Posted on 08/24/2022
A subrogation claim arises if you receive medical treatment through your own health insurance and obtain a personal injury settlement from the third party who injured you. In these circumstances, you almost certainly have to reimburse your own health insurance company for the cost of the medical treatment provided to you through your health insurance plan.
Subrogation is a common law doctrine based on the equity that permits an insurer to take the place of the insured to pursue recovery from third-party tortfeasors responsible for the insured’s loss. As the party who pays the insured’s loss, the insurer (the subrogee) “stands in the shoes” of the insured (the subrogor), and succeeds in the insured’s rights and remedies. A subrogation right may be expressly created by contract or statute.
Most commonly categorized as “conventional” or “contractual” subrogation, “legal” or “equitable” subrogation, and statutory subrogation. “Conventional” or “contractual” subrogation rights arise from an express or implied agreement between the insured and insurer. Equitable subrogation is a legal fiction, which permits a party that satisfies another’s obligation to recover from the party primarily liable for the extinguished obligation. The right of “legal” or “equitable” subrogation arose as a “creature of equity” and “is enforced solely for the purpose of accomplishing the ends of substantial justice.” Statutory subrogation, as one might expect, occurs by a right created by statute.
Under the Hospital Lien Act (“HLA” and California Civ.Code (“CC”), §§ 3045. 1–3045.6), a hospital that treats a patient injured by a third-party tortfeasor may assert a lien against any judgment, settlement, or compromise recovered by that patient from the tortfeasor in the amount of its “reasonable and necessary charges” (CC§ 3045.1). Hospital subrogation liens are common types of subrogation lien in personal injury cases. Under the HLA, any hospital “which furnishes emergency and ongoing medical or other services to any person injured because of an accident or negligent or wrongful act … shall, if the person has a claim against another for damages on account of his or her injuries, have a lien upon the damages recovered, or to be recovered, by the person … to the extent of the amount of the reasonable and necessary charges of the hospital and any hospital-affiliated health facility….” (CC §§ 3045). “The lien shall apply whether the damages are recovered, or are to be recovered, by judgment, settlement, or compromise.” (CC §3045.2.).
The hospital’s recovery on the lien is, however, limited “to an amount which could be satisfied from 50 percent of the” amount recovered by the injured person from the tortfeasor. To assert the lien, the hospital need not provide notice of the lien to the injured person. But the lien “shall not be effective unless a written notice is mailed to each alleged tortfeasor known to the hospital. If the tortfeasor pays the injured person “after the receipt of the notice as provided by CC section 3045.3, without paying to the” hospital “the amount of its lien claimed in the notice, or so much thereof as can be satisfied out of 50 percent of the money due under any final judgment, compromise, or settlement agreement,” then the tortfeasor shall be liable to the hospital for the amount of its lien claimed in the notice which the hospital was entitled to receive as payment for medical care and services rendered to the injured person.
Enacted in 2000, California Civil Code section 3040, among other things, limits the amount that certain medical care providers, such as health maintenance organizations, may collect on a lien “for the recovery of money paid or payable to or on behalf of an enrollee or insured for health care services provided under a health care service plan contract or a disability insurance policy.” (§ 3040 subd. (a).) For example, in common personal injury cases, an insured injured party will receive medical treatment through their health insurance. Under the terms of the health insurance contract, the health insurance company is entitled to be reimbursed if there is a third party settlement, verdict or judgment which is the case if there is a successful resolution to a personal injury claim. Such entities broadly include health maintenance organizations (HMOs), health insurance companies including preferred provider organizations (PPOs), and other medical groups.
Therefore, if you treat on your health insurance due to injuries sustained by someone one else’s negligence and obtain a settlement or verdict arising out of your personal injury case, you may be required by your health insurance contract to pay back your health care provider under California law.
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