Personal Injury Rewards and Your Insurance Policy

One of the most difficult parts about suffering an injury from automobile accident is determining whether your insurance company, which paid for your medical bills, is entitled to reimbursement from you out of the settlement or payment after judgment.  Laws on this issue vary from jurisdiction to jurisdiction, and it is very important to understand what laws apply to you and your policy.  In addition, a recent United States Supreme Court decision may have clouded the waters even further.  Figuring out what the applicable insurance regime is and how to comply with the correct set of rules is a very important part in the process of making yourself whole.

In some jurisdictions, when a health insurance company pays your medical bills, the health insurance company has a right to recoup its expenditures on your medical bills from any compensation you receive from your personal injury claim.  This recoupment is called “subrogation."

If your insurance policy is written under Virginia law, your health insurance company does not have a right of subrogation.  A Virginia statute prohibits insurance policies that allow an insurance provider to subrogate “any person's right to recovery for personal injuries from a third person.”  Virginia’s “anti-subrogation” statute applies only to insurance policies arising under Virginia law.  However, even in Virginia there are federal laws, such as ERISA and national labor contracts that are superior to the Virginia “anti-subrogation” statute, and would, therefore, permit the insurance company to recoup its payments toward medical bills. 

Insurance policies written under the federal Employee Retirement Income Security Act (“ERISA”) allow subrogation.  ERISA also applies to health insurance plans which are self-funded, allowing employers to pay for medical treatment of their employees themselves instead of using an insurance provider.  Under ERISA and in jurisdictions with similar laws, insurance companies have a right to subrogation.  Therefore, if an insurance policy arises under this type of regime and the personal injury victim receives compensation, the health insurance carrier or the self-funded employer is entitled to subrogation.

Unfortunately, there are rare circumstances when these subrogation rights may result in the personal injury victim owing money even after receiving a damage award from a settlement or through a trial, which is what happened in the recent Supreme Court case United Airlines v. McCutchen.  In that case, an airline employee received his health insurance through his employer’s self-funded ERISA plan.  The policy was silent as to whether the airline should help pay for the employee’s legal fees in the personal injury case.  The employee won a monetary award, but the award was less than the amount he netted from the case after he paid his attorney’s contingency fee and litigation costs.  However, applying equitable principles of law, the Supreme Court interpreted the policy’s silence on the subrogation issue  to effectively reduce what the airline could recover based on a pro rata share of the legal fees and remanded the case for further proceedings.  The Court did not want a beneficiary of an insurance policy to become a collection agent for the insurance company absent a clear provision allowing such agency in the policy.

In response to this case, to avoid having their subrogation amount reduced to cover pro rata legal fees, many insurance providers are editing their policies to protect their full subrogation rights without an equitable apportionment of legal fees and costs. 

If you are injured in a traffic accident or other type of accident, it is imperative that you hire an experienced law firm, such as Gross & Romanick, P.C.  We will help you to navigate your insurance policy and enforce your rights.  Call us at 703-273-1400 or send us an e-mail to law@gross.com.  Visit our website at www.gross.com and download our Personal Injury App to your cellphone or iPad.