Kentucky Subrogation Laws

State Subrogation

Equitable and Contractual

Recognizes legal and conventional (contractual), both of which are governed by principles of equity.  Subrogation rights can be modified by contract, provided violence is not done to established equitable principles (Wine v. Globe American Cas. Co., 917 S.W.2d 558 (Ky. 1996))

The relationship between an insurer and an insured is purely contractual, and both parties’ rights are determined by the contract (City of Louisville v. McDonald, 819 S.W.2d 319 (Ky. Ct. App. 1991))

Made Whole Doctrine

YES, can contract around

Right to subrogation generally does not arise until the insured is made whole for injuries and losses sustained.  This can be altered by contract provided violence is not done to established equitable principles. Wine v. Globe American Cas. Co., 917 S.W.2d 558 (Ky. 1996) held that the contract language at issue successfully contracted around the made whole doctrine because the contract language was explicit, both parties were represented by counsel and enjoyed a parity in bargaining position, and insured’s losses had already been sustained and were fully known/appreciated.

Common Fund

Common Fund Doctrine hasn’t been applied to health insurance subrogation in Kentucky

Collateral Source Rules

Ky. Rev. Stat. Ann §411.188 originally stated that evidence of collateral source benefits in medical benefits subrogation cases could be admitted to reduce recovery – however, O’Bryan v. Hedgespeth held that statute unconstitutional.  Presumably this means that evidence of collateral source benefits is not admissible (O’Bryan v. Hedgespeth, 892 S.W.2d 571 (Ky. 1995))

Hospital Lien Act

Kentucky has no hospital lien statute

Medicaid Statutes

• KRS §205.520 Kentucky Medical Assistance Program has the right to recover from third parties that have a legal liability to pay for services paid by the program
• KRS §205.624(2)(b): the injured person may proceed with an action against a third party, but they must notify the program of the action and of any settlement/judgment
• KRS §§205.626(2)-(3): the program has a right to reimbursement against any settlement/judgment obtained by the recipient
  • The assignment provided for in KRS §205.624 is binding and enforceable after the third parties have notice of it
  • Attorney’s fees: attorney may receive a percentage not to exceed 25% of the amount paid to the program that has been recovered in reimbursement.