TEXAS CIVIL PRACTICE AND REMEDIES CODE § 140: HOW DOES IT APPLY TO SUBROGATION RIGHTS IN TEXAS?September 28, 2016
An issue often arising in personal injury settlements is a health insurance company’s right to subrogation. In Texas, there are two types of subrogation: those existing by contract and those in equity or law. Equitable subrogation arises in every instance in which one person has paid a debt for which another was primarily liable and which in equity should have been paid by the latter. In other words, when an insurance company pays a medical or property bill for the insured, they are entitled to be repaid from the settlement proceed. There is an increasing pattern of insurance companies seeking full repayment of the debts. However, Texas law limits their recovery.
One reason that the right of equitable subrogation is granted to an insurer is to prevent the insured from receiving a double recovery. Essentially, Texas deems it unequitable for the insured to receive his medical bills paid for from his insurance company and recover the cost of those bills from a third party. Section 140 of the Texas Civil Practice and Remedies Code applies to an issuer of a health benefit plan that provides benefits for medical or surgical expenses. The health benefit plan may be subrogated for the benefits made as a result of a personal injury to the injured party caused by the tortious conduct of a third party. This chapter only applies to private insurance plans – it specifically exempts Medicare, Medicaid, and worker’s compensation insurance.
When the injured party who is represented by an attorney settles his suit or receives a judgment, the insurance company’s share of the recovery will be the lesser of:
- One half the individuals gross recovery; or
- The total cost of benefits paid
An important note is the injured party does not have to be made whole – i.e. recovery the full price of his damages – for the insurance company to have a right to subrogation. Further, the attorney is entitled to his fees and expenses payable by the insurance company.
For example, your client had $100,000 in medical expenses and recovered $50,000. Attorney fees and expenses make up $20,000. Thus, the insurance company is entitled to $15,000 which is one-half of the recovery ($50,000) minus fees and expenses ($20,000).
Claims of subrogation rights can delay settling a case when the law is not known by the subrogation carrier or the attorneys. Insurance companies will try to recover the entire amount expended, but there are limits to their subrogation rights in Texas. Knowing how to properly calculate the subrogation formula can help ease the process in dealing with insurance companies.
The knowledgeable and experienced staff at the Amaro Law Firm are prepared to assist all of our referral partners obtain the most effective results for their clients. We have worked with firms which refer 18 wheeler wreck case, oil and gas cases, work injury cases, first party insurance cases (i.e., hail storm and windstorm), and other mass torts claims. If you have a case or cases you would like to discuss referring, you can call us at 1-(713) 352-7975 or e-mail us today.