Let’s say you are injured as a result of medical malpractice and you settle with the hospital for $50,000; a compromise that partially compensates you for your medical losses, your lost wages and the mental pain and anguish you went through. The medical bills that you incurred as a result of the hospital’s mistake totaled $75,000 and were paid for by your health insurer. You dutifully paid for your health insurance coverage via premiums for years.
After you satisfactorily settle your claim, you get a letter from your insurer saying that you must turn the entire settlement over to it to “repay” the medical bills they paid on your behalf. You object, arguing that you never agreed to anything of the sort. The insurer responds by pointing to the fine print in the mammoth policy that you received from your employer outlining your benefits. Can the insurer really take your entire settlement from you?
Until recently, the answer might have been “yes.” A contract is a contract and even though no one reads the fine print because you have no ability to renegotiate it anyway, courts have upheld such onerous provisions.
But enter Ms. Rose…..
In CGI Technologies & Solutions v. Rhonda Rose, a federal appeals court in Washington State found that the court must take into account whether such a result is equitable — i.e., is this fair?
Ms. Rose was seriously injured when her car was struck by a drunk driver. Even though her claim was worth a potential $1.75 million, she ultimately recovered $375,000. In other words, her recovery was 21.4% of her total damages. After her settlement, Ms. Rose’s insurance company said that she was required to pay them back the entire cost of her medical bills, $32,000, based on the fine print contained in her health insurance policy. Ms. Rose — not a person to mess with — refused, arguing that since she only recovered .21 on the dollar, her insurer equally must receive only a percentage of its claim. She further argued that since she did not receive anywhere near full recovery for her medical bills, neither should her insurance company. Finally, she argued that since the insurance company was benefiting from her attorney’s work, they should pay a portion of the attorneys’ fee.
After a lower court rejected, Ms. Rose’s argument, she appealed. The appeals court held that even though the insurance contract’s language entitled the insurance company to recover 100% of its payments, the lower court should have taken into account the fairness of the situation. If it found this result to be “inequitable,” the court could lower the amount the insurance company was entitled to claw back.
Moral of the story: do not accept an insurance company’s explanation simply because they claim it is correct. And do not mess with Ms. Rose!