You’ve made the case to the health insurance contact that your client’s plan is not governed by ERISA but is a state-regulated plan protected by the state’s anti-subrogation code at O.C.G.A. § 33-24-56.1. Now you can argue your client was not made whole, and the health insurer will kindly close their file and go away.
Not so fast. Making the argument your client was not made whole or “fully compensated” pursuant to this code section is not always an easy task -- especially when your client’s settle for less than the liability insurance policy limits.
Under § 33-24-56.1, state-regulated insurance has no right to reimbursement for treatments paid for by the plan when the “… amount of the recovery exceeds the sum of all economic and noneconomic losses incurred as a result of the injury, exclusive of losses for which reimbursement is sought.” So after you deduct the amount of the client’s medical specials (the losses for which reimbursement may be sought), the remaining recovery proceeds must still be greater than the client's damages for the client to be considered "made whole." Otherwise, there is no right to reimbursement, per the statute.
This is a tough standard for the health insurer to overcome, especially in low-liability-limits cases, or claims where medical specials make up a large portion of the damages.
However, in higher limits cases where your client settles for less than limits, it’s a more difficult argument. Health insurers are more likely to remain adamant your client was made whole and consequently less likely to go away.
Beware of Thompson v. Fed Express
An older federal case in Georgia held that because a claimant accepted full policy limits of a third-party settlement in exchange for a general release, the patient could not argue that he was not made whole. Thompson v. Fed Express, 809 F. Supp. 950, 954 (M.D. Ga. 1992). You will sometimes see health insurers cite to this case to claim an absolute right to reimbursement where a claimant accepts policy limits. This is in direct conflict with Smith v. Life Ins. of N. Amer., 466, F. Supp. 2d 1275, 1289 (N.D. Ga. 2006). In Smith, the Court specifically states the argument does not apply to reimbursements based on Georgia's anti-subrogation code ( § 33-24-56.1), and recognized there are many reasons why a claimant would settle for less than policy limits knowing it would not fully compensate him.
Reasons to Settle for Less than Limits
There are a number of reasons you can cite to the insurance company for why your client chose to settle the case for less than policy limits. In Smith, the Court noted concerns such as questionable liability or concerns about the tortfeasor's solvency. Add to this list any number of other basic reasons: avoiding the risk of a jury trial; need for cash now rather than wait for trial; insurance coverage issues; comparative negligence and assumption of the risk arguments; coverage issues; or expenses. Basically, restate all the reasons for settlement you expressed to your client in your letter to the health insurer.
Remember that even if you are unsuccessful in arguing your client was not made whole, the health insurer must offset the reimbursement claim by pro-rata share of attorneys fees and expenses, per the statute. This will sometimes result in shrinking the reimbursement claim enough that it will dissuade the health insurer from further efforts to seek reimbursement.
Ben Price is a partner at the law firm of Jarrett & Price in Savannah, Georgia. The information on this site is intended for Plaintiff's lawyers only. The content on this site does not establish an attorney-client relationship and in no way should be considered legal advice.
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