|
||||||||||||||
|
|
Georgia Law Monitor OCGA § 33-24-56.1 By: Dwight A. Meredith In the 1997 session, the General Assembly enacted Senate Bill 280. That bill is now codified as OCGA § 33-24-56.1. The new code section completely revamps the area of law concerning the right of insurance companies and other providers of health benefits to recover amounts paid to their insureds when the insured has recovered damages from a third party. The effect of the new statute seems to be to limit the right of reimbursement in all personal injury cases that are resolved short of judgment and to limit the amount of reimbursement in cases that are tried to judgment. This article will first identify the persons and entities to whom the new legislation applies. Second, it will discuss the prerequisites needed to enforce a claim for reimbursements. Third, the notice provisions of the new statute will be discussed. Fourth, this article will identify the method by which insurers may compel reimbursement. Finally, other aspects of the new statute will be identified and discussed. I. To whom does the statute apply? The statute affects persons injured by the acts or omissions of third parties as well as entities that provide health care and other benefits to such injured parties. The scope of the legislation is therefore determined by the definitions of "benefit provider" and "injured person". The first, "benefit provider", is defined broadly to include:
Thus, the providers of all forms of traditional insurance are defined as benefit providers for the purpose of the statute. Those include Med Pay insurers and health insurance. By specific reference in subsection (l), worker's compensation insurers are designated as governed by a separate statutory scheme located at OCGA § 34-9-11.1. In addition to traditional insurance providers, the statute, by its own terms covers most, if not all, of the new forms of health coverage. Health Maintenance Organizations (HMO's) are benefits providers for the purpose of the statute as are Preferred Provider Organizations (PPO's). In addition to health insurance, disability and other wage replacement coverage providers are covered by the statute. The statute makes no differentiation between an organization that pays for health services directly or requires the injured party to pay for the services with the providers reimbursing the injured party. In either case, the provider of such coverage is a benefit provider for the purpose of the statute. The statute also attempts to cover "employee benefit plans." Many employee benefit plans are formed under the provisions of Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. To the extent that the General Assembly sought to govern the subrogation and/or reimbursement rights provided for under any ERISA plan, it is probably ineffective to do so. ERISA generally preempts state statutes and common law as they relate to an ERISA plan. 29 U.S.C. § 1144 (b)(2)(A). In addition, ERISA plans can not be "deemed to be an insurance company" for the purpose of applying state law. 29 U.S.C. § 1144 (b)(2)(B). The preemption of state law by ERISA is tempered, however, by the "savings clause", 29 U.S.C. § 1144 (b)(2)(A), which allows enforcement of state statutes which "directly control ... the terms of insurance contracts" and are "aimed at" the insurance industry. FMC Corp. v. Holliday, 111 S. CT. 403, 409 (1990). Thus, if the ERISA plan is purely self funded, then ERISA preempts any state regulations. FMC Corp., Supra. Similarly, if the ERISA plan is completely funded by an insurance policy, then the regulation of insurance policies contained in OCGA § 33-54-26.1 should apply. If the ERISA plan is partially self funded and partially funded by an insurance policy, then the outcome as a matter of law becomes unclear. The second definition contained in § 33-24-56.1 (a) is that of the Injured Party. For the purpose of the statute, an injured party is a person who: 1) alleges that he or she has been injured by the acts or omissions of a third party, and 2) has received benefits from a benefit provider. Based on other language in the act, it would appear that a party who "alleges" an injury need not have filed an action but, rather, must have only made a claim. II. Under what circumstances must the injured party reimburse the benefit provider? Subsection (b) of the statute identifies the conditions under which a benefit provider is entitled to recoup the benefits paid from the injured party. OCGA § 33-24-56.1 (b) provides as follows:
Thus, in order for the benefit provider to be able to require reimbursement from the injured party, the following prerequisites must be met: 1) The injured party must have recovered damages from the tortfeasor in the form of a settlement or a paid judgment; 2) The benefit provider must have paid benefits "on account of the injury" for which the injured party has been compensated by the tortfeasor. 