In this story, Wal-Mart is absolutely, positively, in the right from a legal perspective. It's not even a close case. Whe your health insurer pays your health care costs resulting from an injury, and that injury is proven to have been the responsibility of a third party, your insurer gets a right of subrogation on your recovery from that third party, up to the amount of money that the insurer actually paid on your behalf. That's so universal as to be an axiom of insurance law.
Which doesn't mean that Wal-Mart and its lawyers did the right thing in this case. In fact, if someone at Wal-Mart were to sit down and consciously, intentionally plan out a way to make the company look as scummy and morally depraved as possible, it's hard to imagine coming up with a plan more effective than this one. Safeguarding shareholder interests is an important duty. Recovering costs is a necessary part of keeping things like health care plans available for people. But there has to be a point of reasonability, too.
Also I note that the Journal omits another factor from its discussion of the case -- the personal injury attorney who filed the suit on behalf of the achingly deserving victim here could have brought Wal-Mart's health care plan into the picture at an earlier stage of the game; there are ways to make that happen. Typically, you mail the insurer to put it on notice of the pendency of the claim, and tell it that it needs to intervene. If necessary, you sue the insurer to bring it into the case as an involuntary plaintiff. That's an esoteric procedure, though, and one that usually only civil procedure wizards can pull off. Traditionally, that's not how a personal injury case is done because of the economic pressure on the lawyer to litigate the case in the most efficient manner possible. Also, doing that sort of thing will reduce the amount of money going to the plaintiff at the end of the day so some lawyers think that it is a breach of their duty of loyalty to do something like that. And of course, having more players at the table demanding money makes the case globally more difficult to settle.
So I can understand why the attorney would have decided to settle the indemnity claim after resolving the third-party liability claim. Dont' forget that he loses, too; in most states the attorney is personally on the hook for payment of subrogatable funds paid to his clients so his entire fee has evaporated and he may have to dig into his own pockets now to pay for the privilege of having obtained a settlement on behalf of his client. This compounds injury to the insult of what appears to have been a very difficult case to litigate.
The facts of this case are particularly odious, though, and Wal-Mart would have been best advised to compromise rather than insist on being paid every penny.
Hat tip to Megan McArdle.