Wednesday, April 02, 2008

Right and Wrong

[Welcome Insurance Forums and CNN readers!]

This is a difficult subject.

On one hand, corporations & carriers are bound by contract (and sometimes law) to carry out some actions that many consider cruel or heartless.

On the other hand, we have seen situations where these same "villains" are willing to "bend the rules" in order to do what is morally right.

This is one of those situations.

Eight years ago, Debbie Shank was stocking shelves for the retail giant and signed up for Wal-Mart's health and benefits plan.

After a tractor-trailer slammed into her minivan, the 52-year-old mother of three lost much of her short-term memory and was confined to a wheelchair. She now lives in a nursing home.

Wal-Mart has certainly been on the receiving end of criticism over the years for a number of practices that, some believe, are only to pad their profits. Their health care benefit package is one that has been visited and revisited many times.

Wal-Mart's health care plan lets the retail giant recoup the cost of its expenses if an employee collects damages in a lawsuit. And Wal-Mart set out to do just that after Shank and her husband, Jim, won $1 million after suing the trucking company involved in the wreck. After legal fees, the couple received $417,000.

A carriers right to subrogation is in almost every policy, including health, auto, homeowners and more. Essentially a subrogation clause reimburses a carrier for losses paid that they were not technically liable for.

In this case, they paid medical expenses that were directly the liability of the at fault party (the truck driver in this case). When courts found fault and awarded damages Wal-Mart was perfectly within their right to recoup a portion of the claim dollars paid on behalf of Mrs. Shanks.

Wal-Mart sued the Shanks to recoup $470,000 it paid for her medical care. However, a court ruled that the company could only recoup about $275,000 -- the amount that was left in a trust fund for her care.

One would argue this was a heartless move by Wal-Mart.

But what happens if Wal-Mart fails to exercise their rights to recovery? This could set a precedence for future cases where they did pursue their legal rights.

In other words, to use terms floated around by the press, it would not be FAIR for Wal-Mart to pursue one action while failing to do so in another.

In fairness to Wal-Mart, they reversed their decision to pursue the claim against the Shanks and indicated they would modify their plan to allow "more discretion" in the future.

Wal-Mart did the right thing. They were right in initially pursuing their legal right to collect under subrogation. They did the right thing in allowing the Shanks to keep their award.

The sad thing is, no one wins in this.

No one.
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