Winning Arguments Supporting the “Made Whole” Doctrine
by John F. Fay
Your injured client has health insurance. During litigation against the tort-feasor, your client’s health insurer pays some of your client’s medical expenses arising from the injury. Later, when you settle with the tort-feasor, the health insurer wants 100% reimbursement of those medical expenses.
You believe, however, that the settlement has not made your client “whole.” Accordingly, you argue that the insurer has no subrogation rights in the settlement monies. Alternatively, you may want to reimburse the insurer, but argue it needs to take less than a 100% reimbursement, i.e., in fairness, the insurer should pay its share of the client’s attorney’s fees and costs incurred in prosecuting the client’s claim. But the insurer refuses, alleging it has a right of full subrogation under the policy provisions.
In these instances, you have a host of legal and equitable arguments in your favor. A typical insurer that has claimed subrogation for 100% reimbursement is the State of Utah’s Public Employees Health Plan (PEHP). I use the PEHP as an example in this article, but most of the arguments you can use against PEHP are substantially operative against most other insurers making such subrogation demands. These arguments can be used both as a sword and as a shield.
The following arguments are best supported when your client has been left with uncompensated damages, even though you managed to settle with the tort-feasor for the policy limits of his insurance – i.e., your client was not made whole. Of course, there are usually good reasons when a client did not get the policy limit, e.g., your client needed the settlement monies quickly due to financial stress, comparative fault issues, or other pressing concerns. So, this point is not determinative. The following arguments stand formidable by themselves.
PETITION LACKS STANDING
Oftentimes, PEHP will bring a petition demanding full reimbursement against your client in a proceeding before the Utah State Retirement Board. In response, you point out that, pursuant to Utah Code section 49-20-105, PEHP’s petition is well beyond the “purpose” of the Utah State Retirement and Insurance Benefit Act that created the Board. To wit: “The purpose of this chapter is to provide a mechanism for covered employers to provide covered individuals with group health, dental, medical, disability, life insurance,…and other programs requested by the state,…in the most efficient and economical manner.”
Seeking to enforce subrogation rights is not “providing insurance” as encompassed by Title 49.
Additionally, the Board’s “Adjudicative Hearing Procedures” states: “The executive director…may file a petition for a declaratory order determining the applicability of a statute, rule or order of the board…” The issue in contest, however, is the question of the validity of PEHP’s subrogation rights against the client’s “made whole” rights. The subrogation rights are found in a provision in the Master Policy. But under the Board’s “Hearing Procedures,” this dispute does not involve determining the applicability of a statute, rule or order. See Utah Code Ann. §63-45b-21(1) for the same direct argument. So you object that the petition addresses an issue completely outside the governing statute and the Board’s own procedures.
Another argument is that Utah Code section §49-11-301(3) says the assets of the fund are for the exclusive benefit of the members and “may not be diverted or appropriated for any purpose other than that permitted under this title.” Title 49 is silent on subrogation rights, save that a monthly disability payment “shall be reduced” for monies received by way of judgment or settlement from a third party liable for the disability. Utah Code Ann. §49-21-402. The powerful argument is that if the legislature saw fit to incorporate subrogation reimbursement provisions under a disability payment from the monies recovered from a liable third party, it could have inserted a like provision under the member claim’s payment procedures but did not do so. Thus, you argue the legislature’s failure to incorporate such a provision was intentional, i.e., that each term used in a statute is used “advisedly” and since the legislature “could have added” language but did not, it was intentional. Harmon City v. Nielson & Senior, 907 P.2d 1162, 1167 (Utah 1995); Neel v. State, 889 P.2d 922, 926 (Utah 1995).
1. Facts Defeating Policy Provision Arguments
A close review of the PEHP, as well as many other “group” insurance plans, will reveal that when the client signed up, he and a group of other new state employees was told, “This is your insurance plan. Just date and sign on the last page.” And your client signed as instructed. At no time did anyone from PEHP discuss in any way the plan’s benefits, exclusions, subrogation rights, or other provisions. Importantly, you will discover that at no time during the enrollment time or subsequently did anyone from PEHP ever give your client a copy of the plan. See Farmers Ins. Exch. v. Call, 712 P.2d 131 (Utah 1985) (finding certain exclusions unenforceable because Farmers failed to furnish the policy containing those exclusions to its insured.) These findings can defeat or significantly help defeat the insurer’s subrogation demands.
2. No Enforceable Subrogation Rights
Based on the following reasoned arguments, PEHP (or other group insurer) has no enforceable subrogation rights.