3) No reimbursement is required, unless the amount of the recovery exceeds the total of all losses including both economic losses, such as lost wages and medical bills and non economic losses such as pain and suffering, exclusive of the losses for which reimbursement is sought. The requirement of full compensation for both economic and non-economic damages will severely limit the ability of insurers to compel reimbursement from their insureds. There are a variety of reasons for such limitation. Personal injury claims in which the injured party receives a recovery are resolved by trial or settlement. Each of those methods of resolution poses problems for the insurer in seeking reimbursement. First, it should be noted that the statute requires that compensation exceed the losses. Thus, in the case of a personal injury action tried to a jury, one could rationally argue that the recovery does not exceed the losses as one purpose of the jury was to determine the amount of loss. While the insurer, not being a party in the underlying personal injury action, may not be precluded by res judicata or collateral estoppel from challenging the amount of damages awarded, as a practical matter it is difficult to argue that the jury gave damages for an amount greater than the loss. Thus, in the case of a jury trial, the insurer may be limited in seeking reimbursement to cases in which the jury awards punitive damages. In the case of settlements of personal injury actions, two very common situations would prevent reimbursement. First, if the amount of damages exceed the liability limits of the tortfeasor's insurance and the claim settles for policy limits, then the full compensation rule would prevent reimbursement. Secondly, when liability is credibly contested by the tortfeasor, then the injured party often accepts in settlement an amount less that his or her full economic and non-economic damages to avoid the risk of an adverse finding on liability. As the statute requires that the recovery exceed the damages (without discounting for the chance of a defense verdict on liability), the ability of an insurer to successfully require reimbursement is small. The statute also severely limits the amount of reimbursement. Subsection (b) (2) explicitly reduces the reimbursement amount by the pro rata amount of attorney fees and litigation expenses. Assume health insurer has paid $30,000 in medical bills of its insured. At trial, the jury awards the full $30,000 in medical bills, $10,000 in lost wages, $110,000 in pain and suffering and $50,000 in punitive damages against the defendant, for a total recovery of $200,000. The judgment is paid. Based on the award of punitive damages, it is clear that the plaintiff recovered an amount in excess of the losses and, therefore, the full compensation rule does not prohibit reimbursement. The attorney representing the injured party receives $80,000 pursuant to a 40% contingency fee agreement. In addition, the plaintiff expended $5,000 on litigation expenses. In that hypothetical, even after satisfying the full compensation rule, the insurer would not be entitled to reimbursement of the full $30,000 in medical bills paid. Since the attorney's fees and litigation expenses (totaling $90,000) constitute 45% of the total recovery, the insurer, under subsection (b)(2) would be limited to 55% of the amount expended for a total of $16,500. As noted below, in order to enforce a reimbursement right, the insurer must file a declaratory judgment action. For small cases, it may simply not be economical to seek such reimbursement. An insurer may file an action to recover $16,500 out of $30,000 in medical bills paid but is does not seem profitable for an insurer to pay attorney fees and litigation expenses in an effort to recover $1,650 out of $3,000 in medical bills paid. Finally, the method of allocation of the damages paid, either by the trier of fact or by the settlement documents may limit the right or the ability of the insurer to receive reimbursement. Even assuming that the full compensation rule has been satisfied, Subsection (b) allows reimbursement only, " up to the amount allocated to those categories of damages in the settlement documents or judgment..." Subsection (d) provides that any allocation of damages made by the trier of fact at trial of the personal injury action is conclusively presumed to be reasonable. Those two provisions beg the question of what happens if the personal injury action is settled and the settlement documents allocate a completely unreasonable amount to the category. While Subsection (b) limits the reimbursement to the amount allocated in the settlement, the absence of any mention of settlement in Subsection (d) would imply that the insurer may challenge the allocation made in settlement documents (but not if made by the trier of fact) during the declaratory judgment action. We suspect that case law interpreting the language will be required to resolve whether or not an insurer may challenge the allocation of damages in settlement documents. The effect of the new legislation is to make the insurer's right to reimbursement ineffective either as a matter of law or in a practical sense. We suspect that one result of the enactment of OCGA 33-24-56.1 is to limit subrogation reimbursement claims to only the largest cases. III. Notice Provisions Subsections (g) (h) and (i) are concerned with notice of a claim for reimbursement and the affect of providing such notice or failing to provide such notice. Those Subsections state as follows:
