It would be a lot easier for those of us who defend Wal-Mart from the big box haters if they didn't confuse what is legal with what is moral. Lawyers, insurance specialists, wheelchair haters, please explain why suing cripples to get a hold of their personal injury settlements is not totally repulsive, or why Wal-Mart should not suffer a well-deserved public backlash, because it's sure not clear to me.
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28 Mar 2008 09:22 am
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Comments (71)
Sound insurance theory; disastrous public relations and disastrous employee relations.
Walmart is claiming they are simply looking out for the interests of all their workers, according to the column, by recouping those costs spent on her care that were actually recovered in the suit/settlement with the trucking company.
Somehow I don't think a poll of Walmart workers would find that they think their interests were being served by this decision.
That said, her lawyer should have seen this coming, and structured the settlement with the trucking company so that it covered something not already covered by Walmart, in order to preclude Walmart's claim.
Wal-Mart is a publicly traded company whose directors and officers are legally required to place maximization of shareholder value (within the bounds of the law) above any other "moral" considerations. You could argue that the bad P.R. from this suit is a bad business decision, but let's not pretend that simply "moral" considerations are allowed to enter into the calculus. That would be a violation of the law.
It's not her lawyer's fault: if the settlement agreement hadn't covered everything arising from the accident, the trucking company would never have agreed to it.
There is no way to preclude Walmart's claim, buddy.
The only way is to go for a bigger settlement, or not to agree to waive future settlements....
It is really the lawyer that mugged their client. You can be certain that fella got paid first.
Well, it seems like the principle of the health insurance plan recovering expenses from a court settlement makes sense. However, it strikes me that if the insurer wants to be first in line for the settlement monies, it ought to be obliged to joing (and pick up the costs) of the lawsuit. If the insurer didn't think it was worth investing the time and money in the suit, it ought not to expect any of the proceeds.
In this case, with medical expenses of nearly $500K, the settlement amount of $700K is FAR too low. But given that low settlement, it is not even close to reasonable for Walmart to grab all of it -- and of course it's absolutely TERRIBLE PR.
I do have some sympathy for Walmart in trying to provide medical coverage to a generally low-skill, low-paid workforce with higher than average medical problems and costs. But even so, this is inexcusable.
There is absolutely nothing wrong, from a legal perspective, in excecising your rights, so that it is clear that you do get the money from the settlement and then deciding NOT to option those rights.
If I win a million dollars of your money in a judgment I have to record the judgment. If I don't, it doesn't mean that the next time I win a judgment against someone else and try to recover that they can say, "but wait, you won a judgment against lady-in-a-wheelchair and didn't recover from her, so I don't have to pay!" It doesn't work that way.
I can understand for the need of a company like Walmart to pursue the case, I can not understand why they wouldn't just waive off the judgment.
And this is one of the myriad reasons I don't shop at Walmart.
The subrogation clause is in every insurance contract and it makes complete sense - whomever is paying all the medical bills should be reimbursed in a settlement - there is no logic to the insurer paying bills and the employee receiving the settlement - This is the fault of the attorney for not factoring in the past claims along with future claims and fulfilling the obligation to his/her client.
It is the lawyer's fault.
"Wal-Mart's reserves the right to recoup the medical expenses it paid for someone's treatment if the person also collects damages in an injury suit."
To the extent the damages the lawyer went for and recovered were for medical expenses they belong to Wal Mart. Should tried to structure more as pain and suffering and, perhaps, made the distinction between medical expenses incurred and future medical expenses.
Still though, stupid of Wal Mart to let this get this far, and just when they were getting good publicity for going green(er).
Christopher M:
While Wal-Mart is a publicly traded company do you really think that this PR hit won't effect their bottom line? Of course it will. While I'll never buy CD's or some other things there, I would be open to buying certain foods there(say stuff like Wheaties). Stuff like this just hardens my opinion(and many others I am sure), never to step foot in a Wal-Mart unless there is absolutely no other option. So in a way, there hard-hearted decision effects their bottom line in a way they don't like.
Looks like her lawyers took 40 percent of the settlement as a fee, in a case where liability was clear-cut. I'd start by asking the law firm to refund their fee, since they clearly failed to protect their client's rights. Sounds like the subsequent appeals are just back-filling to minimize their malpractice exposure.
That's exactly what I was getting at. The settlement should have been structured as much to pain and suffering and punitive damages as possible (although Walmart might have sued the trucking firm for medical cost reimbursement, if the trucking co. were truly and provably at fault).
It seems to me that if Walmart, via their insurance carrier, was liable for past medical expenses, they would probably also be liable for future medical expenses, as well, though maybe not nursing home care.
This is the best part:
Moreover, the victim is responsible for all legal costs in pursuing the suit.
If you win the suit, you lose the award. If you lose the suit, you're out the legal fees.
It seems to me that if WalMart wants its money back, it should file the suit.
Wal-Mart is a publicly traded company whose directors and officers are legally required to place maximization of shareholder value (within the bounds of the law) above any other "moral" considerations. You could argue that the bad P.R. from this suit is a bad business decision, but let's not pretend that simply "moral" considerations are allowed to enter into the calculus. That would be a violation of the law.
Exactly.
Remind why this is a good thing.
If their lawyer led them to believe that they were going to get to keep all or most of that settlement, the moral outrage should be directed at the lawyer.
Teachable moment: are the taxpayers to expect that the impending government-run national health care system will have none of these immoral subrogation rights?
Substance and snark. First, the substance:
It's even more complicated than you would imagine. In most states, medical insurance companies have to negotiate on the amount of the subrogation claim as a result of the a personal injury settlement (the common fund doctrine is the general basis for that). However, the Feds have complicated the picture. Plans that are covered by ERISA use "first dollar" reimbursement subrogation provisions, which means they get paid first, even if that leaves nothing for the injured party. Attorneys will usually attempt to negotiate those amounts, but have less success in ERISA plan cases. Medicaid also generally claims a "first dollar" subrogation right, as well. Finally, as one of the commenters stated earlier, its probably not Wal-Mart that makes the decision anyway, its the insurance carrier or plan administrator. It's only news if its Wal-Mart instead of some insurance company.
