Subrogation Laws in All 50 States - Interactive Map

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Click on your state for a brief summary of that state's laws affecting or impacting subrogation recoveries.

 

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California Subrogation Laws

State Subrogation

In general, subrogation and assignments are void – however, this does not mean to exclude health insurers from conditioning benefits on rights to reimbursement. Block v. California Physicians’ Service, 53 Cal.Rptr. 51 (Cal. Dist. Ct. App. 1966).

Insurance contract provisions requiring reimbursement of medical payments under the label of subrogation but providing only access to the proceeds of settlement or judgment resulting from the exercise of rights of recovery by the insured person are valid and enforceable. Lee v. State Farm Mut. Auto. Ins. Co., 129 Cal.Rptr. 271 (Cal. Ct. App. 1976).

Insurer entitled to reimbursement rights only, based on policy provisions authorizing same, provided that the insured has been made whole with regard to non-covered damages. No direct subrogation allowed because assignment of personal injury actions is not allowed. 21st Century Ins. Co. v. Superior Court, 213 P.3d 972 (Cal. 209).

Statutory Lien Cap

Cal. Civ. Code §3040

(a)No health insurer lien may exceed:

  • For services provided on a capitated basis, the sum of reasonable costs paid for by the insurer to perfect the lien and the amount paid by the insurer pursuant to the insurance contract
  • For services provided on a capitated basis, the sum of reasonable costs paid for by the insurer to perfect the lien and 80% of the usual and customary charge for the same services offered on a Non capitated basis by medical providers in the region

(c) If the insured engaged an attorney, then the lien may not exceed the lesser amount of:

  • the lien it could get under §3040(a) or
  • 1/3 of the insured’s settlement

(d) If the insured did not engage an attorney, then the lien may not exceed the lesser amount of:

  • the lien it could get under §3040(a) or
  • ½ of the insured’s settlement

**No mention of whether you can contract around these provisions

Made Whole Doctrine

Generally, applies, can contract around

  • Has been held to apply in auto insurance cases (Sapiano v. Williamsburg Nat. Ins. Co. 33 Cal. Rptr. 2d 659 (Cal. Ct. App. 1994)); med-pay reimbursement claims (Progressive West ns. Co. v. Yolo County Superior Court, 37 Cal. Rptr. 3d 434 (Cal. Ct. App. 2005)); and numerous others
  • Security Nat’l Ins. Co. v. Hand, 31 Cal.App.3d 227 (Cal. App. 1973). An uninsured motorist carrier is not entitled to subrogation until the injured insured had been completely made whole.
  • Holcomb v. Hartford Cas. Ins. Co., 281 Cal. Rptr. 651 (Cal. App. 1991). An underinsured motorist carrier is entitled to reimbursement from the tortfeasor without regard to whether the insured has been made whole.
  • 21st Century Ins. Co. v. Superior Ct., 213 P.3d 972 (Cal. 2009). California holds that insurance companies are entitled to reimbursement of payments they made under a Med Pay policy provisions even though the insured has not been reimbursed all of his attorney’s fees. The Made Whole Doctrine does not include liability for all the attorney’s fees the insured must pay in order to recover economic damages including medical expenses from a third-party tortfeasor.

Cases that show an insurance company can contract around the Made Whole Doctrine

  • Progressive West Ins. Co. v. Yolo County Superior Court, 37 Cal. Rptr. 3d 434 (Cal. Ct. App. 2005) provides authority that one can contract around the made whole doctrine, but the contractual provision must clearly and specifically give the insurer a priority out of proceeds from the tortfeasor regardless whether the insured was first made whole (see also Sapiano v. Williamsburg Nat. Ins. Co. 33 Cal. Rptr. 2d 659 (Cal. Ct. App. 1994)).
  • Travelers Indemnification Co. v. Ingebretsen, 938 Cal.App.3d 858 (Cal. Ct. App. 1974) (fire insurance case): when the subrogation provision language in the contract indicates that the insured assigns to the insurer all rights of recovery and when the insurer’s attorney is actively involved in the case, the made-whole doctrine may not apply and the insurer will be entitled to full reimbursement.
  • Sapiano v. Williamsburg Nat’l Ins. Co., 28 Cal.App4th 533 (Cal. App. 1994). In order to effectively negate the Made Whole Doctrine the carrier must have disclaimer policy language and the carrier must cooperate and assist the insured in the recovery effort.

Common Fund

Yes – codified in Cal. Civ. Code §3040(f)

A lien subject to the provisions of this statute is subject to a pro rata reduction, commensurate with the enrollee’s or insured’s reasonable attorney’s fees and costs, in accordance with the common fund doctrine.