Thus, subsection (g) requires that a party seeking recovery from a tortfeasor provide notice to any benefit provider. The notice must be sent by certified mail and must be provided at least ten (10) days prior to the commencement of trial or prior to the date of settlement. The notice must include the following: 1) the existence of the claim; 2) a request for information regarding the existence of any claim for reimbursement the benefit provider may claim; 3) a request for an itemization of payments for which the benefit providers claims a right of reimbursement including the names of the payees, the date of service or payment or both, and the amounts of any such payments. Once the notice required in subsection (g) is provided, the burden of preserving the right to reimbursement is on the benefit provider. To preserve its right of reimbursement after receipt of the notice, the benefit provider must provide to the injured party notice of the claim of reimbursement. If the benefit provider provides no such notice, or inadequate notice, it forfeits its right to require reimbursement. The requirements of the notice the benefit provider must provide to the injured party is quite detailed. The injured party must receive actual notice of the claim for reimbursement prior to the commencement of the trial or consummation of the settlement. If no actual notice is received before those times, the right to require reimbursement is forfeited. The notice is required to include a specific itemization of payments for which the benefit provider seeks reimbursement including the following: 1) the names of the payees; and, 2) the dates of service or payment of both. The code does allow that the notice of claimed reimbursement sent to the injured party may be supplemented so long as the supplementation confirms to the notice requirements such a time and contents. In the event that the injured party does not send the notice required by subsection (g), then the benefit provider's right to reimbursement id preserved subject to the other limitations of the code section, including, inter alia, the full compensation rule. IV. Subrogation Actions Prohibited Subsection (e) of OCGA § 33-24-56 prohibits suits by a benefit provider against the tortfeasor for recovery of the benefits paid to the injured party. In addition, the liability carrier for the alleged tortfeasor may not include as a co-payee on any settlement check or draft the name of an insurer seeking reimbursement. Thus, the only way for a benefit insurer to enforce the right of reimbursement is to bring a declaratory judgment action against the injured party pursuant to OCGA § 9-4-2. OCGA § 33-24-56(c). As noted above, the requirement that the right of reimbursement be enforced through a separate action imposes substantial costs on the benefit provider in the form of attorney's fees and litigation expenses and, as a practical matter, may prevent the seeking of reimbursement for small amounts. V. The Provisions of O.C.G.A. § 33-24-56(C) May Not Be Changed By Contract Subsection (j) anticipates that insurers may seek to avoid the consequences of the statute by inserting policy language that is contrary to the provisions of the statute. The General Assembly has prevented that tactic by enacting subsection (j) which provides as follows:
VI. Confidentiality Clauses in Settlement Agreements One potential problem with the full compensation rule involves the prevalence of confidentiality clauses in settlement agreements. If the amount of a settlement confidential and, therefore, is not known to the benefit provider, how is the benefit provider to know whether or not the injured party has received full compensation? The General Assembly solved that problem by the inclusion of subsection (k) which provides as follows:
VII. Conclusion The enactment into law of OCGA § 33-24-56.1 will greatly reduce the amount of litigation over reimbursements of medical bills over time. The full compensation rule will severely limit the number of claims for reimbursement as most settlements do not provide full compensation (as a result of either a discount for liability concerns or because the tortfeasor has insufficient liability policy limits) and most trials do not result on compensation that exceeds the damages. In addition, the statutory scheme that dictates that enforcement of a right to reimbursement be brought through a separate declaratory judgment action imposes costs on the reimbursement seeking benefit provider that may make the enforcement of a right to reimbursement uneconomical for small claims. The statute brings much needed order and clarity to the areas of subrogation and reimbursement. Dwight Meredith * * * * * * * * * *
* * * * * * * * * * 1. Langford 29th 2. Dean 31st 3. Abernathy 38th SB 280 97 SB280/AP
SENATE BILL 280
By: Senators Langford of the 29th, Dean of the 31st
and Abernathy of the 38th
A BILL TO BE ENTITLED
AN ACT
1 To amend Article 1 of Chapter 24 of Title 33 of the Official
2 Code of Georgia Annotated, relating to general provisions
3 relative to insurance generally, so as to provide for
4 definitions; to provide for reimbursement of medical
5 benefits paid to benefit providers in cases in which an
6 injured insured person has been fully compensated for all
7 economic and noneconomic damages exclusive of such
8 reimbursable benefits; to provide allocations in a
9 settlement or judgment among categories of damages; to
10 provide for reimbursement claims to be paid net of a
11 prorated share of attorney's fees and expenses of
12 litigation; to restrict setoffs for medical reimbursement in
13 payment of other benefits; to provide notice requirements;
14 to provide that a reimbursement claim may not be enforced
15 against an insured without actual notice of the claim; to
16 provide definitions; to provide for exceptions; to provide
17 an effective date; to repeal conflicting laws; and for other
18 purposes.
