SECTION 5

Update on Subrogation Law In Colorado

Presented by

J. Kyle Bachus, Esq.

Bachus & Schanker, LLC Denver, CO

Things Change: Colorado’s New State Subrogation Law J. Kyle Bachus What is the statute about? • The made whole rule is now statutory law in Colorado • Common fund doctrine is also now statutory law in Colorado as well as common law. See, Hawes v. Colorado Division of Insurance, 65 P.3d 1008 (Colo. 2003). So simply speaking: • If the injured party obtains policy limits, the health insurance / med pay does not have a winnable claim to the settlement proceeds • If the injured party gets less than the policy limits, the health insurer/med pay may have a winnable claim for the settlement proceeds at arbitration The Statute and Process Applies to Everything Except: • Medicaid • Workers’ Compensation • Hospital Liens (the statute was not intended to impact lien obligations) • Possible / probable Federal Preemption for Medicare and Self‐Funded ERISA Plans Real Life Example: • Spinal surgery / rear‐end collision • Six (6) months of lost wages • $130,000.00 in medical bills • Only $100,000.00 in liability coverage Not Made Whole 10‐1‐135(4)(a)(2) – Where a party is not made whole, a form letter must be sent to the payer of benefits to void subrogation recovery language. MADE Less is Probably More: • No need to make arguments at this stage why they client received less than the policy limits but still has not been made whole. • No need to instruct them that they must demand arbitration within 60 days. • Short, simple, and straight forward. The Notice Letter in Your Practice • Why? When the clock starts ticking, the payer of benefits has 60 days to demand arbitration • Have form letter ready to send at every mediation and the day of any settlement; If you wait 60 days and the insurer waits 60 days, the injured party has to wait 120 days/4 months for money. Response to the 60 Day Form Letter: No demand for arbitration within 60 days OR

Demand arbitration within 60 days If a Demand for Arbitration Made, What Occurs: • Got policy limits? • Rebuttal presumption – not made whole • Arbitration takes place with the rebuttable presumption that client was NOT made whole If a Demand for Arbitration Made, What Occurs: • Not got policy limits? • Payer of Benefits gets the rebuttable presumption that the client WAS MADE WHOLE. Practice Pointers for Arbitration Consider proposing that a 5 page brief be submitted to a single arbiter for a decision (insurance companies have experience with arbitrations being decided on paper) Arbitration Form: Arbiter or panel are asked to decide the following: Was the injured party fully compensated for all of his/her damages by the settlement amount of _____? “Check Yes or No” Who pays for Arbitration? The answer…Who knows? Effective Date: When can you use the statute? For all settlements or judgments after August 11, 2010. The reason is that C.R.S. §10‐1‐135 Section 2(2) “the provisions of this act shall apply to a RECOVERY made on or after the applicable effective date of this act” RECOVERY is defined at C.R.S. §10‐1‐ 135(2)(d) as “settlement or judgment” No Direct Action for Payer of Benefits CRS §10‐1‐ 135(6)(a)(II) – Another 60 Day Rule: You must file suit 60 days before the statute of limitations to preclude the payer of benefits from filing its own action – play it safe, file 60 days before the statute of limitations. Two more benefits to the statute: • One name on the check, C.R.S. §10‐1‐135(6)(b) • Any money the insurance gets is credited against a life time cap on the health insurance benefits of the injured party, C.R.S. § 10‐1‐135(8) Finally: Billed vs. Paid C.R.S. §10‐1‐135(10)(a): Colorado law now clearly declares that the amount of any discount or write‐off shall not be admitted into evidence.

1. C.R.S. §10‐1‐135(10)(a) – states “the fact or amount of any collateral source payment or benefits shall not be admitted as evidence in any action against an alleged third‐party tortfeasor or [UM claim].” Benefits defined – C.R.S. §10‐1‐135(2)(a) – “Benefits” means payment or reimbursement of health care expenses, health care services, disability payments, lost wage payments, or any other benefits of any kind, including discounts and write‐offs, provided to or on behalf of an injured party under a policy of insurance.