It is common for medical bills incurred in Florida personal injury cases to be paid by health insurance. Some people injured in accidents also receive private disability insurance benefits. Most health and disability insurance policies afford insurance carriers subrogation or reimbursement rights against the insured who has recovered all or part of the insurance payments from a tortfeasor (the at-fault party). This means that the carrier has the right to be repaid some or all of the insurance benefits paid out.
How much must be repaid depends in large measure on the law governing the relationship between the insurer and insured. Self-funded employer policies are governed by ERISA. Non-ERISA policies and fully-insured employer policies fall under the authority of section 768.76(4), Florida Statutes. This blog addresses reimbursement under the Florida Statute.
Section 768.76(4) reads as follows:
A provider of collateral sources that has a right of subrogation or reimbursement that has complied with this section shall have a right of reimbursement from a claimant to whom it has provided collateral sources if such claimant has recovered all or part of such collateral sources from a tortfeasor. Such provider’s right of reimbursement shall be limited to the actual amount of collateral sources recovered by the claimant from a tortfeasor, minus its pro rata share of costs and attorney’s fees incurred by the claimant in recovering such collateral sources from the tortfeasor. In determining the provider’s pro rata share of those costs and attorney’s fees, the provider shall have deducted from its recovery a percentage amount equal to the percentage of the judgment or settlement which is for costs and attorney’s fees.
Most statutes require some sort of judicial intervention to establish their parameters. In Magsipoc v. Larsen, 639 So.2d 1038 (Fla. 5th DCA 1994), the application of section (4) was considered on appeal in a wrongful death case involving the repayment of health insurance benefits to the carrier.
Before dying after nearly drowning in a pool, a young child in the Magsipoc case received extensive medical care in an effort to save her life. Health insurance paid all of the medical expenses and costs (totaling $472,000). Thereafter, the child’s parents sued the pool owners on behalf of themselves and their daughter’s estate.
After mediation, the case settled for $150,000. Boston Mutual, the health insurance company, filed a lien against the settlement. The parents filed a motion for equitable distribution with the circuit court to determine how much Boston Mutual would be allowed to recover.
Evidence was presented at the hearing on the motion. The court decided that the case against the pool owner was a weak one. It also found that had there been no problem with liability or recovery (the pool owners were essentially judgment proof, and they had a homeowners insurance policy with a $300,000 maximum coverage), the total damages would have been $1,500,000, which included the $472,000 in medical expenses and costs paid by Boston Mutual. (An expert, likely an experienced personal injury lawyer, testified that the non-economic damages for the death of a young child in Florida (in the early 1990s) ranged from $900,000 to $1,000,000.)
Based on these findings the court applied 768.76(4) to award Boston Mutual a prorated share of the settlement in the amount of $26,588.77. The court made the following calculations:
$472,000.00 = 31% of $1,500,000 (total potential damages)
$ 84,500.00 = net recovery after reducing the settlement ($150,000) by attorney’s fees and costs ($65,500)
$ 26,588.77 = 31% of the net recovery
Absent from the trial court’s analysis was any determination of what portion of the settlement, which failed to designate any sum as specifically attributable to medical costs and expenses, fairly represented the recovery of medical expenses and costs.
The parents appealed, arguing that Boston Mutual did not have subrogation rights in the net settlement because they did not recover the full amount of their losses. It was their position that until they recovered $1,028,000, the amount determined by the court to be damages exclusive of medical expenses and costs, Boston Mutual should not be reimbursed. Boston Mutual argued that section 768.76 entitled them to prorata subrogation even though the parents did not recover the total amount of their non-economic damages.
The appellate court framed the issue before it as follows:
[W]hether the Florida Legislature, by promulgating section 768.76, intended to create a right of prorata subrogation for collateral source providers when the injured party has not received the full amount of other kinds of damages required to make it whole and whether, under the circumstances of this case, some of the recovery can be deemed recovery of medical costs and expenses.