And now, the snark:
I thought Wal-Mart didn't have health insurance for employees, forcing those employees on the mercy of the state programs.
Teachable moment: are the taxpayers to expect that the impending government-run national health care system will have none of these immoral subrogation rights?
Teachable moment indeed: In Canada, England, France, does the government subrogate settlements?
Much as I detest WalMart, I have to agree with other commenters that the real culprit here seems to be the victim's lawyer who negotiated a woefully inadequate settlement.
At the risk of sounding completely unsympathetic, the article is written like the all-too-common NPR spot: sad, downtrodden person vs. the big, bad company. Actually, this is Law 101 - the principle of "unjust enrichment" (although you could make a compelling argument that no amount of "enrichment" would be unjust in the situation she is left in) where the injured person can't get $900K from insurance and $700K from the trucking company. The title of the article could just as easily be "Accident Victims Try To Double-dip".
It seems to me that if WalMart wants its money back, it should file the suit.
They probably could have, even without their consent or knowledge.
I note the article doesn't say whether the attorney discussed this issue with them or if they knew it could happen and were speculating that it wouldn't...
TakeFlight, the trucking company is liable for damages they caused. (Or at least the trucker in question) Likewise, the insurance company is liable for anything they agreed to pay in case of an emergency. Since the funds are from different sources, it's not any more unjust than it would be to make the same bet with 2 different bookies, and collect from both. I don't think double dipping is an accurate description.
However, the trick is 'what they agreed to pay'. They didn't agree to pay medical expenses if she received an award for damages. For PR purposes the insurance company probably should avoid even having those terms.
It is grossly unfair on the surface, but the reality is it is not just done by Walmart, but everybody.
Now there's a rationale to rationalize immoral things if I ever heard one. Ranks right up there with "Hey, Johnny and Fran jumped off a bridge, let's go too!"
This country used to have a heart. Now it has abrogation clauses, lawyer triple speak...and supporters of such head-above-heart cruelty.
WalMart: if for no reason than preservation of your public image, do the only right thing here: give the poor lady a break, for God's sake.
Hearing (or seeing, here) people say "I detest Wal-Mart" or "...I will never set foot in Wal-Mart..." is a surreal experience for me. I mean, I can very well understand the sentiment like "Wal-Mart sells inferior products I don't have any use for no matter what price they are". Or, "I'd rather pay more for good service than spend half an hour looking for someone capable of helping me in Wal-Mart". Or even "I'd rather not shop in a store smelling of stale popcorn and sporting floors of questionable cleanliness". But, not patronizing a store because of political stances of its owners, or particulars of contractual relationship between the store and its employees? I mean, it would make a bit of sense if it was specifically triggered by some particular incident, such as the one Megan referred to. But in general, as matter of principle? Makes me dizzy... apparently some people don't have enough problems in their lives as it is.
Or maybe the reason I don't understand it is that our local Wal-Marts (in the outer northern suburbs of Dallas) are quite comparable with any other supermarket in the area. Actually, cleaner and nicer than some others. As long as you're only buying pre-packaged goods there, you should be OK :-D
TakeFlight, the trucking company is liable for damages they caused. (Or at least the trucker in question) Likewise, the insurance company is liable for anything they agreed to pay in case of an emergency. Since the funds are from different sources, it's not any more unjust than it would be to make the same bet with 2 different bookies, and collect from both. I don't think double dipping is an accurate description.
Well, it's more like having six insurance policies and having them all pay you in full in the event of a claim. Common Law doesn't like this because you cannot "make money" off of a claim or lawsuit for a damage - it is supposed to be a remedy.
the trucking company is liable for damages they caused
But via subrogation, they are liable to the insurance company up to the point of however much the claim the insurance company paid out because the insurer doesn't just have the liabilities of the insured, they also get the benefit of the insured's rights and remedies against a third party (the trucking company). After that, anything else goes to the insured but in this case there isn't anything else.
Since the funds are from different sources, it's not any more unjust than it would be to make the same bet with 2 different bookies, and collect from both. I don't think double dipping is an accurate description.
That's how I read it as well. Does anyone else know if this is correct?
I am not sure the point of this was: Walmart doesn't have the right to do this. Yes, the law states that this seems to be a right they have. The question is whether it is ethical or not.
I think one of the main issues I would question is the nature of employer/employee contracts. This is not the only contract stipulation that is simply not well considered, there have also been issues in the past about things like mandatory arbitration agreements. The simple truth is that even boiler-plate contracts have several moral concerns themselves:
1) Major corporations and employers have expensive astute legal teams drafting and constructing these contracts, where as a person applying for a job at Walmart rarely (and by rarely I mean never) has legal representation. There is always going to be a distinct disadvantage to the employee, particularly given that these are non-negotiable contracts.
2) For the most part employers have a monopoly advantage of being the sole or primary means of subsistence in America. Bare with me, I know this is a strange use of the term monopoly so let me explain. At the point it is necessary to get a job (again, for the most part) in order to sustain any semblance of a quality of life, employers will always have a distinct leverage and advantage over their employees. This is allows companies to create non-negotiable contract restraints,particularly employers that hire in bulk. The disadvantage here lies with the less educated and experienced in the populace as these are the people less likely to have a diversity of employment options or to be aware of the nuances of contractual relations.
Now I am sure the marketeers reading this either a) stopped after the first two lines I wrote or b) are screaming about competition in their head. For the people who chose a) I am very sad indeed, to the point of crying; as for b) this holds up to neither logical or empirical scrutiny. There is no advantage to competing in regard to these sorts of contractual stipulations because they come in to play for such a small percentage of employees. Of course those who are hurt by them feel them in the worst sorts of ways. Should there be a shortfall of employees companies would be much more likely to offer increases in base salaries than change these sorts of policies. The truth is that employees never really get to make the cost-benefit analysis because of the paucity of choice available. Empirically it is pretty clear that major employers all have fairly standard boiler-plate corporate contracts and rarely compete regard these sorts of stipulations. For instance, when Circuit City added mandatory arbitration to their contracts, instead using that as a point of distinction most competitors added such stipulations as well. Why? Because they easily could, it is basically de facto collaboration.
