83R7234 AJA-F

By: Duncan S.B. No. 1339

A BILL TO BE ENTITLED

AN ACT

relating to contractual subrogation rights of certain insurers and benefit plan issuers.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Title 6, Civil Practice and Remedies Code, is amended by adding Chapter 140 to read as follows:

CHAPTER 140. CONTRACTUAL SUBROGATION RIGHTS OF PAYORS OF CERTAIN

BENEFITS

Sec. 140.001. DEFINITIONS. In this chapter:

(1) "Covered individual" means an individual entitled to benefits described by Section 140.002.

(2) "Payor of benefits" or "payor" means an issuer of a plan providing benefits described by Section 140.002 who:

(A) pays benefits to or on behalf of a covered individual as a result of personal injuries to the covered individual caused by the tortious conduct of a third party; and

(B) has a contractual right of subrogation described by Section 140.004.

Sec. 140.002. APPLICABILITY OF CHAPTER. (a) This chapter applies to an issuer of a health benefit plan that provides benefits for medical or surgical expenses incurred as a result of a health condition, accident, or sickness, a disability benefit plan, or an employee welfare benefit plan, including an individual, group, blanket, or franchise insurance policy or insurance agreement, a group hospital service contract, or an individual or group evidence of coverage or similar coverage document, including:

(1) an insurance company;

(2) a group hospital service corporation operating under Chapter 842, Insurance Code;

(3) a fraternal benefit society operating under Chapter 885, Insurance Code;

(4) a stipulated premium insurance company operating under Chapter 884, Insurance Code;

(5) a reciprocal exchange operating under Chapter 942, Insurance Code;

(6) a health maintenance organization operating under Chapter 843, Insurance Code;

(7) a multiple employer welfare arrangement that holds a certificate of authority under Chapter 846, Insurance Code; or

(8) an approved nonprofit health corporation that holds a certificate of authority under Chapter 844, Insurance Code.

(b) Notwithstanding Section 172.014, Local Government Code, or any other law, this chapter applies to a risk pool providing health and accident coverage under Chapter 172, Local Government Code.

(c) Notwithstanding any provision in Chapter 1551, 1575, 1579, or 1601, Insurance Code, or any other law, this chapter applies to an issuer of:

(1) a basic coverage plan under Chapter 1551, Insurance Code;

(2) a basic plan under Chapter 1575, Insurance Code;

(3) a primary care coverage plan under Chapter 1579, Insurance Code; and

(4) basic coverage under Chapter 1601, Insurance Code.

(d) Notwithstanding any other law, this chapter applies to any self-funded issuer of a plan that provides a benefit described by Subsection (a).

(e) This chapter applies to any policy, evidence of coverage, or contract under which a benefit described by Subsection (a) is provided and:

(1) that is delivered, issued for delivery, or entered into in this state; or

(2) under which an individual or group in this state is entitled to benefits.

Sec. 140.003. CONFLICTS WITH OTHER LAW. In the event of a conflict between this chapter and another law, including a rule of procedure or evidence, this chapter controls to the extent of the conflict.

Sec. 140.004. CONTRACTUAL SUBROGATION RIGHTS AUTHORIZED. An issuer of a plan that provides benefits described by Section 140.002 under which the policy or plan issuer may make payments to or on behalf of a covered individual as a result of a personal injury to the individual caused by the tortious conduct of a third party may contract to be subrogated to and have a right of reimbursement from the individual's recovery for that injury, subject to this chapter.

Sec. 140.005. PAYOR'S RECOVERY LIMITED. (a) If an injured covered individual to whose rights a payor of benefits is subrogated is not able to realize a complete and adequate recovery for an injury sustained as a result of the actionable tortious conduct of a third party, the payor is entitled to recover as provided by Subsection (b).

(b) Subject to Subsections (c), (d), and (e), a payor's share under Subsection (a) of a covered individual's recovery is an amount that is equal to the lesser of:

(1) one-third of the covered individual's total recovery; or

(2) the total cost of benefits paid by the payor as a direct result of the tortious conduct of the third party.

(c) A covered individual may bring a declaratory judgment action to limit the amount of a payor's recovery under this section to an amount that is less than the amount otherwise payable under Subsection (b), as provided by Subsections (d) and (e).

(d) If, in an action under Subsection (c), the covered individual proves by a preponderance of the evidence that the covered individual's total recovery is less than 50 percent of the value of the covered person's underlying claim for damages, the payor's total recovery under this section is limited to an amount that is not less than 15 percent of and not more than one-third of the covered individual's total recovery.

(e) If, in an action under Subsection (c), the covered individual shows by clear and convincing evidence that the payor's recovery of an amount otherwise payable under this section would result in a recognized injustice, the payor's total recovery under this section is limited to an amount that is less than 15 percent of and equal to or greater than five percent of the covered individual's total recovery.

(f) A common law doctrine that requires an injured party to be made whole before a subrogee makes a recovery does not apply to the recovery of a payor under this section.

Sec. 140.006. ATTORNEY'S FEES IN ACTION TO LIMIT SUBROGEE'S RECOVERY. Notwithstanding Section 37.009 or any other law, in an action brought under Section 140.005(c), the court may not award costs or attorney's fees to any party in the action.

Sec. 140.007. ATTORNEY'S FEES IN THIRD-PARTY ACTION. (a) Except as provided by Subsection (c), a payor of benefits whose interest is not actively represented by an attorney in a third-party action to recover for a personal injury to a covered individual shall pay to an attorney representing the covered individual a fee in an amount determined under an agreement entered into between the attorney and the payor plus a pro rata share of expenses incurred in connection with the recovery.

(b) Except as provided by Subsection (c), in the absence of an agreement described by Subsection (a), the court shall award to the attorney, payable out of the payor's share of the total recovery, a reasonable fee for recovery of the payor's share, not to exceed one-third of the payor's recovery.

(c) Notwithstanding Subsection (a) or (b), a payor may not be assessed out of a recovery limited under Section 140.005(d) or (e) any attorney's fees under any theory or rule of law, including the common fund doctrine.

Sec. 140.008. FIRST PARTY RECOVERY. A payor of benefits may not pursue a recovery against a covered individual's first party recovery.

Sec. 140.009. CONSTRUCTION OF CHAPTER. Except as provided by Section 140.005(c), this chapter does not create a cause of action.

SECTION 2. The change in law made by this Act applies only to a contractual right of subrogation in:

(1) an insurance policy or evidence of coverage delivered, issued for delivery, or renewed on or after the effective date of this Act; or

(2) a contract entered into or renewed on or after the effective date of this Act.

SECTION 3. This Act takes effect January 1, 2014.