19 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
20 SECTION 1.
21 Article 1 of Chapter 24 of Title 33 of the Official Code of
22 Georgia Annotated, relating to general provisions relative
23 to insurance generally, is amended by adding, following Code
24 Section 33-24-56, a new Code Section 33-24-56.1 to read as
25 follows:
26 "33-24-56.1.
27 (a) As used in this Code section, the term:
28 (1) 'Benefit provider' means any insurer, health
29 maintenance organization, health benefit plan, preferred
30 provider organization, employee benefit plan, or other
31 entity which provides for payment or reimbursement of
32 health care expenses, health care services, disability
33 payments, lost wage payments, or any other benefits
-1-
1 under a policy of insurance or contract with an
2 individual or group.
3 (2) 'Injured party' means a person who alleges that he
4 or she has been injured by the acts or omissions of a
5 third party and who has received benefits from a benefit
6 provider. This term also includes the personal
7 representative of the estate of such person.
8 (b) In the event of recovery for personal injury from a
9 third party by or on behalf of a person for whom any
10 benefit provider has paid medical expenses or disability
11 benefits, the benefit provider for the person injured may
12 require reimbursement from the injured party of benefits
13 it has paid on account of the injury, up to the amount
14 allocated to those categories of damages in the settlement
15 documents or judgment, if:
16 (1) The amount of the recovery exceeds the sum of all
17 economic and noneconomic losses incurred as a result of
18 the injury, exclusive of losses for which reimbursement
19 may be sought under this Code section; and
20 (2) The amount of the reimbursement claim is reduced by
21 the pro rata amount of the attorney's fees and expenses
22 of litigation incurred by the injured party in bringing
23 the claim.
24 (c) In the settlement of any claim for personal injury,
25 under circumstances where it is claimed that the amount of
26 the recovery does not exceed the sum of all economic and
27 noneconomic losses incurred as a result of the injury, a
28 benefit provider which has paid benefits to or on behalf
29 of the injured person may seek a declaratory judgment
30 pursuant to Code Section 9-4-2 as to what extent it may
31 equitably share in said settlement. If the court
32 determines said settlement does not fully and completely
33 compensate the injured party, the benefit provider has no
34 right of reimbursement.
35 (d) In the trial of any case for personal injury submitted
36 to a court or jury, the trier of fact may allocate the
37 amounts paid among the categories of damages actually
38 sought by the plaintiff at trial, and it shall be
39 conclusively presumed that such allocation by the trier of
40 fact is reasonable.
41 (e) Subrogation for medical expenses and disability
42 payments by a benefit provider against a person at fault
-2-
1 for injury is prohibited and no defendant or liability
2 insurance carrier shall include any insurer seeking
3 reimbursement under subsection (b) of this Code section as
4 a copayee on any check or draft in payment of a settlement
5 or judgment.
6 (f) No benefit provider shall be entitled to reduce the
7 amount for which it is liable under an insured party's
8 coverage for liability, uninsured motorist, disability,
9 medical payments, or other benefits as a setoff against
10 any claim for reimbursement under subsection (b) of this
11 Code section, nor shall any benefit provider be entitled
12 to withhold or set off insurance benefits as a means of
13 enforcing a claim for reimbursement. Nothing in this
14 subsection shall be deemed to prohibit the coordination of
15 benefits between or among benefit providers.
