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U.S. Supreme Court Decision Impacts Injured Party’s Right of Recovery

By Saunders Law Group on August 20, 2013


On April 16th, 2013, the United States Supreme Court issued its opinion in U.S. Airways v. McCutchen. The decision will have lasting and unfortunate impacts on an injured party’s right to obtain full compensation for injuries.

The facts of the case were relatively straightforward: McCutchen suffered significant injuries in a car accident in which the other driver was at fault. McCutchen retained attorneys to pursue a claim but soon discovered that the at fault driver was minimally insured with no more than $10,000.00 in available coverage. McCutchen had Uninsured/Underinsured Motorist coverage that provided him with a total of $100,000.00 in additional monies. McCutchen thus received a gross total of $110,000.00 but had to pay his attorneys 40% of the recovery leaving McCutchen with a net recovery, after attorneys’ fees, of $66,000.00.

U.S. Airways had a health insurance plan that covered McCutchen’s injuries and that health plan paid out $66,866.00 in medical benefits. Once settlement was achieved, U.S. Airways demanded that McCutchen repay the health plan for the full amount ($66,866.00) paid on McCutchen’s behalf.

McCutchen argued that U.S. Airways should reduce its claim to reimbursement by at least the amount of money (40%) that McCutchen had to pay over to his attorneys. McCutchen’s argument was based on well-established principles of law which generally required the health care provider to pay the same pro-rata share of legal expenses as McCutchen had paid since it was McCutchen’s attorney’s efforts that produced the recovery in the first place. If McCutchen had to pay 40% to achieve a recovery, certainly he believed that U.S. Airways should reduce its claimed lien by that same percentage. After all, if McCutchen had not pursued his claim, U.S. Airways would recover nothing.

Unfortunately, the United States Supreme Court ruled in favor of U.S. Airways based almost exclusively on the contact language contained within the health care plan which called for full reimbursement. While the U.S. Supreme Court did provide some window of hope to future claimants, the opinion will cast a long and large shadow on the ability of injured individuals to obtain full recovery for their injuries.

Cautious Plaintiff counsel will want to explore early on in the case whether the medical benefits provider is willing to negotiate its lien. Insurance companies with large payouts in health benefits that insist on full recovery might well find themselves getting nothing if Plaintiffs simply refuse to pursue their claim due to the fact that the insurance company providing medical benefits will obtain all or most of the settlement monies.

Clearly, this is a discussion that should happen with each client early on in the case lest someone find out after years of litigation that the net monies recovered do not benefit the injured Plaintiff at all. That would be a very unhappy client indeed and one who would be justified in his or her anger at the system of justice that deprived them of financial compensation for their injuries while rewarding medical insurance companies. After all, those same medical insurance companies have been paid already—in the form of sky high premiums---for the medical benefits paid out for their insureds.

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