California law (make whole doctrine, and common fund doctrine) applies to private insurance as well as to insured ERISA plans.  Despite ERISA's broad preemption provision in 29 U.S.C. 1144, the "saving clause" in the same section preserves to the states the power to regulate insurance.  Notably, the California approach to the make whole rule appears identical to the federal rule.  California courts are holding that the insured most be fully compensated before an insurer can recover under its subrogation provision. Any citation to state authority should include Chong, because it is a federal diversity case applying California law.

In recent California cases, the court is engaging in lengthy discussions of the make whole rule. The courts are noting that subrogation has its source in equity and arises by operation of law and that the geenral subrogation provisions of most insurance contracts "add nothing to the rights of subrogation that arise as a matter of law."  Courts also notate the fact that "the insurance company may not assert its subrogation claim directly against the third party tortfeasoer on its own behalf."

It is questionable whether trial courts would countenance health insurance insurance carriers intervening in personal injury cases where the make whole rule appeared to defeat the carriers' claims entirely.  Only time will tell. 
2 Comments
Original subrogationinvestigation, "Kaiser Permanente Plunders Patients' Piece of the Pie," is posted on YouTube.
by Jacquelyn Finney March 21, 2011 at 01:35 PM
Original subrogationinvestigation, "Kaiser Permanente Plunders Patients' Piece of the Pie," is posted on YouTube.
by Jacquelyn Finney March 21, 2011 at 01:35 PM
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