Subrogation is a legal process where the insurance company seeks reimbursement from a third party who caused the insured’s loss. For example, if you get into a car accident, you will most likely require medical treatment. Your insurance will pay those bills upfront but will want to be reimbursed by the at-fault party once your case is settled or resolved in court.
Subrogation means your insurance company has a legal right to collect the money it paid to you for your injury, but they can only collect it from the at-fault party that caused your injury and not you. In a personal injury lawsuit, a subrogation payment will come out of the compensatory damages you are awarded from the other party’s insurance company.
Can Subrogation Be Limited?
Yes, subrogation can be limited in the sense that your own insurance has no subrogation rights against you as the policyholder. This means your insurance company cannot pay you money after a personal injury, and then ask you to pay it back. Subrogation only gives your insurance company the legal right to pursue someone else.
Subrogation is also non-existent when you are 100% at fault for an accident. There is no one you can sue for causing the accident since you were entirely at fault. So, your insurance has no one to go after to recover their costs. After all, insurance would be meaningless if you had to pay an insurance premium, as well as reimburse the insurance company for covering your damages.
Different Types of Subrogation
There are three types of Subrogation. They include:
- Legal subrogation: legal subrogation arises by operation of law. This type of subrogation can take place with or without a contract because the law requires it in certain situations. Legal subrogation cannot be used to displace an agreed-upon contract.
- Conventional subrogation: this type of subrogation is the most common because it is a right for reimbursement established in the language of a contractual agreement. It typically arises when one individual satisfies the debt of another as a result of a contractual agreement. An agreement provides that any claims or liens that exist as security for the debt be kept alive for the benefit of the party who pays the debt.
- Statutory subrogation: statutory subrogation is established through the act of legislature. Workers’ compensation is an example of statutory subrogation as it is required by law that work-related injuries be treated through an employer’s workers’ compensation insurance.
How Does Subrogation Apply To Workers’ Compensation?
If you’re injured on the job, you have a right to file both a workers’ compensation claim and a personal injury lawsuit. If a personal injury lawsuit is filed along with your workers’ compensation claim, then the workers’ compensation carrier can file a lien instead of joining the personal injury lawsuit. This lien will cover whatever funds workers’ comp pays to you with the expectation that they’re reimbursed for these costs by the at-fault party once a settlement is reached. This falls under the Common Fund Doctrine, which states that any funds you receive from the person at fault after attorney fees, expenses, and payment of the employer’s lien will relieve the workers’ compensation insurance company.
How Does the “Made Whole” Doctrine Apply to Subrogation?
The Made Whole Doctrine is generally used when an injured party seeks a waiver of the contractual obligation to reimburse medical insurance or car insurance benefits back to the insurer. This obligation usually arises after a personal injury claim judgment or settlement. For example, let’s say you file a personal injury lawsuit after a car accident and the liable party is 100% at fault. Your health insurance may pay you $1500 for medical treatment of a fractured wrist. Let’s say your total damages equal $15,000, but you’re only able to receive $10,000 from the liable party. Since the $10,000 does not “make you whole” after the accident, you can make the argument under the Made Whole Doctrine that you are not required to reimburse the insurance company for the $1500 out of your awarded $10,000.
How an Attorney Can Help
Insurance can be relentless when it comes to reimbursement, but a personal injury attorney can protect your right to compensation and keep the insurance company from taking advantage of your situation. For further clarification of how subrogation will apply to your claim, contact Maison Law today for a free consultation and case evaluation.
