Question: When a third-party tortfeasor’s personal liability policy limits are insufficient to compensate the victim for his non-medical expense damages (i.e. past and future pain and suffering, physical impairment, disfigurement and lost wages)and pay the government's subrogation claim, whose claim to the homeowner's insurance proceeds have priority? Is this the victim or the governments’ responsibility? Must the victim first be made whole for his non-medical expense damages before the government can he or she recover medical expenses to pay for the victim's medical care? Or can the government deplete the available liability insurance monies in satisfaction of its subrogation claim and leave the victim wholly uncompensated for his non-medical expense damages? In other words, if payment of the government's subrogation claim will leave nothing to compensate the victim for his non-medical expense damages, does the government get it all and the victim get none? How are the answers to these questions different, if at all, if the victim settles with the tortfeasor before Tricare benefits have been paid to the health care providers?
Answer: TRICARE derives the authority to assert a subrogation claim under the Federal Medical Care Recovery Act (FMCRA), 42 U.S.C. §§ 2651-2653, which authorizes recovery of the reasonable value of medical care furnished or paid for by the United States under circumstances creating tort liability for such medical care in a third party. 32 C.F.R. § 199.12(b).
Under the circumstances of your question, I would cite the case of Commercial Union Ins. Co. v. US, 999 F.2d 581 (C.A.D.C). The Court here stated that FMCRA is silent as to priority of government's right to recover from tortfeasor medical expenses it incurred on behalf of injured employee over injured employee's right to recover non-medical damages from tortfeasor. The Court also pointed out that 42 USC 2652(c) allows the injured party to recover damages for those damages not covered under FMCRA and giving the government priority would essentially render this section useless. Ultimately the Court held the interpleaded fund would be distributed on ratable basis, such that each claimant received share of fund proportionate to their share of total judgment figure, since FMCRA was silent on question of priority of claimants' rights and since “equity is equality.” While the circumstances of this case may vary from your question, the case certainly provides some guidance.
It is also worth noting that in a case where the injured party pursued the tort claim and the government passively waited for reimbursement, courts have required an equitable reduction in the government’s claim. Mosey v. U.S., D.Nev.1998, 3 F.Supp.2d 113. As a general matter, in our experience, the government is willing to take such matters into consideration and may adjust accordingly so the injured party receives some compensation.
If a settlement took place prior as mentioned in your second question, the priority determination would arguably be the same. Please let me know if you have any questions. Thank you for the question.