3) The larger truth here is that the static status of the law is not the only moral boundary corporations have or ought to have. The truth is that marketeers like to declaim the law as a boundary so that they don't need to consider other basic bounds. But at the point corporations have the advantage of being considered individual entities for the purpose of legal proceedings (a distinction that has markedly changed the landscape of America, and not necessarily for the best) they ought to consider themselves individual entities in a moral and pragmatic sense as well.
Walmart has its upsides and downsides, much as the free-market system in which we believe. But in a system that confers distinct and powerful advantages upon those with more resources simply based on the nature of the system it is incumbent upon us to recognize that those with those greater resources may just have extralegal obligations to those without.
What is the moral principle at work here? Injured people deserve all the money they can squeeze out of any available deep pocket?
Make it less emotional than a severely disabled person: suppose a wealthy arsonist burns down my house. My insurance company steps up and promptly pays in full to rebuild it; I now have my house back. Why on Earth should I then get a windfall of several hundred thousand dollars from the arsonist under the label "construction costs," when my personal construction costs are actually zero?
I should get hotel expenses, pain and suffering, and punitives, but the construction costs should go to the party that actually paid them: my insurer.
If you win the suit, you lose the award. If you lose the suit, you're out the legal fees
This was almost certainly taken on contingency, so if she had lost the suit, she would not have paid any legal fees.
And while I can see the point of the people who say her lawyer structured the settlement improperly, in all probability the trucking company insisted on calling the majority of the settlement "medical expenses" precisely because they didn't want to get sued by WalMart's insurer. Their lawyer was trying to prevent paying twice for the same accident.
I agree this was bad PR (and probably bad lawyering) but I fail to see any moral principle that allows for double-dipping.
The article makes it look like pursuing subrogations rights is new, but misses one detail - the US government has been doing this for as long as I can remember.
Several years ago, I had a case involving a former soldier who was injured while on active duty and treated at the government's expense. I can tell you that the government was absolutely ruthless about getting its medical expenses paid first.
Rob,
It is only double-dipping because of the technicalities of the settlement structure, one I am sure this employee only knew tangentially. Given that pretty much everyone involved in this dynamic had considerable more power and information than the employee there is almost certainly a moral claim here.
I think there is an interesting point tangential to what Jonathan said above. While contract enforcement is part of what [even a] libertarian state is supposed to be doing, I don't see why it should be an absolute contract enforcement. There could clearly be wide areas which the state should not be enforcing: one good example is voluntary slavery/bondage contracts. Thus I don't see anything particularly wrong with this sequence:
1. Employers as a group adopt a particular structure of employment contracts that conveys significant benefits to them in a small minority of cases.
2. Employees as a group do not effectively oppose this because the risk of adverse consequences is small.
3. After realizing this, state chooses not to enforce the particular contract provisions.
This is certainly government regulation, but an upside-down one. The employers are left free to employ whatever legitimate private mechanisms of enforcing the contract provisions (violence of course excluded). What might they be? Blacklisting those few who violates the contract provisions? Maybe. As a result, the costs and benefits of these provisions will be re-evaluated by both sides, with some unintended consequences, no doubt. Still, I don't see anything particularly unlibertarian about this scenario.
In fact, it seems that selectivity in which contractual provisions are state-enforced and which are not might be the [less intrusive] equivalent of regulations in a libertarian state...
t is only double-dipping because of the technicalities of the settlement structure, one I am sure this employee only knew tangentially.
1) If she didn't understand, then her lawyer screwed up. It's my job to know what clients need to know, and make sure that they know it.
2) How hard is it to understand that you're being paid (by the trucking company) for "medical expenses" that you didn't actually pay? Really, does it take 3 years of law school and 20 years of practice to grasp that point?
3) As I pointed out, there is good reason to think that the trucking company insisted on this settlement structure. This may have been a signal to the people involved (especially her lawyer) that the structure had legal and practical significance.
You can certainly make a case for victims of bad lawyers deserving money. But it's harder to make a case for that money coming from a health insurer which evidently did exactly what it is supposed to: pay for her health care.
Since the funds are from different sources, it's not any more unjust than it would be to make the same bet with 2 different bookies, and collect from both. I don't think double dipping is an accurate description.
The problem with this analogy is that betting systems are designed to give you a profit if you win (and the prospect of profit is the only thing that entices you to bet), whereas the tort system and the health insurance system are both designed not to provide a profit opportunity but simply to prevent loss. If the insurance people did not have a right of subrogation, then the amount of actual damages sustained by the tort victim would simply be reduced by exactly the amount the insurer had paid out. Either way, the tort victim/insured is not entitled to a net profit.
The main problem in the case under discussion appears to be that the tort claim against the trucking company was settled for an amount much lower than the tort victim's actual (past + future) damages. That can happen for any number of reasons, such as when the victim was partly at fault, or when there are practical problems proving the case, or when the plaintiff really needs money right now and the defendant takes advantage of that to negotiate favorable terms, or when the plaintiff's lawyer is an idiot.
It appears that the applicable rules here were: (1) the victim could opt to just take the insurance money for whatever was covered and not sue anybody; or (2) the victim could sue the trucking company for full damages, including damages not covered by insurance, but would come out ahead only if the damage award was more than sufficient to repay the insurer and cover the costs of the suit. The victim here apparently settled the lawsuit for less money than was needed to come out ahead.
It's not clear whether the plaintiff's lawyer was at fault for allowing the victim to settle for too little, or for failing to warn the victim about the insurer's subrogation rights, or whether perhaps the victim got all the lawsuit was really worth with full knowledge of the insurer's subrogation rights and is now simply trying to negotiate a better deal by shaming WalMart. But I don't see how subrogation can be thought immoral in principle under the "two bookies" analogy.
