What Can We Learn From Deborah Shank?


The national media and the blogosphere are abuzz since the WSJ reported on the story of Deborah Shank. As explained by the Los Angeles Times:

Shank, a former overnight shelf-stocker for Wal-Mart in southeastern Missouri, was driving her minivan when she was broadsided by a semi and suffered permanent brain damage. Unable to walk without help, she lost the ability to care for herself or interact meaningfully with her family. Now 52, she lives in a nursing home.

Wal-Mart started out as one of the good guys in this story, paying almost $470,000 of her initial medical bills. But three years after Shank’s husband sued and settled with the semi driver’s employer, the retail giant changed hats. It demanded every penny back, plus interest and legal fees — more, in fact, than the $417,477 the settlement had placed in a special-needs Medicaid trust fund for Shank’s future healthcare expenses.

Several things strike me about this story.

First, the WSJ incorrectly described Wal-Mart’s cause of action against Ms. Shank as a subrogation claim. The WSJ stated:

In insurance circles, the recovery practice is called “subrogation.” Employers and insurers say it’s necessary to ensure that medical expenses aren’t paid twice. By recovering those costs from someone who’s been compensated elsewhere, they argue, they’re saving money for everyone on the plan.

But this isn’t classic subrogation. Subrogation is generally thought of as an insurer’s right to step into the shoes of the party whom an insurer compensates and sue any party whom the insured could have sued. Wal-Mart isn’t standing in the shoes of Ms. Shank and suing the trucker, which it almost certainly has the right to do. Wal-Mart is suing under a contractual provision which gives it a right to sue its insured for indemnification and eschewing its subrogatory rights.

Second, although Wal-Mart claims it needs this contractual right to prevent its insureds (the Deborah Shanks of the world) from double recovering, Wal-Mart is using this right to take easy money. That is, there is no evidence that Ms. Shank recovered twice. Ms. Shank likely had claims for pain and suffering, lost wages, loss of consoritum, etc. The settlement agreement could have stipulated that none of the money was going to pay her medical bills and Wal-Mart still would have had the right to sue her for indemnification. And Wal-Mart would have done so, because it is much easier to collect based on the clear contract language than in a subrogation lawsuit against the trucker. Think of it this way, presumably Ms. Shank settled for pennies on the dollar in her tort lawsuit, but Wal-Mart got nearly a full recovery from Ms. Shank. Why? Because Wal-Mart didn’t have to establish the trucker’s negligence or defeat the trucker’s tort defenses as it would have if it had brought the subrogation claim.

Third, I wonder why Wal-Mart and other private insurers are doing this now, when the provisions apparently have been in the insurance contracts for years. One could speculate that private insurers feel emboldened to sue their insureds because Congress blessed this same practice for Medicare in 2003. As part of the same law that created the new Medicare prescription drug plan, Congress granted Medicare the right to recover its from beneficiaries who settle tort lawsuits.

Fourth, these indemnification lawsuits are justified as necessary to reduce the costs of medical insurance. But they might have an enormous impact on the civil and tort system. Injured parties have less incentive to bring and settle tort claims where they are forced to indemnify an insurer, because their expected recovery is much lower. This undermines the access function of the courts and the deterrence and corrective justice function of tort, not to mention undermines the social policy for health insurance. I wrote about these same issues (although in the Medicare context) in a forthcoming paper. Check it out.

You may also like...

21 Responses

  1. jp says:

    at least in some settings the “made whole” doctrine can stop the Walmarts of the world.

  2. Ullrich Schade says:


    If Walmart continues to sue and harass Debbie and Jim Shank, we will no longer shop at Walmart. We are starting a “Walmart – Stop Harassing Debbie Shank” email and blog and will enlist all our friends to stop shopping at Walmart as well.

    We spend an average of $500 per month at Walmart.

  3. Jade says:

    We the people can sue Walmart for our money back !!! Since we the people are paying her bills now ! Sounds only fair !!!

    I know now we buy are water and shit paper some place else now !!!!

  4. Tom Beck says:

    The internal logistic processes that have made the Walmart the world most efficient retalier has atrophied the organization’s heart in favor of its brain. In other words I wonder what Sam Walton would have done?

  5. Heidi says:

    I think Wal-Mart is a heartless corporation and I will not be supporting a company that does not care about their people.

  6. Mary says:

    I just cannot even believe this could happen…Shame on you Walmart.

    I heard your pitiful excuse being read on CNN tonight…What crap…”protecting Assets for the Insurance Monopoly”.

    This is just another reason I and my family Do NOT set foot in any of your “Made in China Crap Stores”, your a pitiful excuse for an Employer, and now a PItiful Excuse for Human Beings.

    I hope this crushes your business outright. Hell we can use your empty stores for Hurricane Shelters here in Florida and all around the Coasts.

  7. Sylvia says:

    After hearing about Debbie Shanks problems with Walmart it reminds me of a David and Golliath situation. Hopefully she can throw an accurate stone

  8. Doris says:

    This does not suprise me a bit, wal mart is out for walmart they don’t care about their employees or their customers, I use to work for them and after I hurt my back, which they paid absolutely nothing to me ,medically or workman’s comp, laid me off and never called me back, I put my application in but no one calls, I don’t care for wal mart at all, why didn’t they have some sort of benefit for this woman, they have benefits for everything else, I am sure they could care for her the rest of her life, and use it for a tax write off. I wish mr or mrs walton was alive I am sure they would of helped her. After all this lady is american made and there is nothing in that store american made, go figure!

