Until recently, there had been a big question over whether a PIP or Med Pay carrier had a right of subrogation in Arkansas. A.C.A. § 23-79-146 authorizes subrogation rights for any casualty insurer, accident and health insurer. It provides as follows:
§ 23-79-146. Subrogation Recovery.
(a)(1) Any casualty insurer, accident and health insurer, health maintenance organization, self-funded group, multiple-employer welfare arrangement, or hospital or medical services corporation that issues, delivers, or renews a contract of accident and health insurance or individual or group accident and health care coverage containing a provision for subrogation for any benefits or services of any kind furnished to an insured, or for payments made or credit extended to or on behalf of any covered person for a physical condition or injury caused by a third party or for which a third party may be liable, shall be entitled to receive subrogation benefits from the third party.
(2) In the event that an insured or covered person recovers from a third party, reasonable cost of collection and attorney’s fees thereof shall be assessed against the insurer and the insured in the proportion each benefits from the recovery. (b) In the event more than one (1) casualty insurer, accident and health insurer, health maintenance organization, self-funded group, multiple-employer welfare arrangement, or hospital or medical services corporation having contractual subrogation rights is entitled to the subrogation benefits specified in subsection (a) of this section, reasonable cost of collection and attorney’s fees thereof shall be assessed against the insurers and the insured in the proportion each benefits from the recovery.
A.C.A. § 23-79-146 provides for a general right of subrogation. However, in Arkansas, an insurer which has paid Med Pay or PIP benefits to its insured under § 23-89-202 was said to have been granted only a lien upon and a right of reimbursement from, any tort recovery or settlement obtained by its insured, less cost of collection. Daves, supra; Northwestern Nat’l Ins. Co. v. Am. States Ins. Co., 585 S.W.2d 925 (Ark. 1979); Carnathan v. Farm Bureau Ins. Co., 705 S.W.2d 885 (Ark. 1986); National Inv. Fire and Cas. Ins. Co. v. Edwards, 633 S.W.2d 41 (Ark. App. 1982). A.C.A. § 23-89-207 provides for this right of reimbursement as follows:
§ 23-89-207. Insurer’s Right Of Reimbursement.
(a) Whenever a recipient of benefits under § 23-89-202(1) and (2) recovers in tort for injury, either by settlement or judgment, the insurer paying the benefits has a right of reimbursement and credit out of the tort recovery or settlement, less the cost of collection, as defined.
(b) All cost of collection thereof shall be assessed against the insurer and insured in the proportion each benefits from the recovery.
(c) The insurer shall have a lien upon the recovery to the extent of its benefit payments.
(d) The insurer for the party who is liable in damages to the injured party shall not condition settlement or payment of a judgment in favor of the injured party upon issuing a single check jointly to the injured party and the injured party’s insurance company.
Trial lawyers have argued that this statute limits the PIP/Med Pay carrier to a simple lien and does not authorize a subrogation suit to be filed on behalf of the subrogated carrier. Despite the fact that § 23-89-207 refers only to a right of reimbursement, the Arkansas Supreme Court has held that the right to reimbursement under § 23-89-207 is a right to subrogation vested in the insurer that is established by statute. Ryder v. State Farm Mut. Auto. Ins. Co., 268 S.W.3d 298 (Ark. 2007).
On February 21, 2013, the Arkansas Supreme Court decided the case of Progressive Halcyon Ins. v. Saldivar, 2013 Ark. 69 (Ark. 2013). In that case Progressive issued a motorcycle insurance policy to Brian McCallum that contained accident and healthcare coverage. The policy included a provision for subrogation of payments made for any injury caused by a third party. On July 18, 2008, McCallum rode his 1996 Suzuki motorcycle and was struck by Saldivar, driving a 1993 Chevrolet Astro, who failed to yield at a stop sign. McCallum submitted a claim for no-fault medical benefits to Progressive and was paid $2,677. Notably, McCallum did not file a third-party negligence suit against Saldivar, who pled guilty for failure to yield, and her insurance company, State Farm, paid for McCallum’s property damage. On July 6, 2011, Progressive filed a subrogation suit against Saldivar seeking subrogation for the $2,677 in benefits paid to McCallum. Progressive based its claim on § 23–79–146, Arkansas’ general subrogation statute. Saldivar filed a motion for summary judgment arguing that under § 23–89–207, Progressive had only a lien and a right of reimbursement. It argued that the insured must first recover in tort for the injury, either by settlement or judgment, before Progressive could recover any medical payments and that McCallum had not filed suit in tort or settled with Saldivar. Therefore, she alleged that Progressive lacked standing to pursue subrogation or reimbursement. The trial court granted summary judgment and dismissed Progressive’s case with prejudice, ruling that Progressive could not recover because there was no evidence of a settlement by McCallum. Progressive appealed.
On February 21, 2013, the Supreme Court announced that § 23-89-207 actually does create a right of subrogation that is subject to the Made Whole Doctrine and that § 23-89-207 does not provide the exclusive remedy when a PIP or Med Pay carrier seeks to recover its payments from a third party. Id. A.C.A. § 23-89-207 mandates that an insurer’s right of reimbursement from its insured only arises whenever: (1) no-fault medical benefits have been paid to the insured, pursuant to § 23–89–202; and (2) the insured has recovered in tort for injury, either by settlement or judgment. Id.
The Supreme Court said that the use of the conjunctive word “and” indicates that these criteria serve as prerequisites before an insurer shall have a right to reimbursement from its insured. Id. However, if these criteria are not met, the PIP/Med Pay carrier can pursue general subrogation benefits from the third party as permitted by § 23-79-146. There are few reported cases specifically allowing a PIP carrier to file suit against a tortfeasor and enforce its subrogation rights provided for in a legitimate subrogation clause contained within its automobile policy, but based on the language of Ryder, and the fact that the statute does not specifically deny such a right, it was suspected that such a subrogation cause of action could be maintained. The Supreme Court confirmed this in Saldivar.
If you should have any questions regarding this article or subrogation in general, please contact Gary Wickert at [email protected].