Subrogation is an equitable doctrine and is governed by equitable principles. This doctrine can be modified by contract, but in the absence of express terms to the contrary, the insured must be made whole before the insurer is entitled to be reimbursed from a recovery from the third-party tort-feasor.
When the insured settles with the tort-feasor before the amount of damages has been judicially determined, it is more difficult to ascertain whether the insurer is entitled to recover all or any of the amount paid on the policy to the insured.
Hill v. State Farm Mut. Ins. Co, 765 P.2d 864, 866 (Utah 1988) (citations omitted).
In equity, what is fair can and should outweigh what is right. PEHP will argue that the insurance contract has provisions equating to “express terms to the contrary” as contemplated in Hill. You reply that “expressed terms” require clear and unequivocal language, a difficult burden that PEHP needs to prove but can only allege.
An insured’s surrender of the made whole doctrine in favor of the insurer effectively acts like an “exclusion” of some of your client’s rights and benefits as an insured. But recognizing such an exclusion is inconsistent with the fact that benefits were paid and therefore must have been “covered.” If the insured has to pay back the benefit monies paid, then in reality there is “no coverage” for those benefits. As a limitation on coverage or on the benefits recoverable, such a provision needs to be identified early in the policy, and in simple terminology readily understood by a layperson. To surrender the made whole principle is to limit the “benefits recoverable” because your client understandably expects to get all the settlement money, but now he has to pay back his insurer. For all practicable purposes, such a “limitation” is an “exclusion.” “Limitations on insurance coverage must be effected through an exclusion clause with language that clearly identifies the scope of the limitation to the reasonable purchaser of insurance.”
Allstate Ins. Co. v. Worthington, 46 F.3d 1005, 1009 (10th Cir. 1995) (quoting Draughton v. CUNA Mut. Ins. Soc., 771 P.2d 1105, 1108 (Utah Ct. App. 1989); see also, U. S. Fidelity & Guaranty Co. v. Sandt, 854 P.2d 519, 524 (Utah 1993).
In Beck v. Farmers Insurance, 701 P. 2d 795 (Utah 1985), the Utah Supreme Court has said that an insurer owes a duty of good faith and fairness in dealing with its insureds and that the “duty of good faith also requires insurers to ‘deal with laymen as laymen and not as experts in the subtleties of law and underwriting’ and to refrain from actions that will injure the insureds’ ability to obtain the benefits of the contract.” Id. at 801. Counsel should argue that using legalese or technical terminology or “hiding” the exclusion deep in the policy violates Beck’s directives. A lay person can quickly and logically “assume” that if he must reimburse their insurer for the medical bills for which he has paid premiums to the insurer, that such a reimbursement is a “limitation on coverage.”
Argue that the contract provisions at bar fail under Beck’s requirements. That is, look for language that is not readily understood by the average Joe. The PEHP policy speaks in terms of:
In the event that Eligible Benefits are furnished to an Insured for bodily injury or illness caused by a third party, PEHP shall be and is hereby subrogated (substituted) with respect to an Insured’s right (to the extent of the value of the benefits paid) to any claim against the third party causing bodily injury or illness, regardless of whether the Insured has been made whole or fully compensated for the injury or illness. [A 73-word sentence.] In the event the Insured impairs PEHP’s subrogation rights under this contract through failure to notify PEHP of potential third party liability, settling a claim with a responsible third party without PEHP’s involvement, or otherwise, PEHP reserves the right to recover from the insured the value of all benefits paid by PEHP on behalf of Insured resulting from the third party’s acts or omissions. [A 64-word sentence.]
No judgment against any third party will be considered conclusive between the Insured and PEHP regarding liability of the third party or the amount of recovery to which PEHP is legally entitled unless the judgment results from an action of which PEHP has received notice and has a full opportunity to participate. [A 52-word sentence.]
PEHP Policy, at pp. 15-16
Argue also that the reasonable purchaser of insurance, the average layperson not versed in insurance vernacular, could not readily understand the plan terms. Point out the obscure terms:
A. Eligible Benefits are furnished
B. a third party or a third party’s liability
C. PEHP shall be and is hereby subrogated (substituted) with respect to an Insured’s right (to the extent of the value of the benefits paid)
D. regardless of whether the Insured has been made whole or fully compensated for the injury or illness
E. a failure to notify PEHP of potential third party liability
F. settling a claim with a responsible third party without PEHP’s involvement
G. a third party’s acts or omissions
H. no judgment against any third party will be considered conclusive between the Insured and PEHP regarding liability of the third party or the amount of recovery to which PEHP is legally entitled unless the judgment results from an action of which PEHP has received notice and has a full opportunity to participate
This language is more legal than lay. It is more insurance vernacular than common man. It is more confusing than clear. Lay people do not understand what is meant by the terms a “third party,” to be “made whole,” to be “legally entitled,” or “an action.” Nor, do they understand what is meant by a “third party’s acts or omissions,” by “considered conclusive between the Insured and PEHP regarding liability of a third party’s,” or by “the recovery to which PEHP is legally entitled.”
