The bottom line: you are NOT limited to simply recovering your out-of-pocket medical costs. Rather, you are likely entitled to recover the full value of the amount charged to your health insurance. This is due to a principal known as the collateral source rule, which states that a jury is only permitted to know the billed amount of the medical bills related to the injury, not the amount paid by the plaintiff. Otherwise, a negligent actor would be able to “get away” with their negligent behavior simply because the person injured happened to have health insurance.
There is another wrinkle to the equation, however. Health insurance companies have a so-called “subrogation lien” on any proceeds an injured plaintiff recovers. That means that the health insurance company has a right to be paid back for the medical bills they paid on your behalf. If they didn’t, the injured person would be getting a double benefit: all their medical bills paid by health insurance, and all their medical bills paid by the responsible party. That said, insurance companies, typically have agreements with doctors and hospitals to pay a reduced rate for medical services. So a health insurer’s “subrogation lien” will actually be an amount considerably less than the face value of the medical bills.
That’s a lot of moving parts, so let’s look at an example. Peter was driving in Nashua and was rear-ended by another driver, who was distracted by his cell phone. That driver (the “defendant,” or “tortfeasor”) had a $100,000 car insurance policy. Peter sustained a broken arm due to the accident. He was transported to the emergency room via ambulance, received x-rays and an MRI, had to wear a cast for several weeks, and underwent a course of physical therapy. Ultimately, he made a good recovery.
Luckily, Peter had a good health insurance policy. The medical bills totaled $10,000. But his total out-of-pocket cost through co-pays and deductibles was only about $1,000.
The hospital and physical therapist billed Peter’s health insurance the full amount of $10,000. However, due to contracts with the medical providers, Peter’s health insurance paid only $5,000 to satisfy those bills.
Peter decides to speak with a personal injury attorney, who agrees to handle his case on a contingency fee basis (no upfront cost to him). Although Peter’s out-of-pocket cost is only $1,000, his attorney will seek the full value of his medical bills ($10,000), plus damages for pain & suffering (and lost wages, if applicable). Peter’s attorney collects Peter’s bills and records and makes a demand on the other driver’s car insurance company. After some negotiation, the attorney settles the case (with Peter’s permission) for $25,000.
Per their contingency fee agreement, 1/3 of that $25,000 constitutes the fee for Peter’s attorney (any expenses, such as the cost of obtaining medical records, will also be deducted). Of the approximately $16,500 remaining, Peter is required to repay his health insurance company for their subrogation lien. As explained above, although the total medical bills are $10,000, his insurance company only paid $5,000, so that is the amount of their lien. Peter’s attorney is also able to negotiate with the health insurance company, and they agree to accept $3,500 to settle the lien. In sum, Peter’s take-home settlement is $13,000, despite only incurring $1,000 in out-of-pocket costs.
This example is presented for educational purposes only. Actual settlement value (and indeed, whether a case will settle or be successful at all) depends on a multitude of factors. For example, whether the other driver had car insurance, how severe the injuries were, whether the injury had permanent effects, how long the recovery was, how painful the injury was, the insurance adjuster on the other side, the amount of the health insurance lien and the ability to negotiate it, and importantly, how clear the other person’s negligence was, and whether the plaintiff was negligent in any way.
At Welts, White & Fontaine, our attorneys have decades of experience negotiating personal injury settlements. If necessary, we aren’t afraid to take cases to trial. We work with you to decide on a settlement goal based on the particular circumstances of your case.
Author: Israel F. Piedra
This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion.