Illinois Subrogation Laws

State Subrogation

Contractual Only

Medical benefits subrogation provisions in contracts are generally enforceable – contract terms will control (In re Estate of Scott, 567 N.E.2d 605 (Ill. App. Ct. 1991).

Claim reimbursement and subrogation allowed if provided for in the policy language. Bernardi v. Home & Auto. Ins. Co., 212 N.E.2d 499(Ill. App. 1965).

Made Whole Doctrine:

No, 770 ILCS 23/50 governs – proportional reduction Yes- can contract around

• Illinois does not apply the Made Whole Doctrine as a blanket rule, and it does not recognize the Made Whole Doctrine like other states do. In re Estate of Scott, 567 N.E.2d 605 (Ill. App. 1991).
• In Illinois, the effect of a subrogation clause is identical to that of a reimbursement clause. Contractual subrogation rights are enforced even if the insured is not fully compensated for all of his or her injuries. However, the Made Whole Doctrine is applied in appropriate circumstances.
• 23/50 codifies the Made Whole Doctrine in subrogation cases and other reimbursement actions by proportionately reducing such claims by the plaintiff/insured’s comparative fault or by proportionately reducing such claims in the amount in which a claim is deemed to be uncollectible due to limited liability insurance. Almost no case law interpreting this provision, it is very new. However, given the emphasis Illinois places on the explicit contract provisions, it is possible that the court might allow parties to contract around this statute.  Prior to the statute’s enactment, courts were very willing to allow subrogation claims even when the insured wasn’t made whole if that’s what the contract stated (Principal Mutual Ins. V. Baron, 964 F. Supp. 1221 (N.D. Ill. 1997)).
• If a subrogation claim arises out of payment of medical expenses and the claimant’s recovery is diminished either by comparative fault or by reason of the uncollectibility of the full value of the claim resulting from limited liability insurance, then the subrogation claim will be diminished in the same proportion as the claimant’s recovery has been diminished. After reduction, pro rata share of the attorneys’ fees and costs will be deducted.

Common Fund

YES, can contract around

In order to recover fees, the attorney must show (1) that the fund was created as the result of legal services performed by an attorney, (2) that the subrogee did not participate in the creation of the fund, and (3) that the subrogee benefited out of the fund that was created.  However, a plaintiff may not recover attorney fees while rendering services for an unwilling recipient (Johnson v. State Farm Mut. Auto. Ins. Co., 752 N.E.2d 449 (Ill. App. Ct. 2001))

The court has held that the common fund doctrine is quasi-contractual, and thus a common fund doctrine remedy is not available when an express contract exists concerning the same subject matter. (Stefanski v. City of Chicago, 28 N.E.3d 967 (Ill. App. Ct. 2015)).

Wendling v. Southern Illinois Hospital Services, 242 Ill.2d 261, 265, 351 Ill.Dec. 150, 950 N.E.2d 646 (2011).

• The court did not apply the common fund doctrine in this situation between a hospital and plaintiffs.
• The court’s reasoning was that “the plaintiffs and the Hospitals are not similarly situated with respect to the fund and do not share the same interest in the funds.”
• “The common fund theory does not apply because the hospital and the administrator do not stand on equal bases as claimants against the fund. Rather, the hospital’s claim to the fund arose only because the hospital was the decedent’s, and thus his estate’s creditor.”
• The court held that the common fund doctrine does not apply to the Health Care Services Lien Act.

Collateral Source Rule

Evidence of payments NOT admissible

Defendant cannot introduce evidence of payment by collateral sources.  Plaintiffs are entitled to seek recovery of the full reasonable value of their medical expenses, regardless of whether they have private insurance or are covered by a government program.  Defendants are allowed to cross examine plaintiffs’ witnesses and call their own in order to try to establish that the full “reasonable” value of the expenses is lower than the actual value. Wills v. Foster, 892 N.E.2d 1018 (Ill. 2008).

Health Care Services Lien Act

• 770 ILCS 23/10(a) Health care professionals and providers that render services shall have a lien upon all claims and causes of action for the amount of reasonable charges
  • Total amount of liens shall not exceed 40% of the settlement/judgment
• 770 ILCS 23/10(b) must be written notice and service to all parties
• 770 ILCS 23/10(c): no individual category of health care professional or provider may receive more than 1/3 of the judgment/settlement. If the total amount of all liens exceeds 40%, then:
  • All the liens of health care professionals shall not exceed 20% of the settlement/judgment; and
  • All the liens of health care providers shall not exceed 20% of the settlement/judgment
• 770 ILCS 23/10(c) (continued): when distributing the 40%, health care services liens shall be satisfied to the extent possible for all professionals and providers by reallocating the amount unused within the total limitation of 40%, while following the 1/3 limitation above
• 770 ILCS 23/10(c) (continued): if the total amount of all liens exceeds 40%, then the total amount of all the liens of attorneys under the Attorneys Lien Act shall not exceed 30% of the settlement/judgment
• Attorney’s fees and costs should not be deducted from plaintiff’s total recovery prior to calculating the amount to be awarded for the payment of a lien (McVey v. M.L.K. Enterprises, LLC, __ N.E.3d __ (Ill. 2015))

Medicaid Statute

• 305 ILCS 5/11-22: the Illinois Department shall have a charge on all claims, demands, and causes of action for the total amount of medical services provided
  • Notice must be served
  • The court may determine what portion of the recovery shall be paid to the injured person and what portion shall be paid to the Illinois Department. The court shall conduct an evidentiary hearing and consider evidence pertaining to:
    • Percentage of the gross amount of recovery that the department is seeking to claim; the percentage of the gross amount of recovery less attorneys’ fees and costs that the department is seeking to claim; and whether it is fair and equitable that the department bear a proportionate share of fees and costs
    • The amount of attorney’s fees and costs incurred (and will still be incurred) by the recipient
    • The total amount of medical expenses and what portion was paid by the recipient, insurance, and the department
    • Whether the recovery represents less than substantially full recompense for the injury and treatment, so that reduction of the charge sought to be enforced against the recovery would not likely result in a double recovery or unjust enrichment
    • The age of the recipient and of persons dependent on the recipient, nature/permanency of the injuries, costs of foreseeable future treatment
    • Realistic ability of recipient to repay in whole or in part the charge sought to be enforced against the recovery when judged in light of the factors enumerated above
  • Burden of proof lies with the party seeking reduction
  • The department shall pay its pro rata share of attorney’s fees – the department cannot recover any of its charge until the attorney’s claim for fees is satisfied
  • In determining reductions, court must weigh several policy considerations, including permitting the state to recover in order to lessen the burden on taxpayer or to enable the state to help others in need, and the prevention of double recovery or unjust enrichment. Court must deal fairly with a public aid recipient who may have been only partially recompensed when consideration is given to his pain and suffering and future medical bills (Wilkins v. Illinois Dept. of Public Aid, 392 N.E.2d 59 (Ill. App. Ct. 1979)).