Subrogation is legal and ethical. A contract clause in her insurance, which she accepted, is that her actual damages are covered by the medical plan, and any funds collected from third parties are to be deducted from that coverage. The only loose thread in this story is the issue of who should have filed the initial damages suit, and who should have invested the time to see it through. If her attorney did not make her or her husband aware of subrogation, then he/she is guilty of malpractice. If insurance companies are in the practice of letting the injured parties bring these suits only to swoop in and claim the proceeds, then that is something worthwhile to discuss about how to fix.
Of course, one can certainly argue that the bad PR costs more than is compensated for by the recovered funds.
First, I'd be really surprised if Wal-Mart doesn't self-insure. Most companies that size do, and the insurance company acts as a plan administrator. Employees do not notice the difference, but this would give Wal-Mart the right to determine whether to sue, not the insurance company.
This does seem like some bad lawyering on the plaintiff's side, and the real problem is that the plaintiff probably thought the medical proceeds were to cover the cost of care going forward (hence the formation of the trust), which her health insurance will not cover, as opposed to the costs that have already been paid by the insurer.
I would imagine that under a single-payer system any settlement would deal strictly with pain and suffering and lost income damages, not medical expenses, so there would be no issue of unjust enrichment.
It's not clear whether the plaintiff's lawyer was at fault for allowing the victim to settle for too little, or for failing to warn the victim about the insurer's subrogation rights, or whether perhaps the victim got all the lawsuit was really worth with full knowledge of the insurer's subrogation rights and is now simply trying to negotiate a better deal by shaming WalMart.
The article does say "It also sent Mr. Shank several notices that he was to inform Wal-Mart's health plan before he settled any suit." I bet the notices said more than that.
Side bar: I wonder why the people and the insurance company wouldn't sue as co-plaintiffs...certainly the insurance company's legal team would have more power to assert against the trucking company...?
Another vote for legal malpractice on the part of her richly compensated lawyer, but no fault on the part of the insurer, which evidently did exactly what it was supposed to do.
I do have to wonder why there isn't a statute of limitations on such claims, though. If her accident was seven years ago and and money was obtained through a settlement which we may presume took 12-18 months(?) at most to work out, how is it that Wal-Mart's insurer only took up the cause two years ago?
This is the one element that seems clearly unjust about this. I would be more sympathetic to the insurer's position if they had been involved in the subrogration proceedings from the beginning. Being able to enter the fray more than three years after the fact is the part that rankles.
James Lawrence wrote: This country used to have a heart.
Yes, James, it's always easy to have a heart with someone else's half million bucks. How about you leave the Appeal to Emotion out of this?
anonymouse,
It's always easy to have a half a million bucks when you have a legal system structure to protect the interests of individuals with the half million bucks. Given that there are inherent structural advantages in the system for those with resources isn't it incumbent upon these same entities to act with a greater deal of moral care?
And if you disagree with the underlying premise of my argument (structural advantages) please tell me why.
There's an article by Colby Cosh today on how much more good Wal-Mart did after Katrina, compared to, say, the Federal, New Orleans, and Louisiana State Governments.
Shortly before Hurricane Katrina made landfall on the U.S. Gulf Coast on the morning of Aug. 29, 2005, the chief executive officer of Wal-Mart, Lee Scott, gathered his subordinates and ordered a memorandum sent to every single regional and store manager in the imperiled area. His words were not especially exalted, but they ought to be mounted and framed on the wall of every chain retailer -- and remembered as American business's answer to the pre-battle oratory of George S. Patton or Henry V."A lot of you are going to have to make decisions above your level," was Scott's message to his people. "Make the best decision that you can with the information that's available to you at the time, and above all, do the right thing."
This extraordinary delegation of authority -- essentially promising unlimited support for the decision-making of employees who were earning, in many cases, less than $100,000 a year -- saved countless lives in the ensuing chaos. The results are recounted in a new paper on the disaster written by Steven Horwitz, an Austrian-school economist at St. Lawrence University in New York. While the Federal Emergency Management Agency fumbled about, doing almost as much to prevent essential supplies from reaching Louisiana and Mississippi as it could to facilitate it, Wal-Mart managers performed feats of heroism. In Kenner, La., an employee crashed a forklift through a warehouse door to get water for a nursing home. A Marrero, La., store served as a barracks for cops whose homes had been submerged. In Waveland, Miss., an assistant manager who could not reach her superiors had a bulldozer driven through the store to retrieve disaster necessities for community use, and broke into a locked pharmacy closet to obtain medicine for the local hospital.[In Wal-Mart We Trust Colby Cosh, National Post, March 28, 2008]
Jonathan wrote: It's always easy to have a half a million bucks when you have a legal system structure to protect the interests of individuals with the half million bucks. Given that there are inherent structural advantages in the system for those with resources isn't it incumbent upon these same entities to act with a greater deal of moral care?
I can't make heads or tails out of this. What are you trying to say?
To recap in simpler terms: Tina had an insurance policy with John. Tom caused an accident that injured Tina. Tina filed an insurance claim with John under the terms of the insurance contract; John paid out the claim. Tina and her lawyer then went to Tom, who was liable for creating her medical costs, and settled for her medical costs. And now John has gone back to Tina and requested that the medical costs be paid back to John under the terms of the insurance contract.
Now, I think it is somewhat obnoxious that John can come back to Tina more than three years after the fact and enforce this provision, and I believe I said as much. But whining about "having a heart" doesn't make that half million materialize out of thin air, and I expect James Lawrence won't be offering to pay it himself, so...where does it come from?
The subrogation clause is in every insurance contract and it makes complete sense - whomever is paying all the medical bills should be reimbursed in a settlement - there is no logic to the insurer paying bills and the employee receiving the settlement - This is the fault of the attorney for not factoring in the past claims along with future claims and fulfilling the obligation to his/her client.Posted by Paul S
This is vile.
This happened to me in an auto accident; the other guy was completely at fault (Missouri is a no-fault state), my car was totaled, and the book value was less than $2,000. Which meant that I wasn't going to get anything comparable for less than $4,000.
So I took this guy to court - and won - and was awarded damages that explicitly had nothing to do with covering the cost of getting another car.
So State Farm stepped in grabbed lousy $1,700 back. Now, mind you, I'd already talked with the insurance rep, asked why I couldn't get more, asked why this guy couldn't be sued (he was 87 at the time, had been involved in a few other accidents already, and lost his license that summer because he entered highway on an off-ramp.) The rep shrugged, said that if I wanted to sue, it was up to me, but that the company didn't feel that 'it was in their interest' to pursue the matter.
He most specifically did not mention anything about the company claiming a portion of the damages if I won.
People like him - and the superiors who set that policy - should be horsewhipped. In public.
And I am not joking.
Now, why isn't it that these people are not required by law to tell you that they will step in and recover the money they paid out if you sue the other driver? What they did, in my book, is completely unethical.
My point was that this was a settlement and deal structure to advantage all the parties but for the injured individual. You can say let's blame the lawyer or from where should the money come, but the point here is simple: we live in a system that plays to the advantages of wealthier, larger party. Simply stating that under the rules of such a system the corporation owes no due to the individual is not a moral claim.
My point is that not only was this bad PR on the part of Walmart, it was an unethical decision. This sort of approach is probably less than favored amongst readers of Megan's blog (though to be fair I really love her economic analysis, but yes I am something of what she might call a statist), but the truth is Walmart largely gets more value out these workers than they compensate them for in the first place. I would argue that Walmart should have more ethical practices in general, but in this particular case I think it owes an obligation to the employee to eat these medical costs instead of taking it from their settlement based on a contractual provision the employee was almost certainly unaware of (and even if aware, unaware of the consequences).
James Lawrence said: This country used to have a heart. Now it has abrogation clauses, lawyer triple speak...and supporters of such head-above-heart cruelty.
When was this, exactly? Provide references.
Because I think you'll find that this, in fact, is simply false.
(And "follow your heart!" is not exactly a great policy for insurance companies. Because, you see, they must remain solvent. Further, they must even be profitable, if only because that way they can provide the lowest possible rate for all their clients.
Maximising payout and not recouping double-dipping recovery from awards from the injury-causing party simply means everyone else pays more for insurance.
But lowering everyone's insurance bill, thus letting them save more or provide for their families better, that's not "heart", it's "cruelty"?
Well, only if you don't think it through.)
Jonathan: Of farkin' course Wal-Mart gets "more value out of workers than they compensate them for". If tehy didn't, there would be no profit. And no profit means no capital growth and complete economic stagnation because of a lack of investment.
The basis of the market economy is not "compensation exactly equal to value", it's "compensation freely agreed to by both parties in a competitive environment".
That is what has made the entire market-based world vastly wealthier, healthier, and better off these past few hundred years. "All benefits from labor to the workers" makes everyone poor and unemployed, very rapidly.
So I took this guy to court - and won - and was awarded damages that explicitly had nothing to do with covering the cost of getting another car. So State Farm stepped in grabbed lousy $1,700 back.
SOV, it looks like your case is similar to the Wal Mart one in that neither injured party really got what was felt to be adequate compensation for their loss. But I think the fact that some form of subrogation occurred is really secondary. Also, whether your damages award was intended to cover the cost of getting another car seems as irrelevant as what you choose to spend your insurance settlement on.
Insurance is nothing more than the transfer of the risk of a loss. If your loss is mitigated by a favorable lawsuit award, then your loss is indeed lessened, or (optimistically) removed. Thus, the insurance company cannot (should not) really compensate you for this any more than it should for a loss you haven't ever incurred.
No loss = no insurance payout.
But I do agree it's lame for them to let you do all the legal work for them...
Ahh Sigivald,
The ever popular everyone's better off argument... one empirically impossible to really prove. The rich certainly are better off. But you miss the point of my argument. I challenge "freely agreed to" because of both imperfect information and a lack of choices as compared to the prospect of not being able to survive. Thus employers have far greater leverage, information and influence, so the concept of "free" is only in reference to direct physical coercion, if that.
Make it less emotional than a severely disabled person: suppose a wealthy arsonist burns down my house. My insurance company steps up and promptly pays in full to rebuild it; I now have my house back. Why on Earth should I then get a windfall of several hundred thousand dollars from the arsonist under the label "construction costs," when my personal construction costs are actually zero?
That isn't really analagous. Had she been injured by a FedEx truck, with the capacity to pay a large settlement, it would be accurate. FedEx could pay to "make her whole" (I believe that's how the lawyers put it), including paying the amount that her medical insurance had already spent.
Instead, she was injured by a small contractor with limited insurance and assets who could not generate a settlement that would provide remedy for her injuries. Then Walmart took that.
The analogy would be if a poor arsonist burned down your house. Your homeowners insurance put you up in a motel for 2 weeks for $1000. Then, when the arsonist gave you the last $800 he had, your insurance company took it.
You can say let's blame the lawyer or from where should the money come, but the point here is simple: we live in a system that plays to the advantages of wealthier, larger party.
As has every human system from the dawn of time. I can't say that this observation is especially novel or helpful.
So let's move on to more helpful areas of discussion. My information may be outdated, and if so, perhaps Rob Lyman or one of the other legal eagles hanging about these parts can offer correction. But IIRC, for any given auto accident where the other party is indisputably at fault, a typical take-it-to-court judgement will pretty much always return, without requiring any elaborate maneuvering, about three times the medical expenses. The attorney will require about a third of the winnings for his/her work.
This woman suffered medical bills to the tune of a half million, so in theory, if the couple had gone to court rather than taking the settlement, they would have walked away with $1.5M instead of half that much, the attorney would have taken his $500k cut, the insurer would subrogated their $500k, and the couple would have been left with...$500k for the trust fund. So why did they go with the $700k settlement, why did the attorney allow it all to be earmarked as medical, why didn't the attorney warn them that they would be obligated to pay all or most of the difference back to the insurer, and why did the attorney feel entitle to take a standard cut after such gross incompetence?
Without additional data to fill in the many blanks that are left in this story, it would appear that they were victims of legal malpractice, and their grievance is with the incompetent and/or dishonest attorney, not the insurer.
