November 26, 2007
Last week, the Wall Street Journal’s (subscription required) front-page story explained insurance subrogation through its personal effect on Wal-mart employee, Deborah Shank.Fifty-two year old Shank worked as a night clerk at Wal-mart for years in order to care for her three sons during the day.Seven years ago while shopping at a yard sale, Shank was hit by a semi tractor-trailer, leaving her paralyzed and brain damaged for life.
Shank’s family sought legal help and eventually obtained a one million dollar settlement, which were the limits of the defendant’s liability insurance policy.With the settlement, the Shanks paid their attorneys, paid off some debts and purchased a wheelchair accessible home for Mrs. Shank.They placed the remaining $417,000.00 in a special trust to care for her at home long term.
After the settlement, Mrs. Shank’s employer, Wal-mart, approached the Shanks for reimbursement of the $470,000 the Wal-mart health care plan had paid out in medical expenses.The Wal-mart plan was self-funded and not an insurance plan.Thus, federal law under the Employment Retirement Income Security Act (ERISA) applied.Thanks to a decision last year in the United States Supreme Court, Sereboff vs. Mid Atlanta Medical Services, Inc., 126 S.Ct. 1869 (U.S. 2006), the federal law allowing for reimbursement of ERISA plans now has real teeth.Owing to the Sereboff decision, the district court and the federal appeals court reviewing the Shank case upheld Wal-mart’s right to reimbursement.The United States Supreme Court is considering the Shank case for review.
Because of these adverse decisions, Mr. Shank divorced Mrs. Shank so that she would qualify for Medicaid and Social Security as a single disabled person.She currently occupies a semi-private room in a nursing home.Without the special trust fund, the Shanks could no longer afford the round-the-clock care that Mrs. Shank needs.
This case sheds light on problems faced by people who suffer catastrophic injuries as a result of accidents.Catastrophic injuries almost always result in high dollar medical payments by medical reimbursement plans.Under the current insurance atmosphere, these plans now aggressively pursue reimbursement from the settlement proceeds.
Importantly, all plans are not entitled to reimbursement.Wal-mart operated a self-funded plan governed by the federal ERISA statute.However, many health care plans are insurance funded plans.State law governs insurance funded plans.In Georgia, the insured health care plan is subject to O.C.G.A. section 184.108.40.206 that provides for “full compensation.”This is also known as the “made whole” doctrine.Under the “made whole” doctrine, the plan is not entitled to reimbursement of medical expenses paid unless the injured person is “made whole” by the settlement.Case law effectively preempts any attempt at reimbursement as settlements are by nature reached through compromise and the injured person is never fully compensated.Also, insurance plans are not allowed to contractually exclude this “made whole” doctrine in their insurance contracts.See Duncan vs. Integon General Insurance Company, 267 Ga. 646 (1997).
However, many benefit recovery plans may seek reimbursement from settlement proceeds despite this law.When you hire a personal injury advocate, you want someone like Robert N. Katz who understands the distinction between state law and federal law plans.Also, many benefit recovery plans may try to get the plan enrollee to sign a reimbursement agreement before the plan pays for medical benefits.Effective legal counsel should advise the plan that it is required to pay benefits per the contractual agreement and cannot require new agreements in exchange for payment. The law firm of Robert N. Katz regularly helps personal injury clients avoid pestering claims by medical recovery firms.
If the injured person has a self-funded medical plan, such as the Wal-mart’s health care plan, then ERISA law will apply.However, effective counsel should ask that the plan seeking reimbursement to attest by affidavit that the plan is self-funded.Second, effective counsel should obtain a copy of the plan’s reimbursement language to ensure that it complies with ERISA law.Finally, a good personal injury attorney will understand the defenses to reimbursement provided under federal law.The ERISA statute authorizes enforcement by equitable relief.Thus, equitable defenses to reimbursement available to the injured person include:laches, clean hands, forfeiture, common fund, and even a federal made whole doctrine.
When you have a catastrophic injury claim, knowing all the interested players is a crucial element of any settlement.With tougher ERISA laws now in place and big businesses pursuing reimbursement, crafting a settlement without knowing all the interested parties can be risky. You will want an attorney to represent you who understands these complicated issues.Robert N. Katz has twenty years of experience navigating the treacherous waters of medical claim reimbursement.
Last quarter, Wal-mart earned 2.9 billion dollars.The Shank reimbursement recovery led on the front-page of last week’s Wall Street Journal.Clearly, big businesses, such as Wal-mart, are willing to risk a public relations disaster in order to recover plan benefits. This suggests that recouping medical expenses will be standard operating procedure in the future.
If you have a catastrophic injury claim, you are advised to seek legal counsel who understands the complex nature of medical reimbursement and who is willing to represent you throughout all aspects of your claim – including issues that arise after settlement.Contact the law offices of Robert N. Katz for your catastrophic injury claim.