Insurance: Subrogation

Subrogation. It is a word many people have never heard of. To subrogate, means, “to stand in the place of.” In the context of a personal injury case, it means that to some extent, your insurance company gets to stand in your place and collect damages from the person who injured you. However, this generally does not mean that any damages you would otherwise be awarded after an injury will be reduced. Here is how it works.

If you are injured by someone else’s negligence and you use your health insurance to assist with the medical bills, your insurance carrier most likely has a right to at least attempt to recover what it paid out in insurance benefits on your behalf. That recovery can be had against the at-fault person directly, but more commonly, the insurance carrier allows you and your attorney to handle the process of collecting any damages to which you may be entitled, and from those proceeds you are responsible to ensure the insurance company is paid back. It is important to have an attorney familiar with this process, as failure to account for the insurance company’s subrogation interest can cost you.

As an example, say you are injured in an accident at your neighbor’s house, and your injury was your neighbor’s fault. In this example, your insurance company pays $20,000 for your medical expenses incurred due to the accident. Of course, the medical bills are in your name, and perhaps you will be satisfied if the neighbor’s insurance company just pays you back for the medical bills incurred. You may think that after you pay your attorney, you’ll still have a nice chunk of cash left over. If you and your attorney fail to account for the insurance company’s right to recover, and you were to settle for only $20,000, then you are going to have to pay out of pocket to pay back the insurance company.

On the other hand, by hiring an attorney familiar with the process of subrogation, you will already be in position to minimize the chance that you would have to pay out of pocket to pay back the insurance company. This is because the attorney will know that the insurance company needs to be paid back, and will take that into account when advising you on the proper amount to accept as settlement for your damages.

The insurance company’s right of subrogation may be limited in some cases, by what is known as the “made whole doctrine”. Generally speaking, this doctrine states that if you are not made whole by the at-fault person through the process of settlement or taking your case to trial, it is possible that your insurance company will not be entitled to any repayment of the benefits it paid on your behalf. Your attorney’s knowledge of this rule and its application can be a powerful tool in negotiating with your insurance company. Your attorney’s knowledge of this rule and its application can help you keep more of the damages you fought hard to recover from the person who injured you.