As of November 12, 2009,

CPLR 4545was amended to preclude private health insurers from recovering pursuant to their contractual and equitable subrogation rights. While they have not formally been barred from initiating claims against tortfeasors, they will now be blocked from asserting any claims against any “settling party”. This means either the plaintiff or defendant.

The intent of the statute, which was sponsored and strongly advocated by the New York State Trial Lawyers Association, a plaintiff’s organization, was to protect the claimant and his attorney from subrogation claims by private health insurers after cases had settled. Until

Fasso v Doerr,12 NY3D 80,was decided in March, 2009, health providers claimed that they were entitled to a part of an injured party’s recovery.Fassoemphasized the “made whole” doctrine and held that only after the injured party was fully compensated could the health care provider assert a claim. That case solved the immediate problem.

The newly created

General Obligations Law 5-335goes further thanFassoin that it provides complete protection to the settling defendant, even if there remains insurance coverage available.It provides that upon settlement, all recovery rights as against the settling parties, plaintiff and defendent, are extinguished. There may be no recovery against those parties.

This insulation from suit does not extend to other medical providers in tort actions such as no fault recovery provisions in

APIP. Those are specifically protected and preserved. Presumably, APIP will still have an “equitable lien” (11 NYCRR 65-1.2)on any plaintiff’s recovery where a “General Release” is tendered. In a like manner,Workers’ Compensationrecovery provisions are not impacted by these statutes. Also, in that they are Federal,Medicaid, Medicareand ERISArecovery rights are not modified by this legislation. [see other knols by this author for discussions on those topics and the of advantages of issuing a “pain and suffering only” release]

The only real benefit from this legislation accrues to liability insurance companies who now will get a pass from their common law obligation to reimburse private health care providers for their expenses in personal injury actions. There is nothing in the law, however,that precludes a health insurer from joining in a pending action or even initiating its own claim prior to the injured party starting suit. Were an insurer to obtain a judgment against a liability carrier, that would seem to be enforceable even if later the injured party were to settle his own claim.

There also would seem to be nothing to prevent the plaintiff’s attorney from also representing the health insurer in order to guarantee that the two claims were settled simultaneously. While there might be ethical considerations in such an arrangement, the Courts do not seem disturbed by exactly the same set up with Workers’ Compensation, APIP, Medicaid, Medicare or ERISA. It would be inconsistent to mandate that an attorney represent multiple claimants and disperse lump sum settlements in the above cases and then hold it unethical to do the same thing relative to private health care providers.

The clumsiness in this analysis

Rule 1.8:(g) of the Rules of Professional Conductwhich provide that“a lawyer who represents two or more clients shall not make or participate in the making of an aggregate settlement of or against the clients.”

These new statutes may create more problems than they solve. On their face, they seem to make the ethics issue easier to follow. However, given the above apparent inconsistencies in application together with the opportunity for the plaintiff’s attorney to increase his fee by representing the additional party, it is likely that private health insurer recovery claims will not go away. There may be not even be a need for a”formal” retainer in exactly the same manner with Medicare and Workers’ Compensation recoveries are handled. For a fee, the plaintiff’s attorney may decide to act as an intermediary between the health care provider and the liability carrier. As an alternative, the plaintiff’s attorney could demand a premium on his personal injury settlement in exchange for executing a general release that bars the health care provider from ever recovering against this defendant.

Clearly, this legislation was drafted prior to

Fasso. It was drafted to address a specific problem that was becoming cumbersome and an impediment to settlements. However, its enactment has come after the Courts already solved the problem. And, it very well may have created more problems with “loopholes” in the legislation itself. With all due respect, this legislation is ill-conceived and executed and will create more problems that it purportedly solves.