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Does an insurance company have a right to take money from your settlement if you have FULL health plan coverage under them?

San Jose, CA |

I was involved in a car accident which resulted in me having to spend a month in the hospital. At the time of my accident, I was FULLY covered under 2 insurances, one being Kaiser permanente. I was wondering if anyone had any knowledge as to why KP is trying to take money from my settlement in order to pay for my medical expenses when I was completely covered under their health plan?

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Attorney answers 5


Your insurance company has a right to seek subrogation. That means that your insurer has a right to be reimbursed for paying on your medical bills when your were subsequently paid by the other party. If you have an attorney, he/she should have negotiated the subrogation down.

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Pursuant to the California Insurance Code, insurance companies are allowed to recover the amounts they expend on an insured, if the amounts expended were the result of negligence by a 3rd party.

Had you retained an attorney like me I could have negotiated the lien down to a level which would have allowed you to keep a significant amount of money in most cases.

This is another example of why you should never handle these types of cases on your own, in the end you flat out will not get as much money as you would with an attorney.

No attorney/client relationship is or shall be created by this response on Avvo to non-clients of The Law Offices of Norman Gregory Fernandez.

John Gus Zgourides

John Gus Zgourides


The three varieties of subrogation or reimbursement—equitable, contractual, and statutory—represent three separate and distinct rights that, while related, are independent of each other. If health insurance is provided through an employer plan, federal law may apply (the Employee Retirement Income Security Act, or "ERISA"). In addition to state and federal laws, health plans usually contain "subrogation" clauses which give the plan a contractual right to muscle in your recovery. Unfortunately, most consumers lack the ability to understand what the clause means, much less the muscle to negotiate it out of the policy or plan language before an accident-related recovery. Traditionally, in Texas we argued that subrogation was not equitable in a case with an inadequate recovery (such as low liability insurance policy limits with catastrophic injuries), We relied on the "Made Whole Doctrine." The Texas Supreme Court distinguished equitable subrogation from contractual subrogation in Fortis v. Cantu, essentially throwing out the Made Whole Doctrine if subrogation language is in the plan or policy language. Where a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy. The Texas Supreme Court has “long recognized a strong public policy in favor of preserving the freedom of contract.” I usually seek waiver or reduction of these "liens." I also demand provision of the plan, the plan summary, and all documents relied upon by the health insurer in asserting its claims. Under ERISA, if they fail to timely comply, fines begin accumulating. As an aside, government benefits such as Medicare, Medicaid, and VA benefits, also assert rights of reimbursement in tort cases. That's another thorny (and related) subject.


Most insurance plans provide for subrogation if you recover against a third party. Your health insurance company can explain it to you. You should be using an attorney.

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Kaiser, like every health insurance provider, has a clause in the health insurance contract that allows it to seek reimbursement from a settlement with a 3rd party because that settlement, at least in theory, includes reimbursement of the medical cost. You should be able to negotiate a reduction of the amount with Healthare Recoveries, and under no circumstances can Kaiser take more than 50% of your settlement under Civil Code §3040.

It may be a good idea to talk to an attorney about the situation. Many lawyers will even give you information over the phone.

Good luck.


It all depends on the language in your health plan contract. This is complicated stuff-- sometimes if the plan is not well-drafted, you can wind up paying nothing back to the carrier. If the $$ in issue are >$10K, you should get a lawyer.

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