Auto accident victims should understand the effect of subrogation on their prospective settlements. Though subrogation affects both insurance companies and their clients, the onus is on you as the plaintiff to ensure the effects are as positive as possible. You can only do this with a thorough knowledge of subrogation.
Meaning of Subrogation
Subrogation refers to the substitution of one party with another with respect to duty or debt. In the insurance industry, subrogation allows an insurance company to pay your damages instead of the original liable party. The insurance company then has the right to collect the money from the person who originally owed you the compensation duty.
The Need for Subrogation
Subrogation is necessary for three main reasons.
Avoiding Double Recovery
Consider an example where an intoxicated motorist rear-ends your car and leaves you with a whiplash injury. The motorist doesn’t accept liability, and you have to litigate the case. Unfortunately, you can’t wait for litigation to get money for your urgent medical bills.
Fortunately, you have medical insurance, and the carrier agrees to pay your bill of $10,000. Months after your recovery, you manage to collect damages worth $25,000 from the liable motorist.
Keeping the entire settlement would mean you have benefited from your auto accident. The law is clear that accident victims shouldn’t benefit from their injuries. Thus, your medical insurer has the right to use subrogation laws and collect their $10,000 from the settlement. You get to keep the remaining $15,000 ($25,000 less $10,000).
Getting Fast Medical Care
Insurance companies would be reluctant to settle claims fast without subrogation. The insurance carriers would need to investigate every claim to confirm their responsibility or duty. Subrogation allows insurance companies to pay claims fast since they can always recover the liable party’s money.
Keeping Insurance Costs Low
Subrogation also helps to minimize insurance costs. Without subrogation, insurance companies could end up paying multiple settlements for the same claims/accidents. That would increase business costs, which the companies would have to pass on to their clients.
Who Can Subrogate
Anyone who stands in and pays for your injuries has the right to recover their money from the liable party. For personal injury claims, the following parties commonly engage in subrogation:
- Health insurance companies that pay treatment costs for auto accident victims
- Auto insurance companies that settle auto accident claims that other auto insurance carries should settle
- Workers compensation insurers who compensate workplace injuries caused by third parties
- Government services, such as Medicare, that settle claims
The above are just a few examples. Subrogation can occur anytime someone pays a claim that another party should pay.
The Plaintiff’s Role
Accident victims also play a role. For one, you shouldn’t sign any settlement waivers that might affect an insurance company’s right to subrogation. Say your medical provider pays your medical bills after an auto accident. You shouldn’t sign a waiver that absolves other parties, such as the at-fault motorist, of liability for the crash.
Secondly, you must preserve all documents that relate to your treatment, settlement, and medical bills. Your insurance carriers expect you to preserve such information to help them in subrogation. Note that your insurance company must inform you of any subrogation plans. Many insurance companies are also willing to negotiate how much they can recover via subrogation.
Experienced injury lawyers understand the effects of subrogation on their clients. Their knowledge is one more reason to use lawyers in personal injury cases. Cantor Injury Law, which has been practicing law since 1993, has the skills and experience to handle your accident case. Contact us for a free initial consultation to assess your case and help you pursue your damages.