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Texas Subrogation Laws
Sections
State Subrogation
Made Whole Doctrine
Common Fund
Collateral Source Rules
Hospital Lien Act
Medicaid Statute
State Subrogation
YES, equitable and contractual. Contractual subrogation clauses entered into after January 1, 2014 are subject to Chapter 140 of Title 6, Civil Practice and Remedies Code
Pre Jan. 1, 2014
Equitable and contractual subrogation recognized (Texas Ass’n of School Boards, Inc. v. Ward, 18 S.W.3d 256 (Tex. App. 2000), Fortis Benefits v. Cantu, 234 S.W.3d 642 (Tex. 2007))
Post Jan. 1, 2014 (Only applies to contractual subrogation – §4 of 2013 Tex. Sess. Law Serv. Ch. 180 (H.B. 1869))
- Tex. Civ. Prac. & Rem. Code Ann. §140.002: This chapter applies to an issuer of a health benefit plan that provides benefits for medical expenses
- Tex. Civ. Prac. & Rem. Code Ann. §140.005:
- If the covered individual is not represented by an attorney in obtaining a recovery, the insurer can recover an amount equal to the lesser of
- ½ of the covered individual’s gross recovery; or
- The total cost of benefits paid, provided, or assumed by the insurer
- If the covered individual is represented by an attorney, the insurer can recovery an amount equal to the lesser of
- ½ of the gross recovery less attorney’s fees and costs as determined in §140.007, or
- The total cost of benefits paid, provided, or assumed by the insurer less attorney’s fees and procurement costs
- The common law made whole doctrine does not apply to contractual provisions under this section
- If the covered individual is not represented by an attorney in obtaining a recovery, the insurer can recover an amount equal to the lesser of
- Tex. Civ. Prac. & Rem. Code Ann. §140.007:
- An insurer whose interest is not actively represented by an attorney shall pay to an attorney representing the covered individual a fee in an amount determined under agreement entered into between the attorney and the insurer plus a pro rata share of expenses incurred
- In the absence of an agreement described above, the court shall award to the attorney, payable out of the insurer’s share of the total gross recovery, a reasonable fee for recovery of the insurer’s share, not to exceed 1/3 of the insurer’s recovery
- If an attorney representing the insurer actively participates, the court shall award and apportion between the covered individual’s and the insurer’s attorneys a fee payable out of the insurer’s subrogation recovery. In apportioning the award, the court shall consider the benefits accruing to the insurer as a result of each attorney’s service. The total attorney’s fees may not exceed 1/3 of the insurer’s recovery
Made Whole Doctrine
YES (can contract around) and NO
- Pre Jan. 1, 2014
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- Made whole doctrine is recognized as an equitable doctrine and is utilized in Texas (Ortiz v. Great Southern Fire & Casualty Ins. Co., 597 S.W.2d 342 (Tex. 1980)).
- Can contract around the made whole doctrine, contractual provisions will trump equitable doctrines (Fortis Benefits v. Cantu, 234 S.W.3d 642 (Tex. 2007)).
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- Post Jan. 1, 2014
- Contractual subrogation provisions are governed by statute stated above. It seems as though equitable subrogation will still be subjected to the made whole doctrine, although this chapter of the code is still too new to have much interpretive case law
- Post Jan. 1, 2014
Common Fund
YES
- Pre Jan. 1, 2014
- The insurer must pay its share of attorney’s fees and costs (Ortiz v. Great Southern Fire & Casualty Ins. Co., 597 S.W.2d 342 (Tex. 1980))
- Post Jan. 1, 2014
- Payment of attorney’s fees in contractual subrogation cases is governed by the statute above
Collateral Source Rules
Applies, evidence is not admissible
Hospital Lien Act
- Tex. Prop. Code Ann. §55.002: a hospital has a lien on a cause of action or claim of an individual who receives hospital services for injuries caused by a third party. For the lien to attach, the individual must be admitted to a hospital not later than 72 hours after the accident
- Tex. Prop. Code Ann. §55.004: the lien is for the amount of the hospital’s charges for services provided to the injured individual during the first 100 days of the injured individual’s hospitalization. It does not cover
- Charges for other services that exceed a reasonable and regular rate for the services
- See statute for inclusion policies for a physician’s reasonable and necessary charges for emergency hospital care services provided during the first 7 days of the hospitalization
- Tex. Prop. Code Ann. §55.005: to secure the lien, the hospital must provide written notice to the injured individual and file written notice with the county clerk before money is paid to the injured person
- Attorney’s fees are not recoverable out of the hospital lien under quantum meruit or common fund theories because the hospital did not benefit as directly from the injured plaintiff’s attorney’s actions, it was incidental. The hospital’s lien is not co-equal with the injured plaintiff’s right to recovery. Bashara v. Baptist Memorial Hosp. System, 685 S.W.2d 307 (Tex. 1985).
Medicaid Statute
- Tex. Hum. Res. Code Ann. §32.033
- The receipt of medical assistance constitutes an assignment of the recipient’s right of recovery
- A recipient must inform the commission of any unsettled tort claim, any injury caused by a third party, etc.
- Cap: The commission’s right of recovery is limited to the amount of the cost of medical care services paid by the commission
- 1 Tex. Admin. Code §357.503
- The Texas Department of Human Services will distribute third-party recoveries as follows:
- DHS will receive an amount equal to DHS’s Medicaid expenditures for the recipient
- The federal government will receive the federal share of the Medicaid expenditures
- The recipient will receive any remaining amount
- Attorney’s fees: DHS may pay reasonable and necessary attorney fees of 15% of the entire amount recovered on behalf of DHS, and reasonable expenses, to a person authorized to recover amounts from third parties, other than a person contracted by DHS to recover on behalf of DHS, if the recovery is made in compliance with this subchapter.
- DHS may pay prorated expenses, not to exceed 10% of the entire amount recovered on behalf of DHS, if attorney fees are allowed under subsection (b) of this section.
- The amount recovered on behalf of DHS for which attorney fees are authorized under this section must be deducted from the total amount of the recovery before attorney fees and expenses are deducted under the terms of the recipient’s contract.
- The Texas Department of Human Services will distribute third-party recoveries as follows: