Insurance Subrogation: What It Means and Why It Matters

There are some words in the English language that are just ugly.  Consider, for example, “tax,” “cacophonous,” “functionality,” and “downsized.”  Whether it’s due to sound, meaning, or appearance, many would agree that these words are simply unfriendly or unpleasing.

The term “subrogation” can arguably fit within a list of your top ten ugliest words.  It sounds weird.  The word itself appears complicated; and, its definition can prove upsetting or displeasing…especially if you’ve suffered damages in a car accident due to another driver’s fault.  Let’s take a further look at this word and see if we can remove some of its unpleasantries.

What is Subrogation?

Assume Sally is involved in an automobile accident with John.  As a result, Sally suffers neck injuries that require medical care and treatment. Sally files a claim with her insurer and the insurer pays her doctor for all treatment expenses (assume these expenses totaled $20,000).  John admits he caused the accident.

Subrogation is basically the process by which an insurer tries to recover its costs from the negligent party in a personal injury matter.  In the above example, Sally’s insurer would most likely try to recover its costs (or, the $20,000 it paid for Sally’s medical treatment) from John (or, John’s insurer).  This, in a nutshell, is subrogation.

Why Does Subrogation Matter?

So far, subrogation doesn’t sound half bad, right?  What is really wrong with an insurer trying to recover its costs?  Well, let’s look at subrogation in a different  manner.

Let’s return to Sally.  Assume she accepted a settlement offer of $30,000 with John’s insurer for all aspects related to the car collision.  With John’s insurer now out of the picture, where does Sally’s insurer turn for repayment of its costs?

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The answer is…Sally’s settlement.  With subrogation, an insurance company that paid an insured’s medical expenses basically holds a lien on any settlement reached; and, it is entitled to repayment from the settlement.  Given that Sally’s medical treatment cost $20,000, subrogation means that her actual settlement award could be cut by two-thirds and she could be left with $10,000.

Granted, this may not seem fair to some.  But, this is the nature of subrogation.  This is also why the mere term “subrogation,” can seem ugly to an insured.

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We should also note that an insurance company will expect the full cooperation of an insured throughout the entire subrogation process.  Cooperation typically means that an insured must notify his insurer prior to finalizing a settlement agreement with the at-fault party.  This helps protect the insurance company’s right to subrogation.

Can an Attorney Help with Subrogation?

Definitely.  Despite any perceived unfairness within the subrogation process, an insured is still obligated under his auto insurance policy to reimburse his insurer for costs it has incurred.  An attorney can work with an insurer to make certain that the insured’s rights are protected.  An attorney can also help negotiate the exact amounts and terms of repayment.

As to this last point, please note that an attorney can try to waive an insurer’s subrogation claim.  Waiver essentially means that an insurer will dismiss their subrogation rights.  If this took place in Sally’s example, her insurer would have dismissed any claims to the $20,000 it paid in medical costs.  The result is that Sally would have pocketed the entire settlement award of $30,000.

Waiver of a subrogation claim is a fantastic thing for an insured.  However, a waiver may not always be available.  Nonetheless, an experienced personal injury attorney can often work with an insurer to get them to reduce, even greatly reduce, their subrogation claims.

A note from a local chiropractor:

Thank you Phillips law firm.

I do appreciate the clarification on the minutia associated with subrogation. However, I believe there are more important reasons for legal representation, even in the event of PIP (Personal Injury Protection) coverage.

In my 25 years of practice, mainly automobile crash victims, I have noted that insurance companies seem to take better care of the other insurance company, than they do their own insured. Just because a person has PIP does not mean their medical bills will be paid, leaving the patient on the hook for the balance of the bill.

The insurance companies like to use shallow and vague reasons why they did not pay standard and usual bills for reasonable and necessary treatment. The patient is responsible for the bill to the medical provider, no matter what.

It is sad that we have come to this: sometimes we need an attorney to help us get fair treatment from our own insurance companies.

It is difficult to feel that ‘we are in good hands,’ when it comes to our own insurance companies.

Respectfully, Dr. JP Mahar. KenmoreChiro.com

The attorneys at our firm have extensive experience in working with insurance companies to protect the rights of our clients.  This experience and protection includes countless hours of subrogation negotiations.  To better maximize your settlement agreement, please contact our firm today.  Our attorneys stand ready to answer your questions and are ready to work towards the justice that you deserve.

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