83R7234 AJA-F
By: Price H.B. No. 1869
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.