Outside Counsel

Last year New York amended its General Obligations Law, adding section 5-335, "Limitation of non-statutory reimbursement and subrogation claims in personal injury and wrongful death actions". It provides, inter alia, that "[w]hen a plaintiff settles with one or more defendants in an action for personal injuries...malpractice, or wrongful death, it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement. By entering into any such settlement, a plaintiff shall not be deemed to have taken an action in derogation of any nonstatutory right of any benefit provider that paid or is obligated to pay those losses or expenses; nor shall a plaintiff’s entry into such settlement constitute a violation of any contract between the plaintiff and such benefit provider."

The idea is that your health insurance company shouldn't be allowed to come after your personal injury settlement to recoup the benefits it paid out (unless there is a specific statutory or contractual right to do so). In HealthNow New York, Inc. v. The State of New York (pdf file) a carrier tried to enjoin the enforcement of this GOL provision, arguing that it is precluded by ERISA. (It might be precluded by some other things too.) The Western District of New York bounced the case on jurisdictional grounds (11th Amendment-- damn!) and didn't reach the merits. It's worth mentioning for several reasons. First, it seems pretty obvious that the industry is bing unusually aggressive about this issue.  An action for injunctive and declaratory relief wouldn't have been the way I'd have suggested attacking the issue. Bring an ERISA action against some of the poor bastards who paid a health insurance premium, got hurt, and recovered some dollars would be the way I'd do it. The GOL would be raised as a defense, and the preemption issue could be argued that way. I have to think it would be less expensive. (I also wonder why this was in the Western District-- shouldn't actions against the State of New York be in the Northern District, where Albany is?).

We haven't seen the last of this question.

See also, Rink v. State of New York. Prior to the enactment of the statute the First, Second and Third Departments had held  that bringing an insurer into the pending tort litigation would create an adversarial relationship between the insurer and its insured and detrimentally complicate the litigation. They didn't allow it. The Fourth Department held that the insurer had the right to intervene in the pending tort litigation. The amendment to the GOL doesn't speak to the right of an insurer to intervene in an action-- it only applies to situations where the matter has settled. In Rink the court noted that once a tortfeasor knows or should know of an insurer's right to subrogation, the insured and the tortfeasor cannot extinguish the insurer's claim without the insurer's consent, and that the GOL amendment only applied to settlements. To the court what this meant was that whatever rights the insurer might have against its insured's prospective recovery were not affected. Because the action underlying Rink was a non-jury matter pending in the Court of Claims, the court permitted intervention to the extent of allowing the insurance company to introduce evidence of the amount of medical and health expenses it paid.  This is really a non-answer, since the circumstances were so narrow.