Justice Scalia: "Because we have an agreement which says that the insurance company gets all the money."  

(Read: "Where's the money, Lebowski?")  

Photo by jvl-/

On November 27, 2012, the United States Supreme Court heard the case of US Airways, Inc. v. McCutchen.  By "heard," I mean that the attorneys for the parties argued their positions to the Supreme Court.  This case is very important, and the Court's decision will have a great impact on personal injury cases involving health insurance plans.  Here's how.

First, what is subrogation?  If you don't know, don't feel alone, some of the Justices asked the attorneys arguing the case the same question. Subrogation is a general term for a right of reimbursement.  Subrogation is a doctrine that courts use to allocate responsibility for payment according to who should bear the cost.  In the insurance world, subrogation occurs when an insurance company makes a payment that someone else is obligated to pay, and then tries to recover its payments.  Separately, a right of reimbursement is a right to be reimbursed for payments made, from specific funds.  In personal injury cases, the fund is the settlement that the injured person recovered from the at-fault party.

Health insurance companies often insert language into the insurance plan with the intent of creating a right of reimbursement.  These insurance companies want to be reimbursed for the medical benefits that they pay from funds obtained from third parties (i.e. the at-fault driver's auto policy, or the injured person's auto policy).  This is particularly true of what are called ERISA plans. ERISA is a federal statute that governs certain employer maintained health plans.  ERISA is complicated and lengthy, and it is often the subject of Supreme Court review.  It was again in McCutchen.  The issue in McCutchen was whether a court has authority to deny an ERISA plan full reimbursement for benefits, even though the plan language provides for full reimbursement.  To put a fine point on the issue, the following is a simplified version of a factual scenario that could give rise to this issue: (1) X has health insurance through his employer's plan; (2) the plan is an ERISA plan; (3) Y drives negligently and injures X; (4) X's health insurance plan pays for some of his accident related medical treatment; (5) X obtains a settlement from Y; and (6) X's health insurance company demands its payments made, from X's settlement.

In reading this, you might be surprised to learn that such a thing is even possible.  That is, that your health insurance plan may go years collecting premiums, and then, in the event that it is obligated to pay for your medical care, recover its payments made from you.  After all, you hired a personal injury attorney, you took on the risk of obtaining a recovery from the negligent driver, you took on the cost of obtaining a recovery, and while your case was progressing, the plan sat back, collected more premiums, and took no action to make its recovery.  Then, at the end it demanded a recovery without having shared in the risk or cost that you took on in obtaining the recovery.  What's worse, the plan's recovery might deprive you of full compensation, depending on how your case turned out.  In McCutchen, it was particularly ugly as due to the limited insurance funds available, and after attorney fees, McCutchen recovered less in settlement than the demand from his health insurance policy for reimbursement.

Courts have found this result unfair, and in Washington, courts have tools to resolve the unfairness.  For example, courts in Washington rule that because the insurance company is obtaining the benefit of the injured person obtaining a recovery (i.e. reimbursement), the insurance company is required to share in the cost of obtaining the recovery, including in the injured person's attorney fees and costs.  Only fair, right?  Unfortunately, ERISA jumps in and preempts (displaces) state law, meaning that an ERISA plan can avoid state laws, like the Washington cost and fee sharing law.  If successful, the ERISA plan can then recover its payments made without sharing in the cost of recovering them.  So again, the question in McCutchen is whether the court has authority to refuse to order full reimbursement to the ERISA plan, and require the ERISA plan to share in the costs of recovery.

Why does this matter?  It all goes back to how many hands are going to reach into your settlement, and what are they allowed to take.  If the Supreme Court in McCutchen rules that courts have no authority to apply longstanding doctrines designed to produce fair results, then ERISA plans win, they obtain full dollar for dollar reimbursement, and they can deprive injured people of their settlements.  If McCutchen wins, then individuals win, they get to keep their settlements, and all the insurance companies get is the premiums that you pay every month...wait, what's wrong with that?

P.S.  The quote at the top is Justice Scalia's explanation for why the plan should get what it wants, i.e. full reimbursement.

CIVIL REMEDIES FOR CRIMES

Florida's criminal law of Trespass and Larceny with Relation to Utility Fixtures; Theft of Utility Services has received quite a bit of national attention due to a November 11, 2012 arrest under this charge by a Sarasota police officer.  The alleged facts, as described in the officer's police report, are straightforward.  My abbreviated summary of the allegations is that an officer approached a group of people appearing to be homeless, and smoking what the officer thought might be marijuana, in a park.  The officer placed one of these individuals in custody, and after observing a broken electrical outlet cover on a gazebo in the park, and hearing the individual's comment that he wanted to retrieve his phone that was plugged into the outlet, he arrested the individual for theft of utilities (i.e. the electricity that was charging his phone).  If you follow the link to the statute to read it, you will see that it really is longer than it needs to be, but it certainly does prohibit theft of utilities under certain circumstances.  Florida's code authorizes punishment for theft of utilities of a jail sentence of up to one year, and of a fine of up to $1,000.00.  However, the last report that I read indicates that the charge has been dismissed.  

