Jud Waltman Featured In Texas Lawyer Magazine

Judson A. Waltman is the managing attorney for personal injury, product liability and maritime litigation for The Lanier Law Firm in Houston.

This year produced two distinct and important changes that will impact Texas personal injury practitioners going forward. These changes came in the form of new rules governing health insurer subrogation rights, and the Texas Supreme Court’s decision to severely curtail trial judges’ ability to issue spoliation instructions.

HB 1869—also known as the Subrogation Reform Bill—was signed into law by Governor Rick Perry during the 2013 legislative session, and took effect on Jan. 1, 2014. The law caps the amount that health insurance companies can recover from the proceeds of their insured’s action against a third-party defendant, thereby preventing the injured party’s recovery from being entirely subsumed by subrogation liens.

The new rules are codified at Texas Civil Practice & Remedies Code chapter 140, and state that an insurer can only recover up to one-half of what an injured party has recovered from the defendant. However, if the injured party is represented by an attorney, then the insurer must also contribute a portion of that attorney’s fees from its share of the recovery (up to one-third of its half of the recovery). Thus, in cases where the injured party is represented by an attorney, the insurer’s subrogation recovery is effectively limited to one-third of the plaintiff’s gross recovery from the defendant.

This change ensures that a personal injury victim will receive at least some of the claim proceeds as compensation for his or her injury, rather than having the entire recovery swallowed up by insurance liens. Previously, where an insurance contract provided for subrogation, insurers could assert large subrogation liens over much, if not all, of an insured’s recovery—regardless of whether the insured had been “made whole.” While many health insurance plans are covered under this new rule, it is important to note that it is not applicable to Medicare, Medicaid/CHIP, workers’ compensation, and self-funded ERISA plans.

A separate—but also crucial—change to Texas law came in Brookshire Brothers v. Aldridge, the Texas Supreme Court opinion severely limiting trial judges’ ability to issue adverse-inference spoliation instructions when a party loses or destroys evidence. Under this remedy, a judge instructs a jury that it may presume that the lost evidence would have been unfavorable to the spoliating party. Before Aldridge, trial judges enjoyed a great deal of discretion to issue spoliation instructions, depending on the nature of the case, the parties involved, and the circumstances of the spoliation.

In Aldridge, the court ruled that, because the spoliation instruction is a severe remedy that carries a high risk of “tilt[ing] a trial in favor of a nonspoliating party,” it should not be used where the spoliation was the result of mere negligence, except in the rarest of cases where the nonspoliating party would be irreparably prevented from presenting its case. According to the court, the adverse-inference spoliation instruction is appropriate only for instances of intentional spoliation, and only after the trial court determines that a lesser remedy would be “insufficient to ameliorate the prejudice” caused by the spoliation.

Many worry that the new spoliation guidelines do not afford trial judges the flexibility needed to deal with the myriad and varied retention practices of the parties before them. In her Aldridge dissent, Justice Eva Guzman pointed out that the new framework does not “provide trial courts with the necessary discretion to appropriately remedy the wrongful destruction of evidence in an era where limited duration retention policies have become the norm[.]” Courts and practitioners should be on the lookout for companies altering their document retention policies to take advantage of the new rule.

Judson A. Waltman is the managing attorney for personal injury, product liability and maritime litigation for The Lanier Law Firm in Houston. He represents plaintiffs in a variety of claims involving personal injuries, products liability and maritime litigation.

Read more: Texas Lawyer Magazine

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