Articles Posted in Subrogation

The Court of Appeals recently addressed the issue of which claims a parent who is not the primary residential parent may bring when his or her child has been injured. In Neale B/N/F Russell v. United Way of Greater Kingsport, No. E2014-01334-COA-R3-CV (Tenn. Ct. App. July 28, 2015), a child was injured at an activity at defendant’s facility. The mother and father initially filed a joint action as next friends of the child, but they voluntarily dismissed that case and father subsequently filed alone. Father, as next friend of child, sought damages for permanent impairment, paint and suffering, medical expenses, and loss of earning capacity. Pursuant to the family’s parenting plan, father was not the primary residential parent.

Defendants filed a motion for summary judgment asserting that father lacked standing to bring the claims. The trial court agreed and granted summary judgment, which the Court of Appeals reversed in part and affirmed in part.

Tenn. Code Ann. § 20-1-105(b) states:

 In case the father and mother of the minor child are living apart and one parent has exclusive legal custody of the child, the parent with legal custody has the sole right to maintain an action for the expenses and the actual loss of service resulting from an injury to the child, except that the noncustodial parent in such case shall have a right to maintain or join an action brought under this section, for the expenses resulting from an injury to the minor child to the extent the noncustodial parent has paid those expenses.

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My law review article, "’Made-Whole" Made Fair:  A Proposal to Modify Subrogation in Tennessee Tort Actions," is among the top ten down loads in its category on the Social Science Research Network.

Here is an abstract of the article:

This Article proposes the adoption of the “Modified Made-Whole Doctrine Proposal." Part I begins by explaining the roots of the law of subrogation rights and its current jurisprudential inconsistencies. It also explores the relationship between such subrogation rights and the made-whole doctrine in the context of Tennessee tort law as well as how this doctrine would be applied in Tennessee today. Part II briefly outlines some of the general questions regarding Tennessee’s current application of the made-whole doctrine, particularly the unresolved issues surrounding the impact of comparative fault on subrogation rights. These are questions which the author’s suggested Proposal is designed to directly address. The detailed framework of this Proposal, including its five fundamental Principles and their underpinning rules, are set forth at length in Part III. Finally, Part IV concludes by analyzing the practical application of this Proposal throughout the various stages of the litigation process and offers guidance to judges, attorneys, and litigants alike as to how such subrogation disputes can be equitably resolved. In sum, the Modified Made-Whole Doctrine Proposal is meant to provide for the efficient, just application of the made-whole doctrine to subrogation interests with respect to Tennessee’s law of comparative fault.

The Belmont Law Review published an article I wrote about the made-whole doctrine in its inaugural issue.  Here is a description of the article.  

 
This Article proposes the adoption of the “Modified Made-Whole Doctrine Proposal." Part I begins by explaining the roots of the law of subrogation rights and its current jurisprudential inconsistencies. It also explores the relationship between such subrogation rights and the made-whole doctrine in the context of Tennessee tort law as well as how this doctrine would be applied in Tennessee today. Part II briefly outlines some of the general questions regarding Tennessee’s current application of the made-whole doctrine, particularly the unresolved issues surrounding the impact of comparative fault on subrogation rights. These are questions which the author’s suggested Proposal is designed to directly address. The detailed framework of this Proposal, including its five fundamental Principles and their underpinning rules, are set forth at length in Part III. Finally, Part IV concludes by analyzing the practical application of this Proposal throughout the various stages of the litigation process and offers guidance to judges, attorneys, and litigants alike as to how such subrogation disputes can be equitably resolved. In sum, the Modified Made-Whole Doctrine Proposal is meant to provide for the efficient, just application of the made-whole doctrine to subrogation interests with respect to Tennessee’s law of comparative fault.
 
It is available for download here:  

Georgia lawyer David T. Lashgari thought it was a good idea to distribute $500,000 in personal injury settlement proceeds knowing that there was an ERISA-protected subrogation interest for $180,000. 

Then he thought it was a good idea to fight an effort by the subrogee to get the money from him and his client. 

Then he thought it was a good idea not to obey a court order that required him and his client to put $180,000 into his trust fund pending final judgment in the case.  (He said he and his client didn’t have the money.)

The 9th Circuit Court of Appeals has ruled that a private Medicare Advantage Organization plan cannot sue a plan participant’s survivors for reimbursement of medical payments out of the proceeds of an automobile insurance policy.

The case is Parra v. PacificCare of Arizona, No. 11-16069 (9th Cir. April 19, 2013),  Parra was struck by car and was seriously injured.  His medical expenses were paid by Defendant, a Medicare Advantage Organization ("MAO").  Parra died from his injuries, and his survivors brought a claim under Arizona’s wrongful death law.  The MAO also asserted a claim for monies it paid for medical expenses.  GEICO, the tortfeasor’s insurer, issued a joint check to the parties for the full amount of the MAO’s claimed interest, to be held in trust pending the outcome of the dispute between the survivors and the MAO. 