My question is, what could have, and should have happened to the charge if it wasn't dismissed?  If it occurred in Washington State, at least one potential way to resolve the charge would have been a procedure commonly referred to as a compromise of misdemeanor.  In Washington State, a compromise of misdemeanor is a mechanism for resolving a misdemeanor criminal charge, with civil remedies. When it applies, it works as follows: the injured party (here, Sarasota City) appears in court and acknowledges in writing that it has received satisfaction for the injury (payment), then the court may order the proceedings discharged, and the defendant cannot be criminally charged for the same offense based on the incident.  What the injured party gets out of the deal is the primary remedy that a civil court would have awarded, compensation, what the offending party gets is to avoid the risk of a criminal conviction, and what the state gets is the accomplishment of seeing that the injured party was made whole, without bogging down the courts.  While a dismissal may have been appropriate in the Sarasota case, in many other misdemeanor cases, a compromise of misdemeanor is a win for all involved.    

PAYBACK CLAIMS

Photo by 401(k) 2012

The topic of payback claims is both simple and complicated at the same time.  First, everyone knows what it means to pay someone back.  The common understanding of paying someone back is as follows: X gives Y five dollars, later, Y gives X five dollars to pay X back, possibly, with interest. How does this simple concept apply to personal injury claims?  With much regret, we are now required to dip our toes into the shallow end of the pool on some issues relating to our health care system.  Let's take the issues in order, with simplified answers.

1.  What is health care?  I am going to give you the inside the box definition first: the maintaining and restoration of health by the treatment and prevention of disease, especially by trained and licensed professionals.  The outside definition of health care will be a nice segue to our next issue, courtesy of Urban Dictionary: a mythical beast often associated with the care of humans.  Often appears only to those who already have the necessary means to adequately take care of or pay for things.  Examples of this mythical beast include primary care doctors, orthopedists, neurologists, physical therapists, chiropractors and massage therapists.

2.  How is health care paid for?  The answer to this question is only limited by the creativity of those participating in our free enterprise system.  However, the big categories of payers are individuals (you and me), private insurers (auto insurers like PEMCO, health insurers like Aetna), and state and federal programs (Medicare, Medicaid, and TRICARE to name a few).  

3.  When do these health care payers have payback claims that relate to a personal injury case?  Our topic now begins!  Health care payers may have payback claims of some kind, including claims against the person receiving the health care, when they pay for health care for which some other person or entity is responsible.  For example, take a car accident case: X drives negligently and hits Y's vehicle, Y is injured and obtains health care, part of which Y's auto insurance company pays for, and part of which Y's health insurance company pays for.  Y resolves her personal injury case with X and obtains a settlement.  The payers, Y's auto insurance company, and Y's health insurance company, may now have claims against Y because they paid for health care for which X is responsible.  In other words, Y's insurance companies will try to recover their payments for Y's health care, from Y.  (Note: Y is not the only person against which these insurers may assert potential payback claims, others include X, and X's auto insurance company.)  The job of Y's personal injury attorney is to totally eliminate, or limit, Y's insurance companies' payback claims.

What does this all mean for the injured person?  It means that you are going to need a good personal injury attorney to continue the fight for some time after the case against the "defendant" concludes.  An agreement to pay compensation by the defendant may take care of what the defendant is interested in, closing your case, but it certainly doesn't complete what you are interested in, that being, getting as much of the funds that are intended to provide you with compensation, actually into your hands.  In my next entry, I am going to discuss what a good personal injury attorney can do on your behalf, after your case against the defendant concludes.  I will also include examples of applications of certain rules that attorneys can use on your behalf, to make all of this more definite, and concrete.

Friday, casual note!  I am just about to finish The Last Hundred Days, by Patrick McGuinness, which I really do recommend.  Full disclosure: I have always been very interested in the Cold War.

Back to School!

In life, and particularly, in the attorney life, you never know enough, and you are never done learning. Fortunately, the Washington State Bar makes sure that attorneys never stop learning, by requiring that attorneys obtain 45 credits of ongoing education each reporting period, which is every three years. Overall, most conferences are very good, and they deal with current, relevant issues that help keep attorneys on top of things.  My favorite conferences are the ones where I leave feeling rejuvenated, excited, and ready to take on new and difficult challenges.  It can be encouraging to share stories, and experiences, with other attorneys that are fighting through the same issues that you are fighting with.

The Washington State Association for Justice puts on absolutely great conferences, many of which are focused directly on the most important issues facing personal injury attorneys. Tomorrow, I will attend a conference focused on trial skills that relate to "winning in the beginning," or in other words, starting a case out right so that you win it in the end.  Not a bad way to spend a Halloween!

Do I need an attorney to settle my personal injury case?

