Why the Health Insurance Companies' Right to Repayment After the Injury Settlement Is Dead in the New Era of Make Whole Arbitrations

Due to the passage of C.R.S. 10-1-135, the "Make Whole" statute, I believe injury victims will have a huge advantage against state-regulated (Non-ERISA qualified) health insurance companies in future subrogation battles. This new statute calls for arbitration to determine the extent to which insurance companies can claim a plaintiff's settlement money. Just this week, I participated in the first arbitration in Colorado that tested the strength of an insurance company's right to subrogation. I believe this new statute effectively ends the "choke hold" that insurance companies have had on plaintiffs for years.

For a more in-depth discussion of subrogation and the "Make Whole Statute," please refer to our prior articles on these topics.

A) FIRST ARBITRATION IN COLORADO ON MAKE WHOLE STATUTE:
This week, Anderson Hemmat arbitrated the first case testing the recent law change in C.R.S. 10-1-135. Pursuant to this statute, a health insurance company has no right to repayment or subrogation if an arbitrator determines that the amount of recovery does not fully compensate the injured party for his or her damages. In other words, the injured victim's right to be made whole is stronger than the right of the health insurance company to be paid back.

Prior to the adoption of the "Make Whole" statute, an injured person was contractually obligated to pay back his or her health insurance company for the medical bills that were paid on the insured's behalf because the medical expenses were caused by someone else's negligence. This contractual requirement is generally buried deep within an insurance policy. Nonetheless, before the enactment of the "Make Whole" statute, health insurance companies never hesitated to enforce their right to repayment.

C.R.S. 10-1-135, the "Make Whole" statute, was adopted last year and went into effect on August 11, 2010. This new statute states that insurance companies do not have a right to take any settlement or judgment money from an injured victim until that victim has been "made whole" by settlement or judgment. An arbitrator determines whether an injured victim has been made whole.

Furthermore, if an injured victim receives the full amount of the available coverage limits the rebuttable presumption is that the injured victim has NOT been made whole. Conversely, if the settlement by the victim is less than the coverage limit, the rebuttable presumption is that the victim HAS been made whole. However, even in those cases, the law simply requires proving, regardless of the settlement reached, that the victim has not been fully compensated for his or her injuries and damages. With the "Make Whole" statute now in place, how exactly will health insurance companies ever succeed in arguing for subrogation at arbitration? Simply stated, they can't.

Throughout the years, we have recovered a hundred million dollars or more for our injured clients. Without exception, all of these victims would give the money they received from their cases back to have never suffered the injury, pain, or disability in the first place. In fact, given a choice between having their health restored or doubling their settlement recovery, the overwhelming majority choose good health over a cash payment. Accordingly, I have always believed that it is unlikely that any monetary settlement can make an injured victim completely whole after sustaining injuries from a negligent party, and I bet that most arbitrators and insurance adjusters will see things my way.

B) THE BATTLE BEGINS:
This week, what started out as a theory got tested as I arbitrated the first case testing the recent law change in C.R.S. 10-1-135.

After a horrific car accident, my client required neck surgery as a part of her medical treatment and healing process. As a result, of the accident my client became disabled, lost her $50,000 per year job, and incurred $102,000 worth of medical expenses (for which the health insurance company paid $36,000). Furthermore, due to her disability, my client has been unemployed for three years. Not surprisingly, the health insurance company wanted every penny of the $36,000 to be repaid.

The only argument that the health insurance company could muster is that my client suffered from pre-existing neck injuries that she sustained before the car accident that was the subject of the arbitration. They argued that my client, who received $150,000 (two policy limit settlements), had been made whole because my client had only suffered a "mere exacerbation" of her prior injuries. Consequently, the health insurance company claimed that it was entitled to subrogation because the bulk of what was being paid to my client for her injuries was "unjust".

Because attorneys that represent health insurance companies are almost all "one-trick ponies" I was more than ready to handle this argument. Right after the insurance company's attorney began to smear my client and de-emphasize her serious injuries, I jumped in and destroyed their entire argument with three carefully crafted questions.

Question #1: "How much of the medical billing paid here is your insurance company client wanting to be paid back?
Answer: "Well, all of it."

Question #2: "So the health insurance company believes that EVERYTHING they spent on Mrs.____'s care should justifiably be paid back from this settlement?"
Answer: "Of course."

Question #3: "And that's because the health insurance company believes that if not for this accident, my client would NOT have required ANY of this care, treatment, or surgery, right?
Answer: "Correct."

RIGHT THEN AND THERE THEIR ARGUMENT WAS DESTROYED!
At this point, all of the health insurance company's arguments, that my client was not entitled to the settlement because her supposed pre-existing injuries were only exacerbated by the accident, fell apart. Their argument fell apart when the insurance company revealed that they wanted to be repaid for all of the money that they paid because they maintained that the crash caused ALL of my client's injuries. Their argument would have only made sense if they had requested a fraction of the medical bills to be paid back. Nonetheless, the health insurance company was greedy and followed the old adage that "pigs get fat and hogs get slaughtered."

CONCLUSION:
With the "Make Whole" statute now in place in Colorado, health insurance companies are going to be man-handled and decimated in arbitration after arbitration unless there are extraordinary factual circumstances or the health insurance company generously concedes to receive a fraction of the amount that it paid for an injured victim's care. Optimistically, the health insurance companies will learn from their consistent defeats and stop asserting that they are entitled to any subrogation rights in Colorado.

At Anderson Hemmat, we believe that the Make Whole statute is an important change in the law that can have a significant and positive impact on an injured victim's recovery. If you have questions about how this change in the law can be used to benefit you, please call and speak to one of our attorneys today.