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Recent statutory changes in New York may facilitate settlements. The General Obligations Law was amended to restrict the rights of health insurance carriers and other benefit providers to recover from the proceeds of settlements of personal injury, malpractice and wrongful death actions.

NEW YORK CREATES A ROAD BLOCK TO LIENS AND SUBROGATION CLAIMS BY HEALTH INSURANCE CARRIERS

As many insurance companies and self-insured defendants know, a sizeable lien by a health insurance carrier may present an obstacle to a successful settlement. The New York Courts have for years allowed health insurance carriers and other lien holders to assert a claim against a settlement by its insured for reimbursement of the medical expenses paid by the carrier.

The courts also frowned on agreements between the parties to frustrate the lienholders' rights. The Court of Appeals held, "Once an insurer has paid a claim and the tortfeasor knows or should have known that a right to subrogation exists, the wrongdoer and the insured cannot agree to terminate the insurer's claim without its consent and such an agreement cannot be asserted as a defense to the insurer's cause of action." Fasso v. Doerr, 12 N.Y.3d 80, 88 (2009)

Health insurance carriers therefore held substantial power to affect settlements. A defendant would have very little incentive to settle a case if it could remain potentially liable to the carrier, and plaintiffs would often see the carrier's lien swallow up a large portion, and occasionally all of the settlement.

Recently, the N.Y. legislature acted to remedy this situation. The newly created GOL §5-335(a), provides:

§5-335. Limitation of non statutory reimbursement and subrogation claims in personal injury and wrongful death actions.

(a) When a plaintiff settles with one or more defendants in an action for personal injuries, medical, dental, or podiatric 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 non statutory 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.

Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider.

Significantly, this provision does not apply to statutory rights of reimbursement such as those for medicare and worker's compensation.

It also does not apply to judgments. An insurance carrier still retains its right to subrogation and reimbursement where a case proceeds to judgment. This should create a substantial incentive for plaintiff's to settle their cases, and defense counsel should exploit this.

Please feel free to contact us if you have any questions.