Auers v. Progressive Direct Ins. Co.

(Published, No. A15-1832) Minnesota Court of Appeals, April 25, 2016

In Auers v. Progressive, the appellate court holds that a negotiated discount is a collateral source subject to offset under Minn. Stat. Sec. 548.251, and a subrogation right cannot exceed the amount that was paid by the subrogee.

In June 2012, Ms. Karen Auers was injured in a car crash.  Ms. Auers was insured by Progressive which provided up to $100,000.00 in underinsured motorist benefits.  Ms. Auers incurred $178,083.44 in medical bills for her injuries.  Progressive paid $20,000.00 of those medical bills in no-fault benefits.  The remaining $158,083.44 were paid by Ms. Auer’s personal health insurer, Blue Cross Blue Shield (BCBS).  BCBS negotiated discounts with Ms. Auers’ medical providers and paid her bills in full for $72,216.85.  BCBS asserted a subrogation lien for the $72,216.85 that it paid.

Ms. Auers settled her tort claim against the tortfeasor’s insurer for the $100,000.00 insurance policy limit.  Ms. Auers died for reasons unrelated to the crash.  Her surviving husband was appointed trustee for her heirs and next of kin to continue her case.  In June 2013, Mr. Auers obtained a release of the subrogation interest and claim from BCBS; BCBS accepted $5,000 in exchange for an assignment of its right of subrogation.  Mr. Auers then sued Progressive, claiming underinsured motorist benefits.  Both parties moved for summary judgment regarding the legal effect of the BCBS assignment.  Mr. Auers argued that the recoverable damages should not be reduced by the negotiated discount because the collateral source statute, Minn. Stat. Sec. 548.251, exempted both the amount paid by BCBS and the negotiated discount and they had purchased and asserted BCBS’s subrogation rights.  Progressive argued that Mr. Auers was entitled to recover only the amount of BCBS’s subrogation, and that the negotiated discount remained a collateral source to be deducted from any award.  The district court granted summary judgment in favor of Mr. Auers and Progressive appealed.

In this case, the court notes that, in order to recover underinsured motorist insurance benefits, Mr. Auers was required to prove that her claim for special damages, after collateral-source offsets, was more than $100,000.  The question in this case was whether the amount of the negotiated discount that BCBS obtained from Ms. Auers’ medical providers was a collateral source that should offset Ms. Auers’ damages.  The court cites the collateral source statute, Minn. Stat. Sec. 548.251, subd. 2(1), which excludes “amounts of collateral sources…for which a subrogation right has been asserted” from collateral source offsets.  The court then concludes that a subrogation right could not be asserted, either by BCBS or by Mr. Auers after the assignment, for the amount of the negotiated discount.  Rather, BCBS’s actual subrogation lien, which is the amount that BCBS actually paid ($72,216.85) was the only amount that would be excluded from the collateral source offset.  Therefore, the court found that the negotiated discount of $85,869.59 was a collateral source that offset Mr. Auers’ claim for special damages.  After the offset, Mr. Auers’ remaining claims for special damages were less than $100,000 and, as such, the court found that Mr. Auers was not entitled to underinsured motorist insurance coverage.


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