Here is a situation that catches many injured people off guard. You are hurt in a car accident caused by a negligent driver. You are treated at a hospital and by various doctors, and your health insurance pays those bills. Later you consult a lawyer, decide to pursue a claim against the at-fault driver, and eventually recover a settlement. Then a letter arrives from your health insurer asking you to repay some or all of what it spent on your care. In certain cases, a disability insurer may assert a similar claim. If this happens to you, a Virginia Beach car accident lawyer can explain where you stand and protect your recovery.
Our firm has represented injured clients throughout Virginia since 1985, and we handle injury cases exclusively. You can read more about our background at Shapiro, Washburn & Sharp. This is one of the more misunderstood areas of injury law, so it is worth explaining plainly.
How an Insurer Reaches Your Settlement
An insurer generally gets to your recovery in one of two ways: through the right of subrogation, or through a reimbursement provision written into your health plan documents.
Subrogation is the older concept. When an insurer reserves the right of subrogation, it may act to recover what it paid on a claim if the loss was caused by a third party. In its truest form, subrogation has the insurer step into your shoes and pursue the at-fault party directly. Reimbursement works differently. Rather than chasing the wrongdoer, the plan waits until you recover money, then asks to be repaid from your proceeds. Most health plans today rely on reimbursement.
The two are often lumped together and loosely called a lien, but that label is not quite right. A true lien arises under a law. Most health plans hold a contractual right of reimbursement, created by the plan's terms rather than by statute. The distinction matters, because a contractual right lives or dies by the language of the contract.
The ERISA Question Changes Everything
The most important question in these cases is whether a federal law called ERISA governs your health plan. When Congress passed ERISA, it reshaped health plans' rights to recover medical expenses paid because of a third party's negligence. Before ERISA, contract terms and state law governed this issue. After it, plans that qualify under the statute gained a powerful federal right of reimbursement.
That distinction produces very different outcomes. Employer-sponsored group health plans are typically ERISA plans, and a self-funded ERISA plan can enforce its reimbursement rights according to the plan's written terms, even overriding protections that state law would otherwise provide. Traditional health insurers, meaning plans not formed under ERISA, often cannot recover the medical expenses they paid, or can recover far less. Because so much depends on this, part of a Virginia Beach car accident lawyer's job is to obtain the plan documents and confirm whether a right of reimbursement exists. An insurer's demand letter is not proof of its right to be paid.
Two Doctrines That Can Reduce What You Owe
Even when a plan has a valid reimbursement right, that right is not always absolute. Two long-standing principles can reduce what an insurer collects, though a well-drafted ERISA plan can contract around them.
The first is the made-whole doctrine. In its default form, it says an insurer should not recover from your settlement until you have been fully compensated for all of your losses, including pain and suffering, lost wages, and future damages. If your recovery does not make you whole, the insurer's claim may be limited or defeated entirely. The catch is that many ERISA plans include language specifically disclaiming this doctrine.
The second is the common-fund doctrine. The logic here is simple fairness. Your attorney did the work that created the settlement fund from which the insurer now wants to be paid. Under this principle, the insurer should shoulder a proportional share of the attorney's fees and costs that produced the recovery, rather than benefiting from that work for free. If the insurer had pursued the claim itself, it would have had to pay its own lawyer. As with the made-whole rule, an ERISA plan's language can sometimes override this protection, which is one more reason the plan document must be read closely.
You Still Recover, and Often Substantially
None of this should discourage an injured person from pursuing a claim. Even when a reimbursement obligation exists, the victim typically still has a substantial recovery left after it is satisfied. That is because a personal injury claim reaches far beyond medical bills. Your damages usually include:
- Pain and suffering, including compensation for permanent effects such as disfigurement from scarring, amputation, or paralysis
- Permanent disability, meaning the loss or reduced use of a body part, whether or not it keeps you from your usual work
- Lost wages and lost earning capacity
- Your total medical expenses, not merely your out-of-pocket co-pays
We handle cases every day for clients who do owe some reimbursement, and it rarely prevents us from obtaining a full and fair recovery for most of them. In situations involving enormous medical bills and inadequate insurance from the at-fault driver, we also have legal methods to seek a reduction of a health plan's reimbursement claim.
Our results reflect that. In one matter, we secured a $600,000 settlement for a client who suffered a career-ending neck injury when another driver rear-ended his truck. Results depend on the facts of each case, but an outcome like that shows that a reimbursement obligation, handled properly, does not stand in the way of meaningful compensation.
Injured by a Negligent Driver? Contact Us Today
If you have been hurt in a car accident caused by someone else, a Virginia Beach car accident lawyer at Shapiro, Washburn & Sharp can pursue your claim, handle any reimbursement demands from your insurers, and work to maximize what ends up in your hands. Contact us at 833-997-1774 for a free consultation with one of our dedicated Virginia Beach car accident lawyers. We have offices in Virginia Beach, Portsmouth, Suffolk, Hampton, Norfolk, and Chesapeake, and we are ready to put our experience to work for you and your family.