There are two things that are bugging me more than Walmart's actions. Ostensibly, Walmart (or the insurer) is using that money to pay for medical services for other workers.
The first thing that bugs me is the huge commission her lawyer got. It looks like 44%. Was it really that risky a case to pusue? Was it a lot of work? I can't see where this is justified.
Second, the driver's company had $1 million in insurance, plus other assets, but the total of the settlements was $900,000 ($700k to her, 200K to her husband). Obviously, that $900,000 was nowhere near enough to remedy the dmages. Why didn't they get $1,000,000 plus the total assets of the company?
I had heard that it was actually the insurance company, not Wal-Mart, that was pursuing this. But in either case, it seems like it would have been better for all involved (except, of course, the party actually liable for the injuries) to get involved in the case as early as possible, rather than swooping in at the end. It would have been both humane and economical, and we wouldn't need to be having this discussion.
Jonathan,
From the looks of it, WalMart wasn't a party to the settlement. So to the extent that it was structured advantageously to them, it has nothing to do with their informational or wealth advantage.
Again, their lawyer looks like he screwed up; although in fairness may be not; it's not like your average journalist understands this sort of thing.
SoV,
If State Farm took the money, then there was probably a clause in your contract saying they would. Which you or (especially) your lawyer should have known about. I agree with you and others, though, that it's pretty lame to refuse to sue on your behalf but take your money if you sue and win.
Njorl,
They might have an excessive fees claim against the lawyer, or they might not. If he has paid experts and done discovery and fought off summary judgment motions, then 44% (which includes both expenses and legal fees) is probably reasonable, but if he just fired off a letter and took the first offer, then it's pretty plainly unreasonable.
And they didn't get the $1 million plus total assets of the company because it wasn't judgment, it was a settlement. The had to take a lower amount to avoid the risk of trial. The company probably wanted to stay in business, so surrendering their assets wasn't on the table.
So why isn't informing the victim that the company will attach some of the winnings if the victim successfully sues?
To be honest, when I first went to my lawyer, he suggested that we sue for other damages, given the nature of the driver and accident. Going after just another couple of thou wasn't worth it. And by the time our case went to trial, the defendent had already lost his license for driving at speeds in excess of 70 mph in the wrong direction on the highway.
So what I was awarded had nothing to do with recovering damages to my car. But State Farm got their cut anyway. _Without_ notifying me first.
When I went to my lawyer, he sighed, said yeah, they do that, and that if I took them to court, and was persitent, I could probably get it back, but that it could take literally years, and that they would do everything they could to make it as expensive as possible for me, just because if I were to win, this might encourage others to sue as well, but he was willing to take the case . . . but not on commission.
Now, my guess is, this strategy is deliberately pursued by the company, and not a matter of 'the agent must have forgot'. After all, if I am informed of what will happen, the odds are that I probably won't go to court, and the insurance company will be that money that's been awarded to me. But if they don't inform me, and I do go to court, why, they just might get that money back.
But I don't see how this can possibly be legal, or at the least, challenged as to its legality. Has this come up before? Is it now a matter of settled case law?
So why isn't informing the victim that the company will attach some of the winnings if the victim successfully sues?
If you mean to ask "Why shouldn't they be required to tell you in advance?", well there's no reason they shouldn't; it won't hurt anyone. I think they should be required appear as intervenors myself, so that their right to the winnings can, if necessary, be adjudicated right then and there. That's not the rule, apparently, but I haven't handled this kind of case and the subrogation cases we read in law school involved the insurer running the lawsuit.
But since it's in your contract, you kinda do get notice, at least of the "You should have read your contract" kind. Given how routine and ordinary subrogation is in insurance law, any lawyer should be telling his personal-injury clients this right up front.
So what I was awarded had nothing to do with recovering damages to my car. But State Farm got their cut anyway. _Without_ notifying me first.
This sounds exceedingly, wildly shady. Normally the check would be made out to your lawyer, whom one would expect to ignore pleas from State Farm and fork it all over to you. How did they get it, exactly? Did the other guy's insurer pay them directly, with no adjudication? If that's what they did, I have to agree, I doubt the legality of that move, but I can't comment definitively.
Yes, that's exactly what happened. Why would my lawyer have gotten the check? He certainly didn't take the first case on commission. And he definitely wasn't going to go up against SF without payment up front either.
That's not the rule, apparently, but I haven't handled this kind of case and the subrogation cases we read in law school involved the insurer running the lawsuit.
Like I said, there's a potential downside to informing someone that, while they won't take the offending party to court, they will definitely have their hand out for the winnings, if any: they might decide that suing the other guy is just too much bother, and the insurance company won't get back any of the money it's already handed out.
Why would my lawyer have gotten the check?
It's standard practice because even lawyers paid on an hourly basis get stiffed by their clients (those on contingency, even more so). Once you've won or lost, the motivation to pay is kinda gone, and it sucks to have to sue your clients for an unpaid bill. So, usually a lawyer will ask for a check from the opposing party to themselves, then keep their fees and send the rest along to the client. Any good program for new lawyers will tell them to do this, and often the other side will just do it automatically (professional courtesy, don't you know).
I do think that Old Guy's insurer did something of very questionable legality and ethics. They risked having you sue them on the judgment (and win!) Any personal-injury lawyers out there want to comment?
Here is an interesting point of information.
In my state, it is not required to carry uninsured / under insured motorist coverage.
Now, suppose you have excellent health coverage (which you pay dearly for), and very good collision coverage.
If there is going to be a claim against an uninsured / under insured motorist, it will almost certainly involve something more than property damage (to your own car and contents), but personal injury to your vehicle's occupants.
Well, under the subrogation rules, the medical insurance company gets first dibs on this, up to the limit of your policy (usually no more than $500,000.)
$500,000 in medical claims runs up in the blink of an eye.
It is highly there would be anything else to cover anything after the medical insurance company is done with you.
So kiss the potential claims for lost wages, uncovered medical expenses, etc. goodbye. If you were to actually try to collect on these, there is the standard 30%+ of contingency fees involved or hourly billings that can add up quickly. So you are basically wasting your time unless the guilty party is extremely wealthy.
