Accidents happen, and if they’re someone else’s fault, you can go to court to try to get compensation for your medical expenses, lost wages, and pain and suffering. If you win, though, the pot of gold you receive may be considerably smaller than you expect: Your health plan may claim some or all of it as reimbursement for money it spent on your medical care.

It’s completely legal and it happens all the time. But a recent Supreme Court decision gives consumers ammunition to push back.

The basic facts of the case are common. In December 2008, a drunk driver ran a stop sign and hit Robert Montanile, seriously injuring him. Montanile had lumbar spinal fusion surgery and other medical treatment that cost $121,044, which was paid for by his employer plan, the National Elevator Industry Health Benefit Plan. Montanile sued the drunk driver and won a settlement of $500,000. He paid his attorneys $263,788 in fees and expenses, leaving him $236,212.

Montanile’s health plan claimed it was entitled to be reimbursed for his medical care.

Contract provisions allowing most health plans to reimburse themselves if a member receives a personal injury settlement or jury award are routine and often assert that the plan should be first in line for settlement or award money. The notion is that if the person is permitted to keep the money paid on his behalf for medical expenses, he’s essentially getting his medical bills paid twice, once by the insurer and then again under the settlement.

Montanile hired another lawyer to negotiate with the health plan, but when they reached an impasse, the lawyer informed the plan’s trustees that if he didn’t hear from them in two weeks, he would release the remaining settlement money to Montanile. When the plan didn’t respond, that’s what he did.

The health plan later sued Montanile for the money, but he said he had spent nearly all of it to pay his second lawyer and care for himself and his daughter. Lower courts ruled that even though he spent the settlement funds, the plan was entitled to reimburse itself from Montanile’s general assets. The Supreme Court disagreed, ruling 8-1 in January that the health plan was entitled to take only the specific pot of money he received in the settlement or goods that could be traced to it.

The case was remanded back to a lower court, and the plan may be able to recover some money from Montanile if it can trace assets to the settlement he received, said Radha Pathak, one of Montanile’s lawyers at Stris & Maher, the Los Angeles-based law firm that represented him in the appellate and Supreme Court cases.

In the simplest sense, the case turned on a lapse in timing. If the health plan had responded to the letter sent by Montanile’s attorney within 14 days, it might have received the funds it was entitled to.

“The clearest message is that if plans want to assert their rights, they need to do it promptly,” said Leslie Anderson, a partner in the Washington Resource Group at benefits consultant Mercer.

But the case also has a significant impact on consumers, who are often fighting an uphill battle in these “subrogation and reimbursement” cases. The Supreme Court’s decision makes it clear that plans can’t seize an individual’s general assets to pay themselves back for medical expenses. It may also improve consumers’ odds of receiving a larger portion of their settlement or jury award by prompting the health plan to negotiate early.

In these cases, problems sometimes arise when there’s not enough money to go around. The total — especially after paying legal bills — may not be large enough to cover the injured person’s medical bills as well as the amounts awarded for lost wages and pain and suffering. In those cases, health plans may claim all or a significant portion of the settlement, leaving the injured person who brought the lawsuit with nothing or much less than the amount awarded.

Jason Lacey, a partner at Foulston Siefkin in Wichita, Kansas, who represents employers in subrogation cases, said he understands how the process may seem unfair to individuals who have taken on the task of going to court. “I took the time to go out and file this lawsuit, and you’re swooping in at last minute and feeding off my efforts,” is how they might feel, Lacey said.

About half of the states have laws that limit or prohibit health plans from reimbursing themselves in subrogation cases until the consumer has received all that she was awarded, such as lost wages and pain and suffering. But those laws don’t apply to self-insured plans that pay health care claims directly rather than buying insurance — a process generally used by large businesses.

Although the Supreme Court’s decision doesn’t alter the general landscape of these cases, it may encourage plans to sit down and negotiate with an injured worker sooner to agree on how to divvy up a settlement or jury award in a way that’s fair to both sides, said Matt Wessler, a principal at Gupta Wessler in Washington, D.C., who has represented workers in these types of cases.

It can be hard for workers and their lawyers to learn whether a health plan intends to assert a lien and if so, for how much, Wessler said. Now, after the Montanile decision, it’s clearer that plans may lose the ability to recover any funds if they wait to share their intentions with the plan member. Armed with that information, workers and their lawyers can use the leverage that they may not pursue the money at all, if the health plan doesn’t come to the table to negotiate early in the process.

If health plans don’t notify the worker or his lawyer early in the process that they have an interest in any potential award, “they risk the possibility that by the time they actually get something sorted out the money will be gone,” he said.

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