Colorado – House Bill 10-1168. The Colorado House has proposed a bill that would dramatically alter the subrogation landscape in the state. The bill essentially codifies the “made whole” and “common funds” doctrines which is a disturbing trend being witnessed in the courts and the legislatures throughout the country. As stated in Section 3(a):
Reimbursement or subrogation pursuant to a provision in an insurance policy, contract or benefit plan is permitted only if the injured party has first been fully compensated for all damages arising out of the claim. Any provision in a policy, contract or benefit plan allowing or requiring reimbursement or subrogation in circumstances in which the injured party has not been fully compensated is void against public policy.
The proposed Act also seeks to preclude the right of the carrier to bring their own cause of action against the tortfeasor for benefits paid to their insured. Section 6(a) provides:
A payer of benefits shall not bring a direct action for subrogation or reimbursement of benefits against a third party allegedly at fault for the injury to the injured party or an insurer providing uninsured motorist coverage.
Additionally, if an insurer obtains reimbursement of benefits paid, the insurer must apply the amount of the reimbursement as a credit against any applicable lifetime cap on benefits contained in the applicable policy or plan.
South Dakota – Senate Bill 169. A recent amendment to the Insurance Code in South Dakota looks to continue the “made whole “ activist trend in subrogation legislation. The amendment is one sentence long and provides, “No insurer under this chapter is entitled to participate in any recovery from any tortfeasor on account of bodily injury or death or damage to property unless and until it’s insured has first been made whole.” This amendment to the Insurance Code would apply to health, worker’s compensation, auto and property insurers. Due to the brevity of this proposed amendment there will be many questions left unanswered if this bill passes. The first that comes to mind is what is meant by “has first been made whole”. Such a broad use of words is open to much interpretation, much of which can be construed negatively against the insurer, which the South Dakota courts will need to interpret as time goes by if this amendment is passed.
The South Dakota amendment and Colorado bill continue the recent trend in the legislatures to limit an insurers’ right to subrogation. As with the just passed New York act and the recently tabled Ohio bill, the nations’ legislatures are becoming increasingly more active in attempting to invalidate at worst and cripple at best an insurers’ right to subrogation. Feel free to contact us for additional updates on these issues and to determine what actions you can take to help stem the recent tide of legislative enactments designed to reduce the right of subrogation.
