Thursday, March 11, 2010

Private Insurance Reimbursement Question

I recently came across your Longaberger Practice Tip. I represent a PI Plaintiff in a case against a restaurant for an allergic reaction (mushrooms) suffered by my client. I settled the case for $30,000 (about $12,000 are meds) and meds paid by the insurance company. I have received no notice of lien/reimbursement of any sort and I am quite sure that they are not even aware there is a 3rd party claim. Do I need to notify them or can I pass the funds? Thanks.

KY Attorney

Thanks for the question and I am happy to provide some insight into the matter. While I cannot definitively say what your obligations may by I can tell you what considerations can be taken into account.

First and foremost, as a Kentucky attorney I am sure you are aware of KRS 411.118. While O'Bryan v. Hedgespeth, 892 S.W.2d 571 (Ky. 1995), found (3) to be unconstitutional, it can certainly be argued that the remaining subsections still apply including (2) which requires claimant OR their attorney to notify any parties that are believed to hold subrogation rights by certified mail. GEICO v. Winsett, 153 S.W.3d 862 (Ct. App. 2004). However it is worth noting that it has been held that this statute will not apply to an ERISA plan. Humana Health Plans, Inc. v. Powell, 603 F. Supp.2d 956 (W.D.Ky. 2009).

Second, Kentucky Rule of Professional Conduct 1.15(c) states that “in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.” The issue here is whether you have received reasonable notice of a just claim. From the facts of your question it would appear that you have not received any notice and thus you arguably have no duty to withhold for BC.

Third, the Longaberger case involved a case where there was clear notice (correspondence back and forth). The Court did not say that identifying such an obligation was the duty or responsibility of the attorney. However, when dealing with an attorney who admitted that he had notice of the plan’s interest as a first priority lien the court was quick to hold the attorney liable. That does not appear to be the case here.

Finally, the client’s interest and decision needs to be considered. While there may not be an affirmative obligation to notify for you, there are certainly going to be contractual consequences for your client, including the potential loss of future benefits and personal liability. These consequences should be discussed with the client. Ultimately the decision needs to be made by you and the client. If the client chooses not to notify it may be a good idea to obtain an informed consent agreement. If the client chooses to notify and you need more information on our lien resolution services, please let me know

Please let me know if you have any questions and I am always happy to discuss.

Michael Russell