16 (g) When a recovery for personal injury is sought from a
17 third party by or on behalf of a person for whom any
18 benefit provider has paid medical expenses or disability
19 benefits, the person asserting the claim for recovery
20 against the third party shall provide notice of the
21 existence of the claim, by certified mail unless some
22 other form of notice is agreed to by the designated
23 recipient of the notice, to any benefit provider which the
24 person asserting the claim has reason to believe has paid
25 benefits relating to the injury for which the injured
26 party seeks a recovery. This notice shall be provided no
27 later than ten days prior to the consumation (sic) of any
28 settlement or commencement of any trial unless a shorter
29 notice period is agreed to by the designated recipient of
30 the notice and shall include a request for information
31 regarding the existence of any claim by a benefit provider
32 and an itemization of payments for which the benefit
33 provider seeks reimbursement including the names of
34 payees, the dates of service or payment or both, and the
35 amounts thereof.
36 (h) If the notice required in subsection (g) of this Code
37 section is provided, a claim for reimbursement under
38 subsection (b) of this Code section is enforceable against
39 an injured party only to the extent that such person has
40 actual notice prior to the consumation (sic) of a settlement or
41 commencement of trial, by certified mail or other form of
42 notice if agreed to by the designated recipient of the
43 notice, of the claim of the benefit provider for
44 reimbursement including a specific itemization of payments
-3-
1 for which the benefit provider seeks reimbursement,
2 including the names of payees, the dates of service or
3 payment or both, and the amounts thereof. Nothing
4 contained in this subsection shall prohibit the
5 supplementation of a claim prior to the consummation of a
6 settlement or judgment, except that any supplemental
7 claims shall be subject to the notice requirements
8 contained in this subsection.
9 (i) If the notice required in subsection (g) of this Code
10 section is not provided, then subsection (h) of this Code
11 section shall not apply, and a claim for reimbursement
12 under subsection (b) of this Code section is enforceable
13 subject to the other provisions of this Code section.
14 (j) No benefit provider contracts or policies containing
15 or incorporating provisions in conflict with this Code
16 section may be issued in this state, and no policy or
17 contract provisions for subrogation or reimbursement in
18 conflict with this Code section may be enforced by a
19 benefit provider with regard to claims or injuries.
20 (k) Any settlement which is subject to this Code section
21 that contains a confidentiality provision as to any terms
22 of the settlement which are necessary to a proceeding
23 under this Code section shall be unenforceable as to the
24 disclosure of such required information.
25 (l) This Code section shall not apply to the rights of the
26 Department of Medical Assistance to recover under Article
27 7 of Chapter 4 of Title 49, nor shall it affect the
28 subrogation rights and obligations provided in Code
29 Section 34-9-11.1."
30 SECTION 2.
31 Notwithstanding the provisions of Code Section 1-3-4.1, this
32 Act shall become effective on the first day of July
33 following the approval of this Act by the Governor or its
34 becoming law without such approval.
35 SECTION 3.
36 All laws and parts of laws in conflict with this Act are
37 repealed.
Notice: Disclaimer of Attorney Client Relationship by mere use of this website. The mere reading or accessing this website does not create an attorney client relationship. Emailing the firm or using the legal forms posted does not constitute and create an attorney client relationship. If you would like to inquire about possible legal representation, please be aware that we cannot represent you until we know that doing so will not create a conflict of interest for you or our present clients. If you wish to initiate an attorney client relationship, we need the opportunity to conduct a conflict search, review your case and materials and, if appropriate in your situation, complete an engagement letter. Additionally, any information presented on this site is the opinion of the author and does not necessarily reflect the opinions of Wood & Meredith, LLP. These articles posted are not intended to provide specific legal or tax advice, but are intended only to generally familiarize the reader with the subject matter. Matters of specific legal or tax nature should be discussed with a competent attorney or tax professional specializing in that particular field or practice. All use of this website is subject to the Contract of Terms.
Copyright © 2003 Wood and Meredith, LLP. All Rights Reserved. |
|||||||||||||
Cited to by
Articles on Restitution