Insurer's contractual right shows it is not creditor

In Idaho, a medical insurer is a subrogee and is entitled to its right of subrogation against compensation the worker received from a third party.

Case name: Williams v. Blue Cross of Idaho, No. 37623, 2011 Opinion No. 93 (Idaho 09/02/11).

Ruling: The Idaho Supreme Court held that a health insurer could exercise its right of subrogation against the lump-sum settlement proceeds a worker received from the state insurance fund.

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What it means: In Idaho, a medical insurer is a subrogee and is entitled to its right of subrogation against compensation the worker received from a third party.

Summary: A worker suffered two injuries to his left shoulder while working. He underwent two surgeries. The state insurance fund initially provided him with benefits for his medical expenses but later refused to provide coverage on the ground that treatment was for a preexisting condition. The worker sought payment for his remaining medical expenses from his personal medical insurer. The insurer accepted responsibility for payment of the medical expenses. The worker sought benefits and entered into a lump-sum settlement with the state insurance fund. The insurer sought to exercise its contractual right of subrogation. In an issue of first impression, the Idaho Supreme Court held that the insurer could subrogate against the worker's settlement.

The worker argued that lump-sum proceeds are exempt from claims of all creditors, including the insurer. The insurer argued that it was a subrogee, rather than a creditor. The court found that the insurer was a subrogee, emphasizing the distinction between a creditor and subrogee. The court explained that the insurer had a contractual right of subrogation, which potentially allowed it to take the place of the worker and obtain compensation from a third party on the worker's behalf. If the insurer were a creditor, the worker would owe it money regardless of whether compensation was received by a third party.

The court said that under the worker's interpretation, he could receive double recovery for his medical expenses. It could also result in insurers hesitating to provide compensation to injured workers who could potentially recover workers' compensation benefits, resulting in a negative effect on injured workers.

Read more at the WorkersComp Forum homepage.

October 20, 2011

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