The above provisions tie several undefined insurance and legal terms together in a single 73-word sentence. This is followed by several more undefined terms in two sentences, one a 64-word sentence and the second a 52-word sentence. Clearly, these sentences compound the confusion to the average purchaser of insurance.
While an insurer may exclude from coverage certain losses by using “language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided,” Village Inn v. State Farm, 790 P.2d 581, 583 (Utah Ct. App. 1970), that is not the case with the PEHP plan. The PEHP plan is convoluted, confusing and omits operative term definitions. Thus, it is not “clearly and unmistakably” communicating to its insured that he will need to pay PEHP back for medical bills it paid. Subrogation clauses that are written like the one above, with language that is not readily understandable by the average Utah purchaser of insurance, should be held to be an unenforceable limitations or exclusions under the principles stated in Allstate, Draughton, Beck and Village Inn.
Importantly, insurers such as PEHP cannot argue that operative terms are defined in the plan when they fail to actually furnish the plan to your client. Moreover, of the terms and phrases highlighted in “A” to “E,” supra, only the terms “subrogation” and “eligible benefit” are defined in the plan. Furthermore, those definitions are not explanations clear to a layperson. See PEHP Policy at pp. 60-69, entitled, “Definitions.”
Obviously, one cannot knowingly agree to provisions not understood. And if a layperson could not or would not understand the term(s), it is incumbent upon insurers such as PEHP as the contract drafters to explain the term(s) in understandable lay language. See McCoy v. Blue Cross & Blue Shield of Utah, 980 P.2d 694 (Utah Ct. App. 1999). Failure to define the operative terms of a policy is fatally defective to enforcement of the insurer’s demands. “A policy may be ambiguous if it is unclear or omits terms.” Falkner v. Farnsworth, 665 P.2d 1292, 1293 (Utah 1983). The PEHP omits term and is unclear.
3. Insurer’s Failure to Furnish the Plan
When an insurer wants its insured to be bound by a policy provision, it needs to show that the insured has had the opportunity to review the insurance contract. See McCoy, 980 P.2d at 699. The legally imposed burden on the insurer in this type of situation is strictly imposed. “An insurer is required to strictly comply with all provisions that give an insured notice of the terms, conditions, limitations or changes to an insurance policy.” Id. at 697. An insured cannot have “notice” of “terms, conditions or limitations” that are neither defined nor understood.
4. Adhesion Contract
Equally important, you may also argue that the plan is an adhesion contract. That is, if your client wanted to be a member of the Utah Highway Patrol, or in some other State employment, this is the insurance plan. He must take it or leave it. There is no room for negotiating the terms of the plan. An adhesion contract is defined as “a contract entered into between two parties of unequal bargaining strength, expressed in the language of a standardized contract, written by the more powerful bargainer to meet its own needs, and offered to the weaker party on a ‘take it or leave it basis.…’” Gray v. Zurich Ins. Co., 419 P.2d 168, 171 (Cal. 1966) (quoted in Wagner v. Farmers Ins. Exchange, 786 P.2d. 763 (Utah Ct. App. 1990)). Our Supreme Court has said, “insurance policies should be construed against the insurer and in favor of the insured because they are adhesion contracts drafted by insurance companies.” U. S. Fidelity & Guar. Co. v. Sandt, 854 P.2d 519, 522 (1993).
In an adhesion contract context, the insurer is going to have problems asserting that your client gave a knowing waiver to a provision hidden in the middle of the contract. In the case of PEHP, the subrogation provision is tucked away on page 15 of a 78-page policy. This defect is fatal when the insurer cannot show that it ever presented the contract to your client. See Christopher v. Larson Ford, 557 P.2d 1009, 1012 (Utah 1976) (finding a warranty disclaimer invalid because it was “hidden” in the contract and not brought to the attention of the buyer). The law looks with disfavor upon semi-concealed or obscured self-protective provisions of a contract prepared by one party which the other is not likely to notice. See id. at 1012; see also Bornhart v. Civ. Serv., 398 P.2d 873, 877 (Utah 1976) (arbitration clause rejected because “its meaning and effect were somewhat uncertain even to lawyers and judges,” and stating, the insured is not required to read, nor to understand, nor to sign anything, but only to pay his premium).
