The latest big legal story has been the fiasco with Wal-Mart and its attempt to seek a share of a former employee’s personal injury settlement. This is actually not an uncommon occurrence.

The story underlying this tragedy is heart-wrenching. A mother, Deborah Shank, was crushed in her car by a tractor trailer. She survived the wreck, but was left brain-damaged and permanently disabled. The financial blow from injuries overwhelmed her family and her husband divorced her, so that she would qualify for insurance through Medicaid.

The family hired an attorney to sue the trucking company of the driver of the rig that had destroyed Ms. Shank’s life. They received a settlement of $1 million dollars and, after paying for expenses, the attorney’s fees, and outstanding medical bills, the Shank family’s share of the settlement was reduced to $417,000.00. Thankfully, her medical bills of $470,000.00 were paid by Ms. Shank’s medical insurance coverage through Wal-Mart.

Sadly, this was not the end of the story. Wal-Mart sued Ms. Shank for the medical bills it had paid, under the terms of a clause in Ms. Shank’s health insurance policy entitling it do so. Given that the bills paid exceeded what was left of the settlement, Ms. Shank and her family would end up with nothing from the settlement.

This is a common problem in personal injury cases; it is called “subrogation.� The health insurance policy has a clause permitting the insurance company to seek recovery for the health insurance bills paid, if the insured receives a settlement from a lawsuit. This right of subrogation is strongest, as in the case of Wal-Mart, where the insurance policy is “self-insured,� meaning that Wal-Mart actually pays all of the bills, as opposed to paying premiums to a health insurance company that pays them.

I suspect that Ms. Shank’s personal injury attorney may have committed a few errors. First, the settlement could have specifically allocated all of the settlement, in a case with such serious injuries, to compensation for “pain and suffering.� This would have, in theory, cut off Wal-Mart’s subrogation claim, as none of the settlement actually would have compensated Ms. Shank for her medical bills.
Second, her attorney could have acknowledged the subrogation claim and attempted to negotiate a side-settlement with Wal-Mart. Why would Wal-Mart be willing to do so? The key is that Wal-Mart could not directly sue the trucking company for Ms. Shank’s medical bills; its rights “piggy-backed� on Ms. Shank’s claim, which she had to pursue for Wal-Mart to be able to get a dime. Hence, the attorney would have threatened to seek no compensation, in exchange for a lowered subrogation claim.

Georgia has something called a “make whole� doctrine. In many cases, it protects an injured party from a subrogation claim filed by a health insurer. This doctrine says that a third party, like an insurance company, cannot seek subrogation compensation unless the insured is “made whole� by a settlement or verdict. Unfortunately, though, this doctrine probably does not apply to a self-insured policy like the one offered by Wal-Mart.

Hopefully, the retail giant will see the folly of fully enforcing its rights. However, Wal-Mart is well-within its rights to seek a share of the Shanks’ settlement. This result may be legal, but this is not justice. Something to think about the next time you shop there.