Governor Signs Law Affecting Health Care Subrogation

In 2009, New York passed a law whose intent was to eliminate the right of health care insurers to subrogate and assert a lien or otherwise encumber a personal injury or wrongful death action.  The law did not affect the ability of property insurance carriers to subrogate.  In the opinion of the New York Assembly, health insurers were “imperiling and preventing” the settlement of lawsuits by accident victims and others, which in turn “caus[ed] undue burdens and pressures upon the court system.”   Consequently, this 2009 legislation added provisions to New York’s General Obligations Law [1] to “protect parties to a personal injury or wrongful death settlement from lien, reimbursement and subrogation claims.”  The law contained an exception for “payments as to which there is a statutory right of reimbursement.”  Thus, for example, workers compensation carriers could still assert liens on tort actions notwithstanding the 2009 law, because the NY workers compensation law contains a statutory right of reimbursement.

Following enactment of the 2009 law, certain health care subrogation companies continued to assert liens on tort settlements, contending that the federal ERISA law controlled and precluded New York State from restricting their subrogation rights to recover.   A group of tort victims filed a class action suit claiming the 2009 law precluded them from asserting liens on their tort settlements.   In March of this year, a federal court in Brooklyn sided with the health care recovery companies and ruled that New York cannot limit the right of recovery of employee benefit plans covered by ERISA.

In light of this federal court decision, the New York legislature in June of this year passed a law to amend the 2009 language ostensibly to assure that non-ERISA recovery claims were still barred.   On November 13, 2013, Governor Cuomo signed the law.   The law takes effect immediately and applies to all settlements entered into on or after November 12, 2009.   The law adds a new definition of “insurer” to include “any insurance company or other entity which provides for payment or reimbursement of health care expenses, health care services, disability payments, lost wage payments or any other benefits under a policy of insurance or an insurance contract with an individual or group.”  Significantly, the amendment of the 2009 law eliminates the “except where there is a statutory right of reimbursement” language.  However, the law specifically states that this law does not preclude subrogation recovery of payment for additional first party benefits, workers compensation, Medicare or Medicaid. 

I assisted the National Association of Subrogation Professionals’ (“NASP”) unsuccessful efforts to lobby the Governor’s office here in Albany, NY to veto the bill.   Attorneys representing subrogating carriers are concerned that, by eliminating the “except where there is a statutory right of reimbursement” language, the 2013 amendment of the 2009 law may have unintended consequences, such as the elimination of the subrogation rights of municipalities and short term disability carriers.   We will keep a watch for court decisions interpreting this law.

[1] Subdivision 4 was added to GOL 5-101 and a new section 5-335 was added.