Thus, one should look to the effect of enforcing the adhesion contract’s provisions, keeping in mind that subrogation is an equitable doctrine governed by “fairness” principles. In this situation, basic equity mandates that: “Where the insured settles with the tort-feasor, the settlement amount goes to the insured unless the insurer can prove that the insured has already received full compensation.” Hill v. State Farm Mut. Auto. Ins. Co., 765 P.2d 864, 868 (Utah 1988).
This analysis requires insurers such as PEHP to show that your client’s settlement made him whole. More pointedly, under Utah Code section 49-1 1-613(4), PEHP as the moving party, bears the burden of proof to show that, given the attorney’s fees, the litigation costs, the past and future lost wages, the future co-pays on the medical bills expected, the client’s whole person impairment, and the accompanying physical disabilities, the insurer cannot demonstrate your client was made whole. Likewise, the insurer cannot show that your client was fully compensated by his settlement monies when he suffers a XX% percentage whole-person impairment, and will continue to suffer such an impairment with its accompanying pain and functional disabilities for YY years, or the client’s life expectancy.
5. Utah’s Legal History Supports Your Position
Utah has not addressed the factual setting of whether a health insurance plan’s contractual subrogation provisions violate long-standing public policy that an insurer cannot assert subrogation rights unless it shows the insured has been “made whole” by her settlement with the tort-feasor. Neither our legislature nor the courts have addressed contractual modification of this public policy in the context of liability insurance settlements. Hill v. State Farm speaks of possible contractual modification of the equitable principle, but Hill did not involve medical expense reimbursements. Thus, the precise issue of a contractual waiver of the made whole rule in a bodily injury liability settlement was not before the Hill court. This is important because your client “bought” the medical expense coverage benefits and the policy attempts to modify this “made whole” principle.
In similar contexts, however, Utah has protected the same made whole position. That is, in under insured and uninsured motorist statutes, our legislature has codified the principle that an insured needs to be made whole before the health insurer can recover for any benefits paid. By such direct action, our legislature clearly intended to foreclose all health insurers’ attempts at contractual modification of this equitable principle. See Utah Code Ann. § 31A-22-305(4)(c)(iv) and 305(10)(c)(iv).
Importantly, our legislature created the modifications to the uninsured and under insured motorist after the Hill decision. Thus, there are good and substantial arguments that our legislature will not permit contractual modifications to defeat this made whole public policy. Our legislature prohibited modification of the made whole rule in the uninsured and under insured motorist laws, knowing full well that an insured can waive such coverages. It prohibited modification because the made whole doctrine is an important public policy. Given this legislative history, why would the legislature permit a contractual modification in the liability settlement context where an insured cannot waive his liability coverage? If it refused to permit modifications when a waiver of coverage was permissible, it surely would not permit modification on mandatory coverages.
Additionally, the legislature would presumably be stricter when an insurer seeks reimbursement for medical expenses that their insured had paid premiums specifically so that the insurer would pay them. In the liability context here, there is an even greater public policy argument against permitting any modification to the made whole doctrine via new contractual subrogation rights.
Long subsequent to Hill, the Utah Insurance Department commented on the contractually created modification of the made whole rule. To wit:
Many insurers file to amend policy language to provide “express terms to the contrary,” thus, allowing insurers to be reimbursed before the insured is made whole. It is not in the best interests of Utah insureds to allow language that limits their ability to be made whole. An insured must first be made whole before an insurance company subrogates. It is understood that an insured is not entitled to double recovery, but his initial recovery, to the fullest amount possible, should come before the insurer. The doctrine of subrogation is equitable. Utah law gives insurer subrogation rights and obligations. However, those rights are not unlimited and do not supersede the right of the insured to be made whole unless the insured contractually relinquishes the right. To allow a policyholder to believe that his insurer has an unconstrained right to unidentifiable proceeds from a settlement would be inequitable and misleading. Policy provisions should include clear language reserving the right of subrogation to the extent that the insured actually receives a double recovery or relinquishes the benefit payment to the subrogated insurer. An insured must recover his due before payment of amounts to which an insurer makes claim will be allowed.