  9. Ron says:

    We stopped shopping at walmart a while ago because of their greedy ways. I will now press friends and relatives to do so with the hopes walmart will go broke and have to close. Walmart wants to see the Shank’s go broke, and I hope the same happens to them!

  10. Amy says:

    I think that Wal-Mart should be ashamed. This news has really disappointed me and I will frequent Target more. I was shopping Wal-Mart for everything, but I no longer plan to spend my money there. Target is really cheaper than Wal-Mart anyway!

  11. Laura says:

    I’d like to sell my shares of stock and give the money to the Shanks. How can I reach them to do this? I’ll never shop there again… this is the last straw for me with Wal Mart. Sam Walton would be ashamed. What a completely stingy and Un-American company.

  12. michele says:

    If Wal-Mart is legally bound by their rules and regulations to sue the Shanks to return this money, then Wal-Mart should give a charitable contribution (which is tax deductible) to the Deborah Shank trust fund and then have the Shanks return the money the courts are requiring them to give back to Wal-Mart.

  13. Mike says:

    Should this behavior from Walmart really surprise anyone. They, like so many other corporations, care only about the bottom line. Shame on them and their greediness.

  14. holly says:

    i am just disguisted and outraged that this can happen in our courts..shame on the walmart lawyers who go after the ones who really need the money for their healthcare after an injury..how do they sleep at night knowing what they have done to this family..why don’t they go after the fraudulent claims and make them go back to work and quit living off our tax paying dollars..i have hurt my back several times working with patients in my job in healthcare and i still work everyday..my cousin who had a malignant tumor on his neck,the tumor and muscles in neck were removed,he now has metal rods holding up his head.he has tried to get a job. no one will hire him due to the liablity.he recieved disability for app 2yrs and now they took him off of it,denying him and saying he needs to repay them for his medical costs, and for him to go get a job..do i need to say more about our medicaid and medicare and this countries healthcare.

  15. Carlie says:

    Sam Walton’s father was a heartless SOB who taught his son to be as heartless by regularly taking his young son with him to observe as he evicted decent people from their homes during the “dust bowl” era. What a role model! WalMart was built on the ethics of the Waltons, and to this day completely lacks human compassion. Disgusting! These people are not good people, and worse, they are proud of what they do as they victimize those unable to help themselves. I wonder, do the powers-that-be, including the Waltons themselves, believe they are good Christians?

  16. Jim Walker says:

    I emailed Wal-Mart with my objections to the suit and got back the standard answer of “recovering” to protect their employees covered under the plan. Here is my final response to them, they did not reply back.

    Dear Wal-Mart Customer Relations,

    I fully understand the normal rules of your plan, I am in the insurance business, specializing in long term care insurance. My father was an actuary and later chief underwriter for two major insurance companies.

    Wal-Mart now intends to claim what is left in the trust, leaving Debbie Shank destitute and without resources to support her ongoing long term care needs. Her husband is unable to pick up the financial slack.

    To not make an exception in this case and not throw Debbie Shank into the street financially naked is unspeakably cruel. Wal-Mart’s actions in this unique case are manifestly evil, devoid of any shred of morality.

    I am sure if you polled your workers covered by the plan and asked them if you should leave Debbie Shank destitute – you find out that your workers have compassion, unlike the company managers and owners.

    My business with you is over.


    James C. Walker

  17. Mark Reedy says:

    Oh my god! I was shocked to see that Walmart was going to take the money for Deborahs care. Shame on Walmart. What happened with giving back to people and the community? K-Mart is just as close.

  18. Mark Reedy says:

    Oh my god! I was shocked to see that Walmart was going to take the money for Deborahs care. Shame on Walmart. What happened with giving back to people and the community? K-Mart is just as close.

  19. Judy Jay says:

    This has been very upsetting to me. How could anyone treat someone with such disrespect. Deborah did not ask for this accident to happen, her husband didn’t ask, her children didn’t ask. This family has suffered tremendously. It is bad enough that this accident happened, but they also lost a son in Iraq fighting for our freedom. Wal*Mart you should really be ashamed of yourself. And I really don’t see how you sleep at night. I will most certainly stop shopping at Wal*Mart immediately. And I will continue to pray for this family and ask everyone out there to pray for them as well. Prayer does work!

  20. Nina says:

    Just because a company has the right to sue and collect doesn’t mean it is the right thing to do. I will stop patronizing a company that kicks a person when they are down. I probably spend around 200 each time I go and I can definitely give that to their competitors . I will also resolve to tell my friends and family my opinion and encourage them to join me in the boycott. I have just heard this 2 nights ago and have one person already joining in my boycott. Sam would not be proud.

  21. mulp says:

    If the legal fees for the plaintiff were 60% of the settlement amount after 8 years, presumably the defendant’s legal costs were similarly high.

    So, with one insurance company claiming the settlement the other paid, the situation is that that two insurance companies paid lawyers something around a million dollars, and the injured woman got nothing from the lawsuit.

    By the law of large numbers, and insurance is all about that, insurance companies don’t sue under the right of subrogation because that wasted money and on average paying the legal liabilities of other insurance companies will balance out.

    In fact, in most cases their costs will be lower, as in paying $500,000 for another company with a liability of a $1,000,000, which in the long run will be reciprocated. Going after the settlement from a lawsuit eliminates the incentive to sue, saving the legal fees on both sides while cutting claim payments.

    Do I have it about right?