The court began its analysis by pointing to the general rule in Florida:
[N]o common law right of subrogation exists for an indemnitor who has fully paid its required sums under an insurance contract to its insured, where the insured has not recovered the total amount of damages, and cannot be said to have been “made whole.” [Rubio v. Rubio, 452 So.2d 130 (Fla. 2d DCA 1984); Florida Farm Bureau Ins. Co. v. Martin, 377 So.2d 827 (Fla. 1st DCA 1979)]. If a full recovery is had by the insured, any additional payments to the insured above and beyond its total loss, may be viewed as a “double recovery,” thus “equitably” entitling the insurer to subrogation. [See Collins v. Wilcott, 578 So.2d 742 (Fla. 5th DCA 1991); Connecticut General Life Insurance v. Dyess, 569 So.2d 1293 (Fla. 5th DCA 1990), rev. denied, 581 So.2d 1307 (Fla. 1991); Decespedes v. Prudence Mutual Casualty Co. of Chicago, 193 So.2d 224 (Fla. 3d DCA 1966), affirmed, 202 So.2d 561 (Fla. 1967); Smith v. Manville Forest Products Corporation, 521 So.2d 772 (La. App. 1988).] In order to alter that common law rule, a statute must be clear and express. [See Sand Key Associates, Ltd. v. Board of Trustees of Internal Imp. Trust Fund of State of Florida, 458 So.2d 369 (Fla. 2d DCA 1984), approved, 512 So.2d 934 (Fla. 1987); Capps v. Klebs, 178 Ind. App. 293, 382 N.E.2d 947 (3d Dist. 1978).]
Since the health insurance policy gave Boston Mutual subrogation rights “to the extent of any and all payments made for such injury,” yet the settlement failed to designate any sum as specifically attributable to medical costs and expenses, the court had to decide, for the first time in Florida — i.e., this was a case of first impression — if the health insurance carrier was entitled to any recovery, and, if it was, how was the amount to be determined. It recognized its quandary by distinguishing undifferentiated settlements, such as the one in the case before it, from verdicts and settlements in which the various damage elements are memorialized, explaining that the differentiated form simplified lien determinations. (CAVEAT: differentiated settlement agreements can scrutinized by a court to determine the reasonableness of the allocations. Parties cannot be unreasonable with the numbers in order to avoid liens.)
The court noted that Boston Mutual had intervened in the underlying wrongful death suit. In theory this would have allowed Boston Mutual to hold up the settlement until it was satisfied with the portion of the recovery allocated to medical costs and expenses. As this would mandate litigation rather than settlement of lawsuits, the court dismissed this alternative.
In its place, the appellate court devised a procedure whereby the trial court would determine what portion “if any” of the settlement “is fairly allocable to medical costs and expenses in the equitable distribution proceeding.” Having arrived at this conclusion, the appellate court reversed and remanded (i.e., sent the case back to the lower court for further proceedings) the trial court’s ruling.
- Read the insurance contract for reimbursement and subrogation language. If the contract contains valid reimbursement and subrogation language, do not ignore the carrier’s rights. Also consider if subrogation is covered by a statute. For example, Medicare and Medicaid have statutory subrogation rights.
- A differentiated verdict answers the distribution questions. An undifferentiated verdict does not. However, with an undifferentiated verdict the full amount of the loss does not have to be determined. That has been done by the verdict. What remains to be determined with the undifferentiated verdict is the allocation for the type of benefits covered by insurance.
- An agreed upon differentiated settlement resolves the allocation issue. It does not answer the full-amount-of-the-loss question. If not resolved by agreement, a trial court must make the determination.
Once the full amount of the recovery and the allocations are determined, distribution is determined in accordance with the following formula:
- Reduce the gross recovery by attorney’s fees and costs to establish the net recovery. In Magsipoc, the net recovery was $84,500.
- Determine the percentage (%) of the net recovery to the full damages. In Magsipoc, the trial court decided full damages was $1,500,000, thus making the percentage 5.6% ($84,500 divided by $1,500,000).
- The carrier’s reimbursement is that percentage (established in part 2 above) of the recovery allocated to the damages paid by insurance. If, for example, the Magsipoc trial judge decided that $50,000 was the portion of the $150,000 settlement allocated to medical expenses and costs, Boston Mutual would recover $2,800 (5.6% of $50,000).
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Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.
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