The survivors sued PacificCare, saying that it had no right to seek recovery of monies from the wrongful death settlement.

The United States Supreme Court has released its opinion in U.S. Airways v. McCutchen, No. 11-1285 (USSC April 16, 2013), a case that raised the issue of whether "equitable doctrines and defenses," such as the "common fund" doctrine and the "made whole" doctrine applied to subrogation interests governed by the Employees Retirement Income and Security Act of 1974 ("ERISA").

McCutchen was injured in a car accident and received $110,000 in a personal injury settlement – $10,000 from the defendant’s liability insurer and $100,000 from his underinsured motorist insurance carrier.  His attorneys’ fees were 40% of the recovery, leaving McCutchen with $66,000.  U.S. Airways had paid the medical bills incurred to treat the injuries in the accident, and demanded repayment of 100% of the monies it paid – $66,866.  When McCuthen refused to do so, U. S. Airways filed suit in federal court.

The USSC ruled that U.S. Airways had the right to enforce what it called an "equitable lien by agreement." and thus had a right to recover its money notwithstanding any argument that McCutchen was not made whole.

The United States Supreme Court has agreed to consider E.M.A. ex rel. Plyler v. Cansler, 674 F.3d 290 (4th Cir.2012), in which the 4th Circuit Court of Appeals said that North Carolina’s one-third cap on the state’s recovery against a Medicaid recipient’s settlement proceeds as provided in its third-party liability statutes, which inherently raised unrebuttable presumption in favor of the state that allocation of one-third of a lump sum settlement was consistent with federal law, violated anti-lien provision in federal Medicaid law.

The Court said that

As the unanimous [Arkansas Department of Health & Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006)] … decision makes clear, federal Medicaid law limits a state’s recovery to settlement proceeds that are shown to be properly allocable to past medical expenses. In the event of an unallocated lump-sum settlement exceeding the amount of the state’s Medicaid expenditures, as in this case, the sum certain allocable to medical expenses must be determined by way of a fair and impartial adversarial procedure that affords the Medicaid beneficiary an opportunity to rebut the statutory presumption in favor of the state that allocation of one-third of a lump sum settlement is consistent with the anti-lien provision in federal law.

The United States Court of Appeals for the Eighth Circuit has ruled that a law firm that was admittedly aware of an ERISA subrogation interest and disbursed settlement  funds from a third-party claim  to its client could not be held personally liable for failure to pay the funds to an ERISA plan.

In Treasurer, Trustees of Drury Industries, Inc. Health Care Plan v. Goding , No. 11-2885 (8th Cir. Sept. 7, 2012), Goding was hurt in a slip and fall accident.  He received medical insurance benefits from an employer-sponsored health insurance plan.  He also brought a third-party claim and settled the case. Goding’s attorneys, Casey and DeVoti, P.C. ("Casey"), were aware of the subrogation interest but distributed all of the proceeds of the settlement (after deduction for attorney’s fees and expenses) to Goding.  The Plan pursued collection efforts against Goding, but he declared bankruptcy and the obligation to the Plan was discharged.  The Plan then pursued a recovery against Casey, asserting multiple theories of recovery.

The trial judge and appellate court rejected all theories.  The ERISA claims were rejected because the Plan had the right to seek equitable remedies only and, since Casey no longer had the money, no equitable claim could be asserted against it.  The Court noted that Casey never agreed to protect the subrogation interest – it only acknowledged the existence of it, The state law claims were rejected because they were preempted by ERISA.

The United States Supreme Court will determine whether an employee benefits plan govered by ERISA is subject to equitable limitations when it demands reimbursement of benefits paid a covered employee who recovers money in personal injury and wrongful death litigation.

The case that will be reviewed is U.S. Airways, Inc. v. McCrutchen, No. 10-383 (3rd Cir. Nov. 16, 2011), ,which is discussed at length in a blog post titled "Third Circuit Says Equity Applies to Subrogation Rights Under ERISA Plan."

Here is the issue as stated in the cert petition:

The United States Court of Appeals for the Ninth Circuit has ruled that an employer-based health insurance plan did not have a right to full reimbursement from a personal injury plaintiff who recovered only a fraction of her damages from the wrongdoer.

The case is CGI v. Rose, No. 11-35127 (9th Cir. June 20, 2012).

In denying the insurer’s claim against Rose, the Court held that “parties may not by contract deprive [a court] of its power to act as a court in equity.”  In a concurring opinion, Circuit Judge Schroeder observed that it would be “manifestly unfair” to allow the plan to recoup 100% of its medical expenses. Such a result, Judge Shroeder observed, would “leav[e] the beneficiary vastly undercompensated for her actual damages” and “unjustly enrich” the ERISA plan, which had been paid premiums for the expenses it was now seeking to recoup.