Every personal injury attorney in Maryland and their clients need to know that most health insurance companies have a subrogation lien on any settlement or judgment obtained by their insured in a personal injury case.   The subrogation lien arises from the contractual obligation of the insured to reimburse the insurer for the insurer’s medical expenses incurred from any personal injury settlement or judgment obtained by the insured.  My colleague, Benjamin Meredith has written an excellent article about subrogation liens.  See  https://www.mdforjustice.com/?pg=MAJRecentNews&blAction=showEntry&blogEntry=99643  

When a person has private health insurance (health insurance not obtained through an employer), the insured is an entitled to a one-third (33.33%) reduction in the private health insurer’s subrogation lien.  See Maryland Courts & Judicial Article section 11-112.   The same is true if a person has health insurance through an employer, which is not self-funded or self-insured.

But when a person has health insurance coverage through a self-funded or self-insured employer, the health insurer will likely claim that ERISA preempts Maryland’s statute and will assert that it does not have to reduce its subrogation lien by any amount.  (Note that most small and medium size employers do not have a self-funded or self-insured health plan).

As a practical matter, a self-funded or self-insured employer health plan is almost always willing to negotiate a reduction in its subrogation lien.  For example, the health insurer may have incurred $150,000 in medical expenses to treat the insured’s personal injuries, but the party who injured the insured only has $100,000 in liability coverage on his automobile.  The insured will have no incentive to pursue a claim against the other driver if all $100,000 in settlement proceeds will have to be remitted to the health insurer.  In such situations, the health insurer will be receptive to a reduction in its subrogation lien pursuant to this well-known maxim: “A small percentage of a watermelon is a whole lot better than zero percentage of a grape”. 

When a child is injured. the parents have great leverage to negotiate a reduction in the subrogation lien against a self-funded or self-insured employer health plan.  While the minor has until the day before he or she turns 21 to file a lawsuit to recover compensation for personal injuries, the parents only have 3 years from the date of their child’s injury to file a lawsuit to recover reimbursement of the medical expenses incurred. See Garay v. Overholtzer, 332 Md. 339 (1993) (“Because parents’ claim for medical expenses was not required to be joined in same action brought by minor child injured by motorist to recover for child’s own personal injuries, parents’ claim for medical expenses was not tolled during minority of child, and thus parents’ failure to file their claim within three years from date of accident barred parents from recovering for any medical expenses for which they had paid or for which they would be obligated to pay during their child’s minority”).