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Tennessee Subrogation Laws
Sections
State Subrogation
Made Whole Doctrine
Common Fund
Collateral Source Rules
Hospital Lien Act
Medicaid Statute
State Subrogation
YES, equitable and contractual (York v. Sevier County Ambulance Authority, 8 S.W.3d 616 (Tenn. 1999)).
Case law indicates that equitable and contractual subrogation will not be treated differently. “We are of the opinion that the better rule is that regardless of the source of the right of subrogation, the right will only be enforced in favor of a meritorious claim and after a balancing of the equities.” Castleman Const. Co. v. Pennington, 432 S.W.2d 669, 676 (Tenn. 1968).
Made Whole Doctrine
YES, cannot contract around (York v. Sevier County Ambulance Authority, 8 S.W.3d 616 (Tenn. 1999), Abbott v. Blount County, 207 S.W.3d 732 (Tenn. 2006)).
The Court in Wimberly made it clear that neither the subrogation provisions in the policies nor the settlement-of-claim receipt signed by the insureds reaffirming the insurers’ subrogation rights was determinative, and added that such an outcome would be at odds with the equitable principles of subrogation. (Wimberly v Am Cas Co of Reading, Pa (CNA), 584 SW2d 200 (Tenn 1979)). This holding resulted in subrogation provisions in insurance policies to not control until the insured was made whole.
Burden of proving that the insured wasn’t made whole is on the insured (Hamrick’s, Inc. v. Roy, 115 S.W.3d 468 (Tenn. Ct. App. 2001)).
Common Fund
YES, unless the insurer hires its own attorney that actively participates in the litigation (Travelers Ins. Co. v. Williams, 541 S.W.2d 587 (Tenn. 1976)).
Trial court determines amount that the insurer’s recovery should be reduced by, to be reviewed for abuse of discretion (Shamblin v. Sylvester, 304 S.W.3d 320 (Tenn. Ct. App. 2009)).
Collateral Source Rules
Applies, evidence is not admissible
CSR applies to evidence regarding medical expenses. Plaintiffs may use evidence of the full, undiscounted medical bills as proof of reasonable medical expenses, and defendants may not use discounted rates paid by an insurance company for any purpose. Defendants are free to use any other evidence to show that full medical expenses are not reasonable, so long as that evidence does not violate the CSR. Dedmon v. Steelman, 2017 WL 5505409 (Tenn. 2017)
Hospital Lien Act
- Tenn. Code Ann. §29-22-101: hospitals shall have a lien for all reasonable and necessary charges for hospital care, treatment and maintenance of ill or injured persons
- Cap: the lien shall not apply to any amount in excess of 1/3 of the damages obtained
- The hospital lien is subordinate to any attorney’s lien or contract
- Balance Billing: a hospital’s non-discounted charges are not reasonable and thus there cannot be a lien on the entire amount the services cost. The lien only applies to the (discounted) amount that would actually be received by the hospital, such as the discounted rate that the hospital is contracted to receive from the insurance companies. See West v. Shelby County Healthcare Corporation, 459 S.W.3d 33 (Tenn. 2014).
- Tenn. Code Ann. §29-22-102: Perfecting the lien
- Within 120 days after discharge, the hospital must file in the office of the clerk of the circuit court a verified statement
- Within 10 days of filing, a copy of the claim must be sent to the interested parties
- A person can file a motion to quash or reduce the lien
- If at the time a settlement/judgment is reached the hospital has not perfected the lien, any lien perfected subsequent to the settlement shall not apply to or create any additional liability on the part of the insurance carrier or other person paying the settlement or claim (this subsection does not apply until 30 days after the person has been discharged)
Medicaid Statute
- Tenn. Code Ann. §71-5-117(a): The state is subrogated to all rights of recovery for the cost of care or treatment for which medical assistance is provided. When the state asserts its right to subrogation, the states shall notify the recipients about their rights
- Reductions 1: Tenn. Code Ann. §71-5-117(f): Before the entry of a judgment or settlement, the plaintiff’s attorney shall contact the state to determine if they have a subrogation interest. Within 60 days of the receipt of this notice, the state shall respond with the amount of the subrogation interest. If there is a disagreement on the amount, the trial judge may hold a hearing to calculate the amount based on the findings of the jury concerning medical expenses and evidence about the total sum of money paid by the state. The gross amount of the subrogation interest shall be reduced by the following factors, if applicable:
- to the extent that the plaintiff is partially at fault, the amount is reduced by the percentage of fault assessed against the plaintiff
- to the extent that fault is allocated to a person immune from the suit, the amount is reduced by the percentage of fault assessed against the immune person
- to the extent that the finder of fact allocates fault to a governmental entity that has its liability limited under state law and the fault of the entity, when multiplied by the total dollar value of the damages found by the finder of fact, exceeds the amount of judgment that can be awarded against the entity, the subrogation interest is reduced proportionately by a percentage derived by dividing the uncollectable portion of the judgment against the governmental entity by the total damages awarded
- to the extent that fault is allocated to a person the plaintiff didn’t sue, the amount is reduced by the percentage of fault assessed against the nonparty
- Reductions 2: Tenn. Code Ann. §71-5-117(g): after the calculations are performed, the judge should further reduce the subrogation interest pro rata by the amount of reasonable attorney’s fees and litigation costs
- Tenn. Code Ann. §71-5-117(h): if the plaintiff or plaintiff’s attorney collects the judgment, each has the obligation to remit the net subrogation interest and attorney’s fees and costs to any counsel employed by the state as required by the final judgment