Opinion ID: 155998
Heading Depth: 2
Heading Rank: 2

Heading: Equitable Subrogation Principles

Text: 43 Copeland also asserts the district court erred in refusing to apply equitable subrogation principles to reduce or eliminate SRS' share of the settlement proceeds. Copeland argues that under equitable subrogation principles, namely the made whole rule, SRS is entitled to recover only after Copeland is fully compensated for her loss. Copeland asserts that she was not fully compensated by the $250,000 settlement because her total alleged damages exceeded $6.4 million, leaving SRS entitled to nothing from this settlement. 2 Alternatively, Copeland asserts that SRS' recovery must be prorated to allow subrogation on a proportional basis of damages to recovery. Copeland specifically argues that because the settlement represents only 3.886% of her total alleged damages, SRS should recover at most only 3.886% of the medical expenses it paid, less its share of litigation expenses and attorney fees. In rejecting Copeland's arguments for application of general equitable subrogation principles, the district court concluded that § 39-719a provides a statutory right on the part of the state to full recovery of medical benefits provided to the plaintiff.... There is no provision for application of general common law or equitable principles, which require full recovery as a prerequisite to subrogation. 44 Kansas courts have not yet interpreted the language of § 39-719a to determine whether SRS' statutorily created right of subrogation is subject to traditional equitable subrogation principles. Copeland therefore relies on cases from other states in arguing that the statute incorporates unexpressed equitable principles because it creates only a subrogation right and does not provide for a lien. See, e.g., Paulsen v. Department of Soc. & Health Servs., 78 Wash.App. 665, 898 P.2d 353, 354, 356 (1995) (holding state's statutory right to recover medical payments was not subject to equitable subrogation principles because the statute provided for a lien in addition to a subrogation right and because statute's language emphasized full reimbursement to state). A review of the cases cited by Copeland and the specific language and structure of § 39-719a indicates that § 39-719a should not be read to incorporate the equitable principles urged by Copeland. 45 In construing medical assistance reimbursement provisions comparable to § 39-719a, courts have generally concluded that traditional equitable principles do apply to a state's statutory subrogation right absent some indication of legislative intent to displace such principles. 3 See White v. Sutherland, 92 N.M. 187, 585 P.2d 331, 334 (Ct.App.1978); see also Hedgebeth v. Medford, 74 N.J. 360, 378 A.2d 226, 230-31 (1977). We therefore look at the specific language of § 39-719a to determine whether the Kansas legislature has expressed or otherwise indicated an intent to abrogate or incorporate the equitable principles advanced by Copeland. 4 46 We first note that § 39-719a contains no language explicitly providing that SRS' subrogation right is limited by general equitable principles, nor is there language explicitly giving the court discretion to apportion proceeds according to such principles. Cf. Davis v. City of Chicago, 59 Ill.2d 439, 322 N.E.2d 29, 31-32 (1974) (discussing statute providing that [t]he court may determine what portion of the recovery shall be paid to the injured person and what portion shall be paid to the [state agency providing medical assistance] and stating that the clear intent of this language was to permit trial courts to exercise discretion in apportioning any recovery between the state and injured person). Specifically, there is no indication in § 39-719a that SRS is limited to recovering a pro rata share of the medical assistance recipient's settlement proceeds, or that SRS may only recover if the recipient is fully compensated. 47 Although the statute does not indicate that SRS' recovery is limited by general equitable principles, the statute does expressly place a number of specific limitations on SRS' recovery. The primary statutory limitations on SRS' recovery are found in subsection (b) and subsection (c). 5 Section 39-719a(b) provides for the allocation of attorney fees, stating that the court shall fix attorney fees, which shall be paid proportionately by [SRS] and the injured person ... in the amounts determined by the court. Kan. Stat. Ann. § 39-719a(b). This subsection thus provides the court with some discretion in allocating attorney fees. The subsection further provides, however, that the fees paid by SRS may not exceed either two-fifths or one-third of the medical assistance recovered, depending on whether there was a trial or a settlement prior to trial. 6 See id.; cf. Walker v. District of Columbia, 682 A.2d 639, 644 (D.C.1996) (holding equitable principles statutorily abrogated partly because statute explicitly created exception to full reimbursement to government by requiring government to pay portion of medical assistance recipient's attorney fees). Section 39-719a(c), as discussed previously, also places a limitation on SRS' recovery when the injured party's total damage award has been reduced as a result of negligence attributed to the party pursuant to § 60-258a. See Kan. Stat. Ann. § 39-719a(c). 48 Because the statute contains these express limitations on SRS' subrogation right, we are reluctant to impose additional, implied limitations on SRS' recovery based on general equitable principles unexpressed in the statute. 7 Cf. Walker, 682 A.2d at 644 (stating [t]he Act itself defines the operative principles that govern these exceptions. There is no warrant for the judicial imposition of another, ill-defined exception [based on equitable principles] to the explicit distributive scheme of the [subrogation] statute); Norman J. Zinger, 2A Sutherland's Statutes and Statutory Construction § 47.11 (5th ed.1992) (stating that exceptions are not to be implied. Where there is an express exception, it comprises the only limitation on the operation of the statute and no other exceptions will be implied). 49 The general language creating SRS' subrogation right further indicates that, with the exception of the limitations discussed above, SRS is entitled to full reimbursement for all medical assistance payments made to the recipient. The statute provides that when SRS has paid for medical care and when a third party has a legal obligation to pay those medical expenses, SRS may recover the same from the recipient or from the third party and shall be in all respects subrogated to the rights of the recipient in such cases. Kan. Stat. Ann. § 39-719a(a) (emphasis added). As the district court indicated, the statute thus  'emphasize[s] reimbursement, which by definition denotes restoration of an amount equivalent to that expended or repayment in full.'  April 12, 1996 Memorandum & Order at 4 (quoting Paulsen, 898 P.2d at 356); cf. Dale v. Gubin, 879 S.W.2d 699, 700-01 (Mo.Ct.App.1994) (rejecting argument, based on equitable principles, that state's reimbursement must be reduced by proportionate share of attorney fees because statute unambiguously provided that state agency shall have a right to recover the full amount of payments made to a provider). See generally Unified Sch. Dist. No. 259 v. Sloan, 19 Kan.App.2d 445, 871 P.2d 861, 865-66 (1994) (rejecting, in insurance contract case, application of general equitable principles where insurance contract provisions creating subrogation right expressly provided for complete reimbursement). 50 After reviewing the statutory scheme and specific language of § 39-719a, we conclude that SRS' subrogation right is not subject to the equitable principles urged by Copeland. As in other cases in which courts have concluded equitable subrogation principles have been statutorily abrogated, the Kansas statute's explicit provisions limiting SRS' recovery in certain circumstances and the statute's language emphasizing full reimbursement for medical assistance payments made by SRS are indications that the legislature did not intend to reduce or eliminate SRS' recovery when the injured party has not been fully compensated by the injured party's settlement with the tortfeasor. 8 The statute's provisions and specific language instead indicate that the Kansas legislature has weighed medical recipients' need to be compensated for their injuries against the need for conservation of public funds, and has determined that, in general, the public funds have priority. Coplien v. Department of Health & Soc. Servs., 119 Wis.2d 52, 349 N.W.2d 92, 95 (Ct.App.1984). 51 We accordingly reject Copeland's arguments that the district court erred in refusing to eliminate SRS' recovery based on the made whole rule or to reduce SRS' recovery on a proportionate basis. 52