Utah Insurance Department Bulletin, 96-9, 10/23/96. The legislature and the courts should weigh heavily the State Insurance Department’s advice, seeing the department as an independent source charged with protecting the rights of both insurers and insureds. The Bulletin talks in terms of insureds “allowing” language that limits their ability to be made whole. The allowing language suggests that Utah insureds have some “bargaining” powers to use in keeping their made whole rights intact. But when the insured has no bargaining powers or tools to negotiate with, the courts should not enforce the waiver because the insured has not “allowed” any language. Here, the insured did not “knowingly allow” these waivers provisions. Rather, insurers such as PEHP force them on their insureds.
6. Insurer’s “Double Recovery”
The insurer demands 100% reimbursement of the medical bills it paid in your client’s behalf. But remember, the insurer has received your client’s insurance premium dollars. Your client paid those premiums to “insure” that the insurer would pay these same medical bills. Now comes the insurer wanting to keep both your client’s premium dollars and still recover the full value of the benefits paid. Thus, to a certain extent, the insurer is improperly recovering twice.
7. The Contract Violates Utah’s “Common Fund” Doctrine
Policies such as PEHP’s violate another basic principle of equity. The insurer wants full reimbursement for the benefits your client purchase, all the while (1) keeping your client’s premium monies, but (2) without contributing anything to the costs and efforts the client incurred to obtain the settlement monies now available to reimburse the insurer. In similar situations, insurers and others with a financial interest in the settlement monies must contribute to the insured’s costs in securing the settlement or recovery fund.
To demand full recovery at the cost of the financial suffering of its insured violates Utah’s “common fund” doctrine. This doctrine says the settlement monies from a tort-feasor constitute a common fund wherein those claiming a monetary interest in the client’s claim look to the common fund for their recovery or reimbursement. Historically, when a party such as an insurer has a valid interest in this common fund, that party is required to contribute a fair share of the total fees and costs incurred by the plaintiff claimant in securing the settlement, i.e., the common fund monies. To mandate such a contribution is inherently within the court’s equitable powers “to do justice.” The traditional common fund theory applies “to avoid unjust enrichment of those who benefit from the fund that is created by the litigation, and who otherwise would bear none of the litigation costs.” Barker v. Utah Public Serv. Comm’n, 970 P.2d 702, 711 (Utah 1998). See also Stewart v. Utah Public Serv. Comm’n, 885 P.2d 759 (Utah 1994).
It is well settled in Utah that when an insured who has been made whole recovers money that rightfully belongs to a subrogee, that subrogee is required to pay its share of attorney’s fees and costs before receiving any reimbursement. See Laub v. So. Central Telephone Co., 657 P.2d 1308 (Utah 1982). And that is when the insurer has “enforceable subrogation rights” and the client has been made whole. In the present discussion, at best, the insurer has questionable subrogation rights, and the insured has not been made whole. It is inequitable for insurers such as PEHP to demand reimbursement without sharing the costs and fees incurred in securing the settlement.
Utah’s worker compensation laws have a codification of this common fund principal. Under Utah Code section 34A-2-106, when a claimant’s efforts and expenses secure monies from a third party, the worker compensation fund reduces its reimbursement lien proportionally by measuring the lien against the full settlement. Generally, the reduction is about 1/3 of its outstanding lien, together with sharing 1/3 of the costs the claimant spent in securing the settlement, award or verdict monies.
8. Recent Case Law
In the recent case of Houghton v. Dep’t of Health, 125 P.3d 860 (Utah 2005), our supreme court again re-enforced the equitable principles underpinning the common fund doctrine. In Houghton, the state through Medicaid paid the class action plaintiffs’ medical bills. The plaintiffs’ attorneys secured the settlement monies without any state participation. The state then wanted full reimbursement and refused to share in the costs incurred by the plaintiff(s) in prosecuting their claims to recoveries. The court said the state must share in the costs of securing the settlement monies, whether it gets reimbursed from the tort-feasor or directly from the plaintiffs.
Similarly, the United States Supreme Court recently decided Arkansas Dept. of Health & Human Servs. v. Ahlborn, 547 U.S. 268 (2006), ruling that Arkansas’ Medicaid program could get reimbursed only from that of the settlement that represents “payment for medical expenses.” That is, Arkansas could not get reimbursed out of the lost wages or pain and suffering damages etc., contained in the settlement monies. Additionally, under the “equitable allocation theory” notwithstanding its lien amount, Medicaid could recover only a proportional share of the “medical expense monies.” Specifically, Medicaid had paid $216,000 for the plaintiff’s medical bills and the case had an agreed-to value of $3,040,000, but the total settlement was only $550,000. Accordingly, Medicaid’s reimbursement was limited to one-sixth of its lien amount, or some $35,000.
