July 27, 2000
SUBROGATION AND REIMBURSEMENT RIGHTS
By: Jerome Harleston, Senior Attorney
You want to know whether health insurers have a subrogation right or a right of reimbursement under Connecticut law.
The Collateral Source Rule appears to eliminate a health insurer's ability to recover payments by subrogation or reimbursement in both civil actions and settlements where the health insurance plan is fully insured and not governed by the federal Employee Retirement Income Security Act.
Claims or personal injuries that are covered by multi policies such as a health insurance policy and automobile medical payments coverage are resolved through the coordination of benefits rather than through subrogation or reimbursement.
COLLATERAL SOURCE AND THE RULE
A collateral source is any payment made to a claimant, or on his behalf, under any health or sickness insurance policy, automobile insurance policy that provides health benefits, and any other similar insurance. It does not include life insurance or any contract or agreement of any group, organization, partnership, or corporation to provide, pay for, or reimburse the costs of hospital, medical, dental, or other health care services.
The Collateral Source Rule provides in part that in any civil lawsuit where liability is admitted or determined by the trier of fact, the court is required to reduce any award by the amount of a payment made to, or on behalf of, the plaintiff by any health insurer, accident insurer that provides medical benefits, or any similar source. The amount of insurance premiums the plaintiff or his immediate family member or employer paid offsets the amount of the reduction. Unless otherwise provided by law, no insurer or any other person providing “collateral source benefits” may recover from the defendant or any other person. The prohibition applies whether the claim is resolved by settlement or judgment (CGS §§ 52-225a and 52-225c).
The phrase “unless otherwise provided by law” in CGS § 52-225c has led some health insurers to claim that their right of reimbursement is contractual and thus should be protected under the phrase. Some plaintiff's attorneys believe that the statute extinguished both contractual and common-law rights to reimbursement and that only statutory rights survive.
Although many insurance contracts use the term “subrogation” to refer to both “pure” subrogation and to an insurer's right to reimbursement, CGS § 52-225c appears to eliminate both types of recoveries and CGS 38a-336b specially eliminates subrogation against an owner of an underinsured motor vehicle.
Pure subrogation is the situation where the insurer stands in the shoes of the insured in regard to the person responsible for the accident and seeks to exercise the insured's legal right against such person. Right of reimbursement is the situation in which the insurer seeks to be reimbursed by its own insured from the proceeds of a recovery.
COORDINATION OF BENEFITS
A coordination of benefits provision in a health insurance policy is one that is intended to avoid claims payment delays and duplication of benefits when a person is covered by two or more plans providing benefits or services for medical, dental, or other care or treatment. It avoids duplication of benefits by permitting a reduction of the benefits of a plan when, by rule established in state regulation, it does not have to pay its benefits first. The regulation give guidance in determining which of multi plans is primary and which is secondary. A primary plan is one whose benefits for a person's health care coverage must be determined without taking the existence of any other plan into account. A secondary plan is one that is not primary (Conn. Agencies Reg. § 38a-480-1 seq. est.).