Under such circumstances, that uninsured / under insured coverage is basically insuring your medical insurance company.
On this logic, I declined uninsured / underinsured motorist coverage.
Every insurance executive / agent I ran this argument by agreed it is a good thing to do.
This is especially the case if you have disability insurance.
Well, it's more like having six insurance policies and having them all pay you in full in the event of a claim. Common Law doesn't like this because you cannot "make money" off of a claim or lawsuit for a damage - it is supposed to be a remedy.
This is absolutely wrong. In general, at common law it is irrelevant whether either party has insurance. The logic is that if I'm negligent and hurt you, I shouldn't benefit from the foresight you showed by buying insurance. So if I cause you $1m of harm, and half that is covered by your insurance, at common law I would be liable to you for $1m.
Now, most insurance policies will have a subrogation clause that will give the insurance company a right to recover the $500,000 it paid out. But that is a contractual right your insurance company has which is independent of your right to sue me for negligent. If you had six insurances policies, none of which had subrogation clauses, I would still be liable for $1m, even though you would end up better off because of the accident.
To frame the issue economically for Megan's benefit:
Subrogation is part of the price you pay for your insurance policy. Without subrogation as part of the contract, the fees you'd have to pay would be a lot higher because, in that case, the insurance company would necessarily be out-of-pocket for 100% of any legitimate claim.
Start insisting that insurers forgo their subrogation rights when the insured sympathetic, and some sympathetic folks will end up a little richer. But the rest of us will see the cost of our insurance skyrocket.
Now, why isn't it that these people are not required by law to tell you that they will step in and recover the money they paid out if you sue the other driver?Try reading your contract with the insurance company.
It strikes me that the lawyer should have sent a letter to the insurance company asking "do you wish to participate in this lawsuit?". And if the family had sued only for the victims ongoing maintainence costs, would the insurance company have been able to claim the judgement to cover other costs?
kiss the potential claims for lost wages, uncovered medical expenses, etc. goodbye
if the family had sued only for the victims ongoing maintainence costs, would the insurance company have been able to claim the judgement to cover other costs?
In principle, the insurance company should only get to claim that part of the settlement or judgment that applies to the claim they paid. So lost wages, uncovered expenses, ongoing maintenance, etc should be untouchable. In practice 1) I suppose the subrogation clause could try to claim parts which are designated for other purposes to avoid clever structuring, and 2) the other side is going to want to designate damages as being whatever your insurance company paid, because they don't want to face a second lawsuit from the insurer.
In addition, from SoV's telling, there may also be some sleazy practices at work.
As a lawyer who does some personal injury cases, I know a little bit about these issues. One important point to realize that the subrogation rights of the insurance companies (health or casualty) is contractual - you agreed to it when you obtained the insurance. The insurance company is under no obligation to remind you of the contact terms when there's a claim. By virtue of signing the insurance contract, you are already obligated to reimburse the insurance company.
The lawyer is under a difference obligation. If the insurance company notifies the lawyer of the subrogation lien, in most states, the lawyer is obligated to withhold the lien amount from the settlement proceeds and pay that over to the insurance company. If they don't, the law firm can be personally liable for the amount of the lien.
In addition, several, if not most, states have statutory provisions allowing hospitals and medical providers the ability to assert liens for the cost of their services, above and beyond what the insurance company has paid. Often these statutes are extremely complex - check out the Medical Providers Lien Act in Illinois for an example.
And D, I hate to disagree, but I tell clients to always buy as much uninsured and underinsured coverage as they can - often it's the only coverage available to pay for medical costs, both for the costs not covered by insurance and for what ever recovery may be left.
Finally, a good PI lawyer will usually be able to negotiate the amount of the lien, especially if the accident and injuries were severe. I've had a number of cases where we've been able to reduce a $300,000+ insurance lien to one third of the available coverage. We've also waived all fees on a number of cases, in order to ensure that our clients receive something from the available coverage.
As a lawyer who does some personal injury cases, I know a little bit about these issues. One important point to realize that the subrogation rights of the insurance companies (health or casualty) is contractual - you agreed to it when you obtained the insurance. The insurance company is under no obligation to remind you of the contact terms when there's a claim. By virtue of signing the insurance contract, you are already obligated to reimburse the insurance company.
Would you be against a law that would require the insurance companies to inform a client who decides to go a ahead with a lawsuit the company will not pursue that they will attach a claim to any judgment?
As I said, I was surprised that the SF could get money from lost work, emotional distress, and punitive damages(well, I didn't get that either, the guy had already lost his license.)
As a side issue, does anybody have any data on whether or not younger drivers insure older drivers? My best friend who lives in Florida says that high rates are a problem there, and he blames the Fogeys for this.
the lawyer is obligated to withhold the lien amount from the settlement proceeds and pay that over to the insurance company.
Well, stuff it in the trust account until the dispute is settled, anyway.
The question I have for you, gripping hand, is about the ability of insurance companies to assert liens on damages not related to the insurance. If somebody pays me for, say, personal injuries and medical bills, can my car insurance company claim a piece of that for the collision damage? In the highly theoretical world of law-school hypos, the answer is "no." How about in the real world?
Is it really too much to ask that people actually read the contracts before they sign or complain that no one read it to them, or gave them the gist of it.
Well, yes, I think it can be fairly said that a lot of people who read those contracts will say they got burned. The problem is, reading the contract, and understanding what it says are two different things, and this difference cannot be put solely to a lack o f intelligence or laziness on the part of the signer.
Case in point: I don't mean to toot my own horn, but if you want to know about de Rham cohomologies on an oriented manifold, Nullstellensatz, radicals of ideals, etc., I'm your guy.
But when we finally sat down to review the contract for purchasing our house . . . oh my. There was a lot of it I didn't understand, and we ended up having some professionals going over it with us to explain the details and what they meant. Iow, jargon is jargon, and specialized language usage is specialized language usage, and to complain that someone shouldn't have signed something they didn't fully understand is specious, especially when familiar words sound right in the context, and mean something similar to what is really being stated.
