The subrogation trap: Another argument against damage caps
The Wall Street Journal has the sickening story of a brain-damaged woman who is losing all of her settlement to none other than Wal-Mart:
JACKSON, Mo. -- A collision with a semi-trailer truck seven years ago left 52-year-old Deborah Shank permanently brain-damaged and in a wheelchair. Her husband, Jim, and three sons found a small source of solace: a $700,000 accident settlement from the trucking company involved. After legal fees and other expenses, the remaining $417,000 was put in a special trust. It was to be used for Mrs. Shank's care.
Instead, all of it is now slated to go to Mrs. Shank's former employer, Wal-Mart Stores Inc.
Two years ago, the retail giant's health plan sued the Shanks for the $470,000 it had spent on her medical care. A federal judge ruled last year in Wal-Mart's favor, backed by an appeals-court decision in August. Now, her family has to rely on Medicaid and Mrs. Shank's social-security payments to keep up her round-the-clock care.
Wal-Mart absolutely has a right of subrogation; I'm not criticizing them for pursuing it. There are a few problems here. First, the settlement is way too low for these injuries. If all of the $417,000 was slated to be used for future medical care, then the settlement didn't include anything for noneconomic damages. That's a very crappy settlement, unless liability was very questionable. One way to prevent an injustice like this is for victims to receive a noneconomic damages settlement in excess of their economic damages settlement. Otherwise, the victim can literally end up with nothing while insurers get it all.
Second, we now have a case of an insurer being reimbursed at the expense of taxpayers. Again, I have no issue with subrogation, but isn't there something wrong with allowing subrogation to proceed when it means the taxpayers will have to step up?
Forget everything about "runaway juries" and "frivolous lawsuits." This case epitomizes the real problems with the civil justice system today: Individuals aren't properly compensated, major corporations have all the power, and quite often, taxpayers are called upon to pay for the negligence of others.