment rights under Ariz. Rev. Stat. § 36-2903(F). The State can only enforce its lien on any portion of a tort settlement where medical payments were actually paid. Southwest Fiduciary, Inc. v. Arizona Health Care Cost Containment System Admin., 249 P.3d 1104, 1109 (Ariz. Ct. App. 2011).
• ARS §36-2915 establishes the administrations right to a lien for the charges for hospital or medical care and treatment provided to a member as a result of injury by a third party
  • The member must provide written notice to the administration within 20 days after the commencement of a civil action
  • To perfect the lien, the director must, w/in 60 days from the date of notification to the administration of the hospital discharge or rendering of medical care, record a verified statement with patient info, charges, and info about people who could be liable. Within 5 days of recording the lien, the director must mail a copy of the lien to the patient and each person alleged to be liable.  The recording of the lien constitutes notice.
  • Footnote 2 in Arizona Health Care Cost Containment System v. Bentley indicates that failure to properly perfect the lien precludes recovery (Arizona Health Care Cost Containment System v. Bentley, 928 P.2d 653 (Ariz. Ct. App. 1996)).
• Cap/Reduction: Can recover no more than the portion of the settlement that represented recovery of payments that AHCCCS actually made on behalf of the victims, less a deduction for legal expenses
  • AHCCCS’s share of a settlement should be calculated based on amounts it has paid for the victim’s medical care, not based on larger amounts reflected in bills issued by medical providers that later agree to accept less than the billed amounts as full payment – Southwest Fiduciary, Inc. v. AHCCCS Admin., 249 P.3d 1104 (Ariz. Ct. App. 2011).
• Balance Billing – Arizona follows “Billed only” rule
  • Plaintiffs can submit evidence of and recover the full amount of reasonable medical expenses that they are billed, without any reduction for write-offs or write-downs. The court did not distinguish between Medicare, Medicaid, or private insurance write-offs. A write-off is considered a collateral source.

Statute of limitations

• 2 Years A.R.S. § 12-542
• 2 Years UM subrogation SOL runs from date of first payment. A.R.S. § 12- 555(D)