Subrogation is the legal right for one party, usually an insurance company, to seek reimbursement from a third party that caused a loss. In personal injury cases, it often comes into play when an insurer pays for an injury but then pursues the person or entity responsible for the accident.
How Subrogation Works
When you are injured and your insurance company pays for your medical bills or other expenses, they often gain the right to seek reimbursement from the person or party responsible for your injury. This process is called subrogation.
After paying your claims, your insurer may file a separate claim against the at-fault party or their insurance company to recover the money they spent. Subrogation ensures that the financial burden falls on the person who caused the harm, not on the insurer or the injured party. It also prevents an injured person from receiving double compensation, first from their insurance and then again from the at-fault party.
Why Subrogation Matters in Personal Injury Claims
Subrogation can directly impact the amount of money you keep from a settlement or court award. If your insurance company has paid your bills and has a subrogation right, they must be repaid from any settlement you receive. If you settle your case without adequately accounting for this, you could unexpectedly owe your insurer a large portion of your settlement.
Failing to resolve subrogation claims before finalizing a settlement can lead to financial complications, additional legal disputes, and even reduce the net amount you walk away with after your case ends. It’s essential to address subrogation early in the personal injury process to protect your recovery.
Common Situations Involving Subrogation
- Health Insurance: If your health insurer pays your medical expenses, they can seek repayment from the settlement or the responsible party.
- Auto Insurance: Car insurers that pay for damages after an accident may pursue the driver who caused the crash.
- Workers’ Compensation: If your employer’s insurer covers a work injury, it can later sue any third party responsible for your injury.
The “Made Whole” Doctrine
In some states, insurers can only recover money if the injured person has been fully compensated, or made whole, first. This protects injured individuals from losing money they need for their recovery.
Waiver of Subrogation
Sometimes, an insurance policy or settlement agreement may include a waiver of subrogation. This means the insurer gives up its right to pursue repayment, usually negotiated in advance.
Injury attorneys often negotiate with insurers to reduce the amount of subrogation claims. This helps maximize the net recovery the injured person receives after legal fees and costs.
Legal Limits on Subrogation
- State Laws: Some states restrict subrogation rights to protect injured parties.
- Contract Terms: The language of the insurance policy controls when and how subrogation applies.
- Third-party settlements must address any subrogation claims to avoid future legal issues.
Potential Problems
If subrogation isn’t handled correctly:
- You may have to repay large sums after a settlement.
- The insurer could sue you if you don’t honor its subrogation rights.
- Settlement negotiations can get delayed or complicated.