Collateral Source Rule

Very complex set of rules outlined in Corenaum v. Lampkin, 156 Cal. Rptr. 3d 347 (Cal. Ct. App. 2013). But some evidence will be admissible

Hospital Lien Act

  • Cal Civ. Code §3045.1: Any hospital has a lien upon the damages recovered by the person receiving medical care in the amount of the reasonable and necessary charges of the hospital
    • Disapproving of the Swanson decision (see below), Parnell v. Adventist Health System/West, 26 Cal. Rptr. 3d 569, 577-80 (Cal 2005) held that a lien under the HLA requires the existence of an underling debt owed by the patient to the hospital and that, absent such a debt, no lien may attach
  • No pro rata reduction of attorney fees on liens asserted under the HLA (Parnell v. Adventist Health System/West, 26 Cal. Rptr. 3d 569, 577-80 (Cal 2005))
    • Provisions of §3040 don’t apply
  • Cap at 50%

Cal Civ. Code §3045.4 and Newton v. Clemons, 1 Cal. Rptr. 3d 90 (Cal. Ct. App. 2003) require that a hospital can only recover up to 50% of the settlement

  • Civ. Code §3045.3: a lien shall not be effective unless written notice is given to each party thought to be liable
  • Balance Billing – Two Conflicting Views (courts have no agreement on this issue)
    • Nishihama v. City and County of San Francisco, 112 Cal. Rptr. 2d 861 (Cal. Ct. App. 2001): a medical care provider asserting an HLA lien may only recover up to the contractual rates agreed upon with the health insurance carrier for the type of service rendered to the insured patient – balance billing for a portion of the difference between a hospital’s discount and customary rates is prohibited
    • Swanson v. St. John’s Regional Medical Center, 118 Cal. Rptr. 2d 325 (Cal. Ct. App. 2002): the payment of discounted charges by the patient’s health insurance carrier does not extinguish the hospital’s statutory lien – balance billing is allowed
      • has been disapproved of by Parnell v. Adventist Health System/West, 26 Cal. Rptr. 3d 569, 577-80 (Cal 2005), but not specifically overruled

Medicaid Statute

  • Wel. & Ins. Code §14124.71: director has the right to recover value benefits provided to beneficiary as a result of injury by third party
    • This section does not employ a subrogation scheme – rather it gives the department a direct right of action for recovery of money spent to treat beneficiary. Although the department’s actual recovery of payment for the debt is conditioned on the existence of a fund created from a judgment or settlement, the department’s right to recover is independent of the beneficiary’s right (State v. Superior Court, 99 Cal. Rptr. 2d 735 (Cal. Ct. App. 2000)).
  • Cap/Reductions: department reimbursement limited to reasonable value of benefits provided less 25% for share of attorney’s fees (Cal. Wel. & Ins. Code §14124.72(d))
    • Benefits from which the Department may recover are limited to those expended for medical care and services. Ahlborn can be used as a guide to determine what portion of the settlement is attributable to medical expenses. (Bolanos v. Superior Court, 87 Cal. Rptr. 3d 174 (Cal. Ct. App 2008), citing §14124.76). Future health care expenses are to be excluded from the calculation of the portion of the settlement attributable to medical expenses if it can be proven that Medi-Cal will pay for it (Aguilera v. Loma Linda University Medical Center, 185 Cal. Rptr. 3d 699 (Cal. Ct. App. 2015).
  • Cap: Cal. Wel. & Ins. Code §14124.78 states that the department cannot recover more than the beneficiary recovers after deducting attorney’s fees and litigation costs
    • If recovery is determined under this section, then reductions in Cal. Wel. & Ins. Code §14124.72(d) will not apply
  • Written notice is required (Cal. Wel. & Ins. Code §14124.73)
  • Wel. & Ins. Code §14124.76: Burden on benefit recipient to notify department
    • No settlement/judgment in an action by a beneficiary to recover damages shall be deemed final or satisfied without first giving the director notice and a reasonable opportunity to perfect and to satisfy the director’s lien
    • Director’s recovery is limited to the portion of the settlement that represents medical expenses – the court shall be guided by Ahlborn in making the apportionment.
  • Wel. & Ins. Code §14124.785: recovery is limited to the amount derived from applying §14124.72, §14124.76, or §14124.78, whichever is less.

Cases

Fifield Manor v. Finston 54 Cal.2d 632 (1960), the California Supreme Court says that even though the Insurer had a contract to provide lifetime necessary medical care to the Insured (an old man who was later hit by a car and died) the Insurer had no right to be reimbursed by the Insured’s estate. The Insurer did however have a right to seek reimbursement from the tortfeasor. The court goes on to say, “the courts have quite consistently refused to recognize a cause of action based on negligent, as opposed to intentional, conduct which interferes with the performance of a contract between third parties or renders its performance more expensive or burdensome.” (May be obsolete, based on old law yet not reversed.) (Laura’s notes: there’s a lot of negative treatment here, many cases have declined to follow)

Statute of Limitations

  • Medical Malpractice: 2 Years A.C.A. § 16-114-203(a)
  • 3 Year UM subrogation SOL runs from the date that payment was made. Cal. Ins. Code § 11580.2(g).

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