So, both the local and national climates are to do justice to the parties involved. To do justice means the insurer will share in the costs of securing the settlement by limiting its reimbursement to a fair or proportional share that its lien has to the fair value of the claim.
9. Signing Enrollment Form
Some insurers such as PEHP may argue that your client signed an “enrollment form” that made reference to the policy, and that the form is sufficient to support enforcing the reimbursement provisions. But the enrollment form itself violates Utah insurance law, thus precluding this argument. Utah Code section 31A-21-106(1) states that no policy may incorporate by reference any provision not fully set forth therein. See Cullum v. Farmers, 857 P.2d 992 (Utah 1993). Arguing that the enrollment form itself binds the client to the provisions of an unattached policy violates this law.
10. Other Arguments to Proffer
Other arguments intertwined with some of the prior arguments, though distinguishable, are:
A. Policy Language Problems. Look at the reimbursement provisions. Are they set forth in terms of seeking reimbursement from monies recovered from “third parties”? If so, settlements from uninsured and under insured motorist claims are beyond the reach of such provisions. Do the provisions talk of getting reimbursed from the “medical expenses” of the settlement? If so, then only that part of the recovery identified as “past medical expenses” is subject to reimbursement rights. The past and future lost wages and the general damages are outside their reach.
B. Comparative Negligence. If the insured claimant was assessed some degree of comparative negligence, then you argue the amount of the subrogation lien needs to be reduced by the same percent. This argument is also available when the insured claimant’s injury was superimposed upon a relevant apportionable, pre-existing condition. For example, assume a $10,000 recovery with a $2000 subrogation lien, $3000 in attorney’s fees and $450 in costs. Assume also the insured was assessed 20% comparative negligence and had 20% apportioned out of the recovery for a pre-existing condition. Finally, assume the subrogation provisions are not otherwise subject to defeat. First, appropriately reduce the $2000 to reflect the common fund principles, e.g., $1000 for attorney’s fees and another $150 toward costs. Now, from the insurer’s $2000 lien, deduct $400 for the comparative fault and another $400 for the relevant pre-existing condition. Deducting that $1950 leaves a lot more money in the client’s hands.
C. Immune Defendant. Where an immune defendant is involved, take the percentage of fault attributable to the immune defendant and subtract that same percentage of money from the subrogation total. You may find the insurer objecting if you try to subtract out anything above 39%. See Utah Code Ann. § 78-27-39. But press forward, arguing other equitable made whole principles.
PEHP will argue that as a “self-insured” program it is beyond the parameters of Utah insurance law. The case authorities cited herein are based on principles of equity and “common sense.” Therefore, a self-insured plan should not be able to circumvent their application as they reach well beyond the narrow confines of insurance law. Remember that subrogation is an equitable doctrine and generally subject to fairness and public policy. All contracts require that the parties deal with each other in good faith and fair dealings. See Leigh Furniture v. Isom, 657 P.2d 293, 304 (Utah 1982). Insurers need to deal with customers
fairly and in good faith. The common fund doctrine reaches beyond insurance subrogation. Common sense dictates that undisclosed, hidden contract and undefined provisions are not enforceable. Likewise, wordy, incomprehensible provisions are inequitable. A court should penalize an insurer who fails to produce the policy to its policyholder. PEHP is not the renegade it asserts it is. It is not beyond the laws that dictate equity and common sense. Fortunately, other group insurers cannot make this PEHP argument. It is unique to PEHP as PEHP is a creature of the state.
ERISA-governed plans pose unique difficulties under the ERISA legislation itself and many onerous federal court decisions. Careful review and consideration of ERISA-specific precedent is essential when dealing with those plans.
The governing law charges the insurer with the burden of proof on its subrogation claim. Yet, you show that the insurer has presented only “self-serving” conclusions, conclusions void of any statutory or case law authority in support of its positions. Show that the insurer has not carried its affirmative burden to show that the settlement made your client “whole.” Ultimately, argue that subrogation is an equitable remedy, and that the equities favor your client. “Subrogation is not a matter of right but may be invoked only in circumstances where justice demands its application.” Transamerica Ins. Co. v. Barnes, 505 P.2d 783, 786 (Utah 1972). “Furthermore, subrogation must not work any injustice to the rights of others.” State Farm Mut. Auto. Ins. Co. v. N.W. Nat’l Ins. Co., 912 P.2d 983, 986 (Utah 1996).