What Lawyers Do

Here is a wonky piece on health insurance companies trying to edge in on personal injury verdicts and settlements….

In New York, if health insurance covers your medical expenses, you cannot seek reimbursement for them in a personal injury lawsuit. Yet health insurance companies often attempt to either intervene in such lawsuits or obtain reimbursement from the insured after judgment or settlement.

This right frequently arises because clauses are inserted into health insurance contracts that provide for lien or subrogation rights when medical expenses are paid due to the fault of another, a fact that most plaintiffs are surprised to learn.

Recently, on September 17, 2008, a St. Lawrence County trial court addressed this issue in House v. Stephens, 863. N.Y.S.2d 906, denying Excellus Health Plan the right to intervene in a medical malpractice action filed by the plaintiff, Sally House.

House was not seeking recovery for past medical expenses. Thus, Excellus asked to jump into the action to protect its rights under the health insurance contract.

Reading the contract closely, the court found that it was premature for Excellus to intervene because a settlement or judgment had not yet been secured, but House was obligated to cooperate with Excellus in any future action it filed against the defendant based on its rights of subrogation, or else she would be responsible for payment of her past medical expenses.

As other courts have observed, when an insurance company attempts to intervene in a personal injury action it can create a conflict of interest with its insured, and also convert simple personal injury actions into complicated, multi-party litigation. When insurers seek reimbursement from insureds who were precluded in a settlement or trial from obtaining compensation for prior medical expenses, it is just plain unfair.

The current climate would be more fair and hospitable for injured persons with health insurance coverage if subrogation clauses were prohibited. Another option is to permit the award of damages for past medical expenses, even if reimbursed by a collateral source, and then let the insurer assert a lien against the presumably larger settlements that would result.

Either way is better than the status quo.