Rep. Four Price
Legislation establishing a procedure to allocate the proceeds of a contractual subrogation claim will be debated in the House tomorrow. HB 1869 by Rep. Four Price (R-Amarillo) provides that a subrogee health insurer may recover the lesser of: (1) one-third of the covered individual’s (the injured party) total recovery; or (2) or the total cost of benefits paid by subrogee as a direct result of the tortious conduct of the third party. The bill responds to the Texas Supreme Court’s 2010 decision in Fortis Benefits v. Cantu, in which Court held that a subrogee gets “first money” before the injured party is compensated. For all practical purposes the decision abrogated the traditional “made whole” doctrine that subordinated the subrogee’s contractual claim to the injured party’s right to a full recovery for medical damages. The bill is designed to encourage settlements on the basis that there is little incentive in current law for a claimant to settle a claim that will subject to a first-money lien that may absorb 100% of the recovery. In this scenario, if an injured party sees no chance for an adequate recovery, the party may either refuse to settle and take his or her chances in a jury trial, or decline to pursue the claim at all. Because the subrogation interest itself is contingent on the injured party’s recovery to begin with, neither of these alternatives are good for the claimant, the subrogee, or the civil justice system. TCJL supports HB 1869 as a fair and reasonable way to preserve subrogation rights while encouraging settlements.
