The “Right” of Subrogation for Insurance Companies versus the “Right” of Injured Persons to Compensation


Currently pending before the Ohio Governor is House Bill 64, also part of the State Budget, which must be signed, if at all, by June 30, 2015. Included in the Bill is a new insurance subrogation law that impacts Ohioans who have been injured by someone and have incurred medical bills that might be covered by some form of insurance. Here’s how it works.

In Ohio, and in most other states, insurance companies have a common law or a contract right of subrogation. This means that if your insurance company, or the government (Medicare, Medicaid, Worker’s Compensation) pays your medical bills, that were caused by someone else’s fault, the insurance company can represent you and get the bills they paid for you back from the person whose fault it was to start with. This right of subrogation applied if it was a medical payments policy on your car insurance or homeowners insurance, workers compensation, a car accident, an injury caused by falling, slipping, or tripping due to some dangerous condition of someone’s property, medical negligence, and other situations.

For the longest time, Ohio, and many other states, observed what was known as the “Make Whole Doctrine.” This means that you, the injured person, are entitled though to be fully compensated for an injury, or “made whole,” before an insurance company gets subrogated or reimbursed. So if another driver hurts you, they have to compensate you first, completely, and only then does the insurance company get paid back.

Over the last several years, the Make Whole Doctrine has been eroded away. In most instances, due to decisions of the courts and acts of the Legislature, insurance companies have been permitted to “step to the head of the line,” and get paid back for what they paid out – usually only paid out because the injured person paid premiums to get that right – before the injured person gets anything. So for an example, another driver might hurt you in an accident, and you have $50,000.00 of medical bills as a result paid by your own health insurance. But the other driver only has $50,000.00 of liability insurance. Your insurance company would have a right to the entire recovery, first, before you get reimbursed for any lost wages, pain and suffering, and before reimbursement to your own attorney for fees and expenses incurred to get that recovery. And, the insurance company didn’t have to pay anything for the work that you and your attorney did to prove the case and get the recovery. So it was the “Make Whole Doctrine” upside down – the insurance company gets paid first, even though it took premiums for the benefits it paid out, and before the actual injured person gets anything.

There is now though in the Ohio General Assembly a part of the current budget bill that will fix a large part of that, and for the benefit of actual Ohio citizens. It is found in House Bill 64, the state budget bill, which the Governor must sign by June 30, 2015. The corporate lobbyists, with the health insurance industry and the Chamber of Commerce leading the way, are pressuring Governor Kasich to use his line-item veto to erase the corrections.

The corrections fix the subrogation rules as follows:

  1. If the injured person receives from a claim or settlement from the person who cause their injuries less than full value for his/her claim, the subrogated interest (in most cases, a health insurer) gets only its pro rata share of the recovery, diminished by the same proportion that the plaintiff’s recovery is diminished. So that if the true full value of a person’s claim is $100,000.00, but they only get $50,000.00 (usually due to lack of full insurance on the party at fault, or compromise to avoid the time and expense of trial), their claim is reduced by 50%, and so is the insurance company’s. If they paid $30,000.00 in medical bills, they also get only 50% back, just like the injured person.
  2. The subrogated interest must also pay its pro rata share of legal fees and expenses. So if the injured person owes a lawyer 1/3 to get the recovery, the insurance company’s claim is also reduced by 1/3 (which depending on the attorney representing the injured person, either pays the attorney for getting the insurance company the money they wouldn’t otherwise have, or it can go back to the injured person).
  3. If the injured party and the subrogated interest cannot agree on the numbers, either may have a court resolve it for them.

The pro rata subrogation provision, which is modeled after an Indiana statute, places Ohio on the conservative side of similar state laws nationally. It is not completely “make whole,” but is not as bad as the law here now. Forty out of 50 states are either “make whole” or are pro rata. In addition, Ohio’s workers’ compensation system, Medicaid and Medicare, also have a proportionate share policy that governs their subrogated recoveries, automatically, so this law only applies the same concepts – shared reduction of claims and recovery – to private insurance companies just like public ones.

Persons who are in favor of applying this “shared recovery” law, and reduce the private insurance companies’ priority rights or recovery which is now even greater than the person who actually suffered the injury, are encouraged to call the Governor’s office (614-466-3555), or send an email, to support signing this Bill with this new provision. Here’s what you can say: “I support the fair subrogation provision in the budget bill and ask the Governor to sign it into law. It’s fair and proven to work.” The Governor’s contact form can be found here:

http://www.governor.ohio.gov/Contact/ContacttheGovernor.aspx.

More information can be obtained about civil justice in Ohio at:

https://www.oajustice.org – for the Ohio Association for Justice

and in Kentucky at:

https://www.kentuckyjusticeassociation.org – for the Kentucky Justice Association

and nationwide at:

http://www.justice.org – for the American Association for Justice.

This Blog is not intended to be legal advice on any matter, for any person, or for any particular case, and is my opinion on the subject matter under discussion and is based on my admission to practice in State and Federal courts in Ohio and Kentucky only.  Many of the opinions expressed will have no application at all in any other jurisdiction other than the one discussed.  Each person’s situation is different, and a personal consultation with a qualified attorney in the area of practice you are concerned about is necessary for a competent evaluation of your rights and obligations.  Internet reading is never a substitute for an actual consultation with a competent lawyer.  More information about my practice and background can be found at:

http://www.eaglelawoffice.com

I hope readers find this information helpful and interesting.

Thomas G. Eagle, Attorney, licensed to practice in State and Federal courts in Ohio and Kentucky only.

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