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A BILL TO BE ENTITLED
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AN ACT
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relating to contractual subrogation rights of certain insurers and |
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benefit plan issuers. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Title 6, Civil Practice and Remedies Code, is |
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amended by adding Chapter 140 to read as follows: |
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CHAPTER 140. CONTRACTUAL SUBROGATION RIGHTS OF PAYORS OF CERTAIN |
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BENEFITS |
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Sec. 140.001. DEFINITIONS. In this chapter: |
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(1) "Covered individual" means an individual entitled |
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to benefits described by Section 140.002. |
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(2) "Payor of benefits" or "payor" means an issuer of a |
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plan providing benefits described by Section 140.002 who: |
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(A) pays benefits to or on behalf of a covered |
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individual as a result of personal injuries to the covered |
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individual caused by the tortious conduct of a third party; and |
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(B) has a contractual right of subrogation |
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described by Section 140.004. |
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Sec. 140.002. APPLICABILITY OF CHAPTER. (a) This chapter |
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applies to an issuer of a health benefit plan that provides benefits |
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for medical or surgical expenses incurred as a result of a health |
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condition, accident, or sickness, a disability benefit plan, or an |
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employee welfare benefit plan, including an individual, group, |
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blanket, or franchise insurance policy or insurance agreement, a |
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group hospital service contract, or an individual or group evidence |
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of coverage or similar coverage document, including: |
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(1) an insurance company; |
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(2) a group hospital service corporation operating |
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under Chapter 842, Insurance Code; |
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(3) a fraternal benefit society operating under |
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Chapter 885, Insurance Code; |
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(4) a stipulated premium insurance company operating |
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under Chapter 884, Insurance Code; |
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(5) a reciprocal exchange operating under Chapter 942, |
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Insurance Code; |
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(6) a health maintenance organization operating under |
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Chapter 843, Insurance Code; |
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(7) a multiple employer welfare arrangement that holds |
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a certificate of authority under Chapter 846, Insurance Code; or |
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(8) an approved nonprofit health corporation that |
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holds a certificate of authority under Chapter 844, Insurance Code. |
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(b) Notwithstanding Section 172.014, Local Government Code, |
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or any other law, this chapter applies to a risk pool providing |
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health and accident coverage under Chapter 172, Local Government |
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Code. |
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(c) Notwithstanding any provision in Chapter 1551, 1575, |
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1579, or 1601, Insurance Code, or any other law, this chapter |
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applies to an issuer of: |
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(1) a basic coverage plan under Chapter 1551, |
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Insurance Code; |
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(2) a basic plan under Chapter 1575, Insurance Code; |
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(3) a primary care coverage plan under Chapter 1579, |
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Insurance Code; and |
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(4) basic coverage under Chapter 1601, Insurance Code. |
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(d) Notwithstanding any other law, this chapter applies to |
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any self-funded issuer of a plan that provides a benefit described |
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by Subsection (a). |
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(e) This chapter applies to any policy, evidence of |
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coverage, or contract under which a benefit described by Subsection |
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(a) is provided and: |
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(1) that is delivered, issued for delivery, or entered |
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into in this state; or |
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(2) under which an individual or group in this state is |
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entitled to benefits. |
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Sec. 140.003. CONFLICTS WITH OTHER LAW. In the event of a |
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conflict between this chapter and another law, including a rule of |
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procedure or evidence, this chapter controls to the extent of the |
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conflict. |
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Sec. 140.004. CONTRACTUAL SUBROGATION RIGHTS AUTHORIZED. |
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An issuer of a plan that provides benefits described by Section |
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140.002 under which the policy or plan issuer may make payments to |
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or on behalf of a covered individual as a result of a personal |
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injury to the individual caused by the tortious conduct of a third |
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party may contract to be subrogated to and have a right of |
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reimbursement from the individual's recovery for that injury, |
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subject to this chapter. |
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Sec. 140.005. PAYOR'S RECOVERY LIMITED. (a) If an injured |
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covered individual to whose rights a payor of benefits is |
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subrogated is not able to realize a complete and adequate recovery |
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for an injury sustained as a result of the actionable tortious |
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conduct of a third party, the payor is entitled to recover as |
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provided by Subsection (b). |
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(b) Subject to Subsections (c), (d), and (e), a payor's |
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share under Subsection (a) of a covered individual's recovery is an |
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amount that is equal to the lesser of: |
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(1) one-third of the covered individual's total |
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recovery; or |
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(2) the total cost of benefits paid by the payor as a |
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direct result of the tortious conduct of the third party. |
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(c) A covered individual may bring a declaratory judgment |
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action to limit the amount of a payor's recovery under this section |
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to an amount that is less than the amount otherwise payable under |
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Subsection (b), as provided by Subsections (d) and (e). |
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(d) If, in an action under Subsection (c), the covered |
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individual proves by a preponderance of the evidence that the |
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covered individual's total recovery is less than 50 percent of the |
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value of the covered person's underlying claim for damages, the |
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payor's total recovery under this section is limited to an amount |
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that is not less than 15 percent of and not more than one-third of |
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the covered individual's total recovery. |
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(e) If, in an action under Subsection (c), the covered |
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individual shows by clear and convincing evidence that the payor's |
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recovery of an amount otherwise payable under this section would |
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result in a recognized injustice, the payor's total recovery under |
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this section is limited to an amount that is less than 15 percent of |
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and equal to or greater than five percent of the covered |
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individual's total recovery. |
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(f) A common law doctrine that requires an injured party to |
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be made whole before a subrogee makes a recovery does not apply to |
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the recovery of a payor under this section. |
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Sec. 140.006. ATTORNEY'S FEES IN ACTION TO LIMIT SUBROGEE'S |
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RECOVERY. Notwithstanding Section 37.009 or any other law, in an |
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action brought under Section 140.005(c), the court may not award |
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costs or attorney's fees to any party in the action. |
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Sec. 140.007. ATTORNEY'S FEES IN THIRD-PARTY ACTION. (a) |
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Except as provided by Subsection (c), a payor of benefits whose |
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interest is not actively represented by an attorney in a |
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third-party action to recover for a personal injury to a covered |
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individual shall pay to an attorney representing the covered |
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individual a fee in an amount determined under an agreement entered |
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into between the attorney and the payor plus a pro rata share of |
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expenses incurred in connection with the recovery. |
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(b) Except as provided by Subsection (c), in the absence of |
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an agreement described by Subsection (a), the court shall award to |
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the attorney, payable out of the payor's share of the total |
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recovery, a reasonable fee for recovery of the payor's share, not to |
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exceed one-third of the payor's recovery. |
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(c) Notwithstanding Subsection (a) or (b), a payor may not |
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be assessed out of a recovery limited under Section 140.005(d) or |
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(e) any attorney's fees under any theory or rule of law, including |
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the common fund doctrine. |
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Sec. 140.008. FIRST PARTY RECOVERY. A payor of benefits may |
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not pursue a recovery against a covered individual's first party |
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recovery. |
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Sec. 140.009. CONSTRUCTION OF CHAPTER. Except as provided |
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by Section 140.005(c), this chapter does not create a cause of |
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action. |
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SECTION 2. The change in law made by this Act applies only |
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to a contractual right of subrogation in: |
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(1) an insurance policy or evidence of coverage |
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delivered, issued for delivery, or renewed on or after the |
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effective date of this Act; or |
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(2) a contract entered into or renewed on or after the |
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effective date of this Act. |
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SECTION 3. This Act takes effect January 1, 2014. |