So, I ask again: would you be against a law that required an insurance company to spell out the consequences of undertaking a lawsuit that the company itself refused to pursue. To me, this is just a 'plain language statute' issue. I don't mind so much if SF flat-out tells me before-hand that they will take part of my judgment should I win one against the person I'm filing against. I mind a great deal that they take their cut and informing me this is the case _afterwards_.
I get the impression that you're against such a law, but I could be wrong.
SOV,
So, what standard of "plain language" do you set? Not everyone has the same level of reading comprehension- some can't read at all. If something has jargon in it that you don't understand, then don't sign until you understand it. Why is this so difficult for people to do? If you want an explanation of a contract clause's meaning, then you have ask for it. Surely you know whether or not you understand something, don't you? And if you don't, only the clairvoyant can determine this if you don't speak up.
From what you wrote about your case, I suspect your lawyer let you down by not explaining the possible consequences of winning a judgment against the other driver. You wrote that you sued for other damages like "lost wages" and "emotional distress", but I am guessing that the settlement also included actual damages as well (you notably did not include the amount you were rewarded in your description), and it is this portion that the insurance company claimed.
You're ducking the question. And also, it looks as if you were saying it's my own fault, _despite_ reading the fine print carefully.
I'm supposed to deduce from the contract that when they lay claim to recovery of auto damages, that means they can tap _any_ award money? Really? Who'd a thunk?
As I said, I suspect that insurance companies find it to their advantage _not_ to inform their clients that this is the case; to do so would be to lower the possibility that they could recover some of the money they've paid out.
I'd also like to say that this is either the writings of someone who just doesn't live in the real world, or is trying for some rhetorical points:
Surely you know whether or not you understand something, don't you? And if you don't, only the clairvoyant can determine this if you don't speak up.
Or as Will Rogers said, "It isn't what we don't know that gives us trouble, it's what we know that ain't so."
Uh, no Yancey, it's quite possible to read something and think you understand it, but really not have a clue as to what's going on. It's also quite possible to write in such a way as to inculcate a deliberate misunderstanding.
Really, this isn't a radical notion, and 'plain language' statutes have been introduced before. Precisely because the wording was designed to obfuscate rather than clarify.
SOV,
If your insurance policy didn't state that the insurance company had a right to subrogation, then you have a point, but that is almost certainly not the case despite your assertion that you read it closely, which I no longer believe anyway. I suspect you didn't read it and made a mistake not taking this into account when you filed your suit (your lawyer seem to be aware of it on some level according to the way you told your story). As is your usual wont, you are trying to disown some of your mistakes.
If you want to convince people you were wronged, I would suggest you post up the text of your insurance policy in place at that time and a cleansed version of the text of your settlement. There are so many holes in the story you told that I simply don't believe some of the things you have claimed.
Sigh. I don't believe you when you say 'you don't believe me now.' This is just another tactic that you seem to feel is perfectly justified in the service of a higher cause.
You've also not answered the question, but I took your measure a long time ago.
SoV,
Most unusually, I take your side here. I would go one better than you: the insurance company shouldn't have subrogation rights unless it participates in the lawsuit.
I still maintain, however, that any lawyer not mentioning this issue right upfront is doing his clients a major disservice.
So, I ask again: would you be against a law that required an insurance company to spell out the consequences of undertaking a lawsuit that the company itself refused to pursue. To me, this is just a 'plain language statute' issue. I don't mind so much if SF flat-out tells me before-hand that they will take part of my judgment should I win one against the person I'm filing against. I mind a great deal that they take their cut and informing me this is the case _afterwards_.
I wonder how common this really is. I certainly don't see any reason why this couldn't be required to be spelled out more plainly. But I also have to agree that any lawyer that undertakes a suit without informing his client of the possible ramifications is doing a great disservice.
Incidentally, the only reason why I am aware of subrogation is because of renting aircraft. When you rent a plane, you are typically "covered" as an additional named-insured on the owner's policy. But you can betcha that if you had any hand in bending their aluminum, that insurance company will be coming after you! And if you think repairing your car is expensive.... This is what "renter pilot" insurance is designed to cover.
Despite the fact that this is often plainly spelled out in rental agreements, I'd bet that most pilots remain either unaware or don't see it as a likely-enough problem. To combat this, some owners require renters to maintain their own renter's insurance.
The subrogation clause is completely normal, and it's not wrong. All it says is that the insured cannot collect twice. If a defective washing machine burns your house down you don't get to collect for one new house from your insurance company and a second new house from Maytag - your insurance company pays you and then goes after Maytag for reimbursement (although they'll file the suit in your name - juries somehow don't like insurance companies).
What's odd about the Walmart case isn't that the medical insurance expects to be reimbursed out of the settlement, but that they weren't doing the heavy lifting in the suit in the first place. That left the victim to hire some contingency-fee shark, who settled rather low (IMO, and assuming there wasn't some reason the victim was partially at fault) and took an oversized chunk of the settlement. I think that if the insurance company had pursued the case, they'd have received their reimbursement less legal costs of under $100K, and the victim would have got the rest for pain and suffering. Instead, everyone except the lawyer is coming up short.
I would agree with a rule change concerning subrogation when the insurer doesn't participate in the lawsuit: either they should be cut out of the award or settlement, or they should pay some or all of the legal fees.
Megan,
I would completely agree with you that it is bad optics.
However, I beg to differ on how to interpret this.
The fact is that subrogation clause (where insurance companies, particularly medical insurance, have the first dibs on any financial settlement, is a standard operating practice and law in, I believe, all states.
It is grossly unfair on the surface, but the reality is it is not just done by Walmart, but everybody.
I also think it is somewhat unfair to say this is being done by Walmart, when it is being done by their insurance administrator (BCBS?).
What you have a very good case for is to ask whether such a subrogation clause should be outlawed, and if not, then the monies will have to be recovered in the form of higher insurance premiums for everyone.
Respectfully,
D
Posted by D | March 28, 2008 9:36 AM