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Make Whole Doctrine
Thursday, May 6th, 2010

What happens to accident victims when their health insurance pays the medical bills related to a serious injury?  Quite simply, insurance companies are first in line to ask for their money back and in front of the seriously injured person.

Consumers pay for health insurance through premiums paid individually or through their employer.  In possibly the most shocking and well-publicized case of insurance company greed, Walmart demanded to be reimbursed from settlement proceeds awarded to a severely brain-injured woman who was injured by a careless driver.  Deborah Shanks’ life changing injuries require that she receive 24-hour health care.  She settled her case against the at-fault driver for the policy limits of $1 million, which wasn’t nearly enough to compensate her for her past medical bills or cover her future medical care.  An employee of Walmart at the time of the accident, Mrs. Shanks had health insurance through Walmart that covered her medical care.  But once her case was settled, Walmart wanted Mrs. Shanks to repay 100% of her settlement for amounts paid out for her medical care, which would have left Mrs. Shanks with nothing.  After a long legal battle (and bad press for Walmart), Walmart and their health plan agreed to drop their request for all of Mrs. Shanks’ settlement.

While Mrs. Shanks’ story has a positive ending, for many people injured in accidents it doesn’t turn out this way.  Most private health plans have provisions within the policy for recovery of the coverage they provide to injured people if a person is injured by a third party.  If someone else caused the injury and the injured person gets any settlement, the insurance company wants their piece of the pie – even though the insured person has paid premiums for the care.

The South Dakota legislature recently passed a bill that would have prohibited insurance companies from collecting from injured people until the person was “made whole” or fairly compensated for their losses after an accident or other injury.  This would prevent giant, corporate insurers from recovering their money before injured people were compensated for their injuries, wage loss, and other damages.  This was the first bill of its kind and South Dakota would have been a trailblazer in consumer protection.  Unfortunately, South Dakota Governor Mike Rounds did not agree.  He vetoed the bill to the dismay of those who had fought so hard to protect consumers.  Despite the setback, we expect many other state legislators, lawyers, and interest groups will continue to fight for the rights of consumers.

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