Understanding Health Insurance Subrogation Liens in a 3rd Party Accident Case and Nevada’s “Make-Whole” Doctrine.
If you have been involved in an accident, you may understand that using your health insurance to pay for your medical bills is a huge benefit due to the offset in contracted medical pricing–the prices your medical providers must bill you are predetermined by your health insurance’s contracted pricing. The downside, however, is the fact that if it is a group health policy, it likely must be paid back from any settlement from a 3rd party.
Under Nevada Law, insurance companies must specifically exclude the “make-whole doctrine” in the policy to avoid its enforcement. The “make-whole doctrine is a general equitable principle of insurance law that prevents an insurance company from enforcing its subrogation rights before the insured has been fully reimbursed for their losses. Under the doctrine, an insured who has settled with a third-party tortfeasor is liable to the insurer-subrogee only for the excess received over the total amount of his loss. Unless it is explicitly excluded, the make-whole doctrine operates as a default rule that is read into insurance contracts. The make-whole doctrine limits a plans subrogation rights where an insured has not received compensation for his total loss, i.e., has not been made whole.” Canfora vs. Coast Hotels and Casinos, 121 Nev. 771, 778 (2005).
This law is useful when there is an issue as to comparative negligence in an accident case. Nevada currently only allows for an offset of attorney’s fees from a worker’s compensation case under the Breen Formula, a/k/a the common fund doctrine where the theory is that all parties should share some of the attorney costs for collection of suit. In a 3rd party accident case, often the victim is left without full compensation and therefore a reduction is implicit in the subrogation clause whether the insurance company knows it. Subrogation agents assume that they have a right to the whole amount until challenged with the Canfora “make-whole” doctrine. It truly is unfair for an insurance company to not pay their fair share when health insurance premiums have been paid, and the victim is left paying a premium payment and also a subrogation lien. Contact Benson & Bingham regarding any personal injury matter.