SECTION 5

Update on Subrogation
Law In Colorado

Presented by

J. Kyle Bachus, Esq.

Bachus & Schanker, LLC
Denver, CO
Things Change: Colorado’s New State Subrogation Law

J. Kyle Bachus

What is the statute about?

• The made whole rule is now statutory law in Colorado
• Common fund doctrine is also now statutory law in Colorado as well as common law.
See, Hawes v. Colorado Division of Insurance, 65 P.3d 1008 (Colo. 2003).
So simply speaking:
• If the injured party obtains policy limits, the health insurance / med pay does not have a
winnable claim to the settlement proceeds
• If the injured party gets less than the policy limits, the health insurer/med pay may have
a winnable claim for the settlement proceeds at arbitration

The Statute and Process Applies to Everything Except:

• Medicaid
• Workers’ Compensation
• Hospital Liens (the statute was not intended to impact lien obligations)
• Possible / probable Federal Preemption for Medicare and Self‐Funded ERISA Plans

Real Life Example:

• Spinal surgery / rear‐end collision
• Six (6) months of lost wages
• $130,000.00 in medical bills
• Only $100,000.00 in liability coverage

Not Made Whole

10‐1‐135(4)(a)(2) – Where a party is not made whole, a form letter must be sent to the
payer of benefits to void subrogation recovery language.
MADE
Less is Probably More:
• No need to make arguments at this stage why they client received less than the policy
limits but still has not been made whole.
• No need to instruct them that they must demand arbitration within 60 days.
• Short, simple, and straight forward.

The Notice Letter in Your Practice

• Why?
When the clock starts ticking, the payer of benefits has 60 days to demand arbitration
• Have form letter ready to send at every mediation and the day of any settlement; If you
wait 60 days and the insurer waits 60 days, the injured party has to wait 120 days/4
months for money.

Response to the 60 Day Form Letter:

No demand for arbitration within 60 days
OR
Demand arbitration within 60 days

If a Demand for Arbitration Made, What Occurs:

• Got policy limits?
• Rebuttal presumption – not made whole
• Arbitration takes place with the rebuttable presumption that client was NOT made
whole

If a Demand for Arbitration Made, What Occurs:

• Not got policy limits?
• Payer of Benefits gets the rebuttable presumption that the client WAS MADE WHOLE.

Practice Pointers for Arbitration

Consider proposing that a 5 page brief be submitted to a single arbiter for a decision
(insurance companies have experience with arbitrations being decided on paper)

Arbitration Form:
Arbiter or panel are asked to decide the following:
Was the injured party fully compensated for all of his/her damages by the settlement
amount of _____? “Check Yes or No”

Who pays for Arbitration?

The answer…Who knows?

Effective Date: When can you use the statute?

For all settlements or judgments after August 11, 2010.
The reason is that C.R.S. §10‐1‐135 Section 2(2) “the provisions of this act shall apply to
a RECOVERY made on or after the applicable effective date of this act” RECOVERY is
defined at C.R.S. §10‐1‐ 135(2)(d) as “settlement or judgment”

No Direct Action for Payer of Benefits

CRS §10‐1‐ 135(6)(a)(II) – Another 60 Day Rule:
You must file suit 60 days before the statute of limitations to preclude the payer of
benefits from filing its own action – play it safe, file 60 days before the statute of
limitations.

Two more benefits to the statute:

• One name on the check, C.R.S. §10‐1‐135(6)(b)
• Any money the insurance gets is credited against a life time cap on the health insurance
benefits of the injured party, C.R.S. § 10‐1‐135(8)

Finally: Billed vs. Paid

C.R.S. §10‐1‐135(10)(a):
Colorado law now clearly declares that the amount of any discount or write‐off shall not
be admitted into evidence.
1. C.R.S. §10‐1‐135(10)(a) – states “the fact or amount of any collateral source payment
or benefits shall not be admitted as evidence in any action against an alleged third‐party
tortfeasor or [UM claim].”

Benefits defined – C.R.S. §10‐1‐135(2)(a) – “Benefits” means payment or

reimbursement of health care expenses, health care services, disability payments, lost
wage payments, or any other benefits of any kind, including discounts and write‐offs,
provided to or on behalf of an injured party under a policy of insurance.