A natural follow up to my recent entry about what happens when a personal injury case concludes, is the question of whether a person actually needs an attorney to settle a personal injury case.  The short answer to this question is "no," you do not "need" an attorney to settle your personal injury case.  As soon as you are injured in an accident that is someone else's fault, the insurance company for the person at fault will be calling you, and writing to you on a regular basis in order to settle your claim.  All you have to do is sign everything that the insurance company wants you to sign, and your case will be over. Unfortunately, what you will also be doing is placing your fate entirely in the hands of an insurance company, and you should know that your interests, and the interests of the insurance company, could not be more different. 

What does an insurance company think about when a car accident happens?  Really, only one thing, its exposure.  The insurance company's insured has done some act, in the case of a car accident, its driver may have driven too fast, failed to yield the right of way, or may have done some other kind of negligent driving.  In other kinds of cases, take an injury at a construction site, a general contractor may have failed to provide a safe job site.  No matter what the mechanism is for creating the exposure, exposure is the lens through which the insurance company will analyze your case.  What does exposure mean?  One common way to understand the term exposure is the measure of vulnerability to a loss.  In a car accident case, the insurance company's exposure is the value of your injuries, medical treatment and other damages.  Now, you might be thinking, isn't the reason that the law requires that we all have insurance, so that when I get hurt in an accident, there is a way for me to be compensated?  Whatever the right answer is to this question, the insurance company's answer to that question is, "no."  Take Allstate.  Allstate is the largest publicly traded home and auto insurer.  In an article from July 31, 2012, The Wall Street Journal reports that Allstate "spent 86.3 cents on claims and expenses for every dollar it collected in premiums across its property-casualty segment."  The goal of Allstate, and every other insurance company, is to drive down that 86.3 cent figure as low as possible, in order to maximize profits. 

How do insurance companies reduce their exposure?  Anderson Cooper reports, "its the three Ds: delay, deny and defend."  I will discuss these insurance company tactics in later entries, but for now, you should understand that that reducing exposure is bad for you, and good for the massive corporate bureaucracy.  The list of things that a good personal injury attorney can do for you at least includes: (a) conducting a thorough investigation of your case; (b) finding and preserving all of the important evidence for proving your case; (c) helping you understand the real value of your case; (d) knowing, understanding and applying the law to your advantage; and (e) everything else that falls under the big umbrella of proving your case in court.  The bottom line for you in answering the question of whether you need an attorney to settle your personal injury case, is that what you really should be asking is whether you need a good, personal injury attorney to get a fair deal. The answer to that, better question is an emphatic yes, you need a good, personal injury attorney to be treated fairly, and to obtain fair compensation for your injuries.  

What happens after a personal injury case concludes?

The conclusion of a personal injury case should be a satisfying, and an empowering time in a person’s life.  When a personal injury case concludes in the right way, and in a way that makes a person feel like they got what they were entitled to get, that they were heard, and that their life, and their injuries were taken seriously, there is no better feeling for them, or for their personal injury attorney.  It is a mixture of incredible accomplishment, and total relief.  In fact, for most personal injury attorneys, the entire focus of their careers is to learn how to accomplish great things for their clients. 

What many people do not know that have not been through a personal injury case (which is a good thing, of course) is what happens to the settlement funds at the conclusion of the case.  The answer is, a wide range of things can happen to the settlement funds, and a good, experienced personal injury attorney can really make a difference in making sure that you keep the maximum portion of your settlement.  Here is how it works, generally: first, legal fees are paid, then case expenses, then so called payback claims.  The remainder goes to you!

Let's take an example, consider a settlement of $50,000.00 for a person that was injured in a car accident, and that was represented by a personal injury attorney.  In this case, the first payment from the $50,000.00 settlement is to the injured person's attorney for 1/3 of the $50,000.00, or $16,666.67, leaving a remainder of $33,333.33.  What happens next? The attorney's expenses are paid.  Expenses refer to the attorney's costs, which vary depending on the case, but almost always include the cost of the paper used on the case, and the purchasing of medical records.  Some cases have low costs, but others have larger costs.  An example of a larger cost would be hiring an expert, such as a medical doctor, or an accident reconstructionist.  In our example, if the costs were $500.00, then the remaining funds would be $32,833.33.  Once the case expenses are paid, then, you must consider payback claims.  Payback claims are a separate, very interesting topic, but for now, consider the common situation of having to payback some part of the payments made by your insurance company for your medical treatment prior to settling your case.  (I will discuss payback claims in another, separate entry.  Sometimes, payback claims may be reduced to $0!) So, if your insurance company paid $10,000.00 for your medical treatment, it might be entitled to approximately $6,666.67 in payback.  Assuming no other payback claims, this would leave you with a net cash payout of $26,166.66.

    

Greetings!  Welcome to the blog of Dean F. Swanson!  I am a personal injury attorney, and I am also, depending on your perspective, either addicted, or in more friendly terms, totally committed to what I do.  I hope that you find this blog enjoyable and informative on some of the important things going on in personal injury law, and in the law generally.  It is my goal through this blog to provide you with important insight into the fascinating world of personal injury law.  To find out more about me, and where I work, follow this link (injuredinseattle.com).  Cheers!