Common Fund Reinstated In Texas! Or Is It?

By admin  on 06/02/13

HB 1869, (full text here) passed in the last legislative session in Austin, purports to statutorily reinstate the common fund doctrine in Texas when it comes to the contractual subrogation rights of self-funded, non-ERISA health benefit plans.

But the statute has some ambiguity.

Specifically, when it comes to the definition of what a “recovery action” is.

Is it (a) the subrogee’s “independent” action to recover paid benefits (as 140.005 would lead us to believe), or is it (b) “an action to recover for a personal injury,” as 140.007 indicates?

If it is (b), what does 140.007(c) mean, exactly?

Does it mean the TOTAL fee a covered individual’s attorney is entitled to in a recovery action where a subrogee is “actively” represented can only ever be a court-determined portion of 1/3 of the subrogee’s recovery, which can only ever be, at a maximum, what the subrogee paid out?

So while I’m theoretically thrilled the common fund doctrine has been re-animated by this legislation, much remains to be seen concerning who is incentivized to do what by the new law.