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What is Subrogation in a California Personal Injury Case?

After sustaining an injury in an accident due to the the carelessness and negligence of somebody else, you need medical care and treatment. A victim’s auto or health insurance company typically pays pursuant to its contract. Then, after you resolve a personal injury claim or lawsuit against the person who caused your injuries and damages, your insurance company is going to want the money that it paid out on your behalf back from that person. That’s what the subrogation process is. Whether you realize it or not, it’s highly likely that you agreed to subrogation when you entered into your contract of insurance with your insurer.

Standing in the Shoes of the Insured Person

In the context of personal injury claims, the law on subrogation is well settled. When there is an express subrogation provision in an insurance contract, an insurance company may recoup its payments directly from the party who caused the accident and injuries. The insurance company “stands in the shoes” of the insured person, and the insured person must protect the insurer’s rights and help the insurer enforce them. The elements of subrogation follow:

  • The insurance company made payments to protect its best interests.
  • The insurer could not have acted as a volunteer.
  • The debt paid wasn’t one for which the insured person was primarily liable.
  • They paid part or all of the debt.

How Subrogation Works in Auto Accidents

Here’s a simple example of how subrogation works in a personal injury case. Charlie is sitting at a red light when Carlos rear-ends him at 35 mph. Charlie suffers a concussion, a serious neck strain and a couple of broken fingers.  He was in an emergency room, his fingers were splinted, and he followed up with his own doctor. The doctor recommended rest and physical therapy. He attended physical therapy for over two months, and his total medical bills from the accident are $15,000.

His car insurance paid per his medical payments coverage. Sometime later, Charlie settles his case against Carlos for $60,000. Under the terms of his auto insurance policy, Charlie’s insurer gets $15,000 of that $60,000. As Charlie’s insurer has notified Carlos’ insurer of its subrogation lien, the name of Charlie’s insurer appears on the settlement check. Charlie’s attorney will attend to proper disbursement of the funds.

Subrogation in Workers’ Compensation

Subrogation might also apply when an employee receives workers’ compensation benefits for on-the-job injuries. For example, if a carpenter from one company sustained injury through the fault of an electrician from another company who was working on the same job site, the carpenter may be able to obtain workers compensation benefits at the same time that he’s pursuing a personal injury lawsuit against the electrician and his employer. If the workers’ compensation insurer paid a total of $8,000 in medical bills and temporary total disability, and the carpenter settles his case against the electrician for $35,000, the worker’s compensation insurer is entitled to its $8,000 back pursuant to its workers’ compensation lien.

Uninsured Motorist Insurance and Subrogation

Another way that the right to subrogation might arise is through uninsured motorist insurance. For example, a car jumps a curb and hits Maxine. She suffers a broken leg, and the car flees the scene of the accident. Maxine needs surgery to repair her leg. Her hospital and rehab bills total $65,000. Fortunately, Maxine purchased uninsured motorist coverage with a $500,000 policy limit. She got the full $500,000 in court. Sometime later, the driver of the car that hit Maxine is found. If that driver maintained $500,000 of liability coverage, Maxine would need to reimburse her insurer the $65,000 in medical bills that were paid on her behalf by her insurer.

Payment by Your Health Insurance Company

If you were injured as a result of the negligence of somebody else in an accident that didn’t involve a motor vehicle, you’ll likely be making a claim under your health insurance coverage. The right of subrogation isn’t only retained by auto and motor vehicle insurers. Health insurers maintain this right too. Even Medicare, Medicaid or Medi-Cal have included the right of subrogation in their coverage. Section 3040 of the California Code of Civil Procedure reinforces this right. It also contemplates disability insurance. Under this statute, if there is an express judicial finding that the insured person was partially at fault for an accident, the right to reimbursement decreases by the percentage of fault attributable to the insured person.

Other Provisions of Section 3040

The last thing that an accident victim wants is to have a subrogating insurance company take all of their settlement or verdict. Section 3040 protects against this because it limits the insurer to the cost or medical services or a percentage of a total settlement or verdict, whichever is less. Much depends on what kind of payment arrangement that a doctor has with an insurer and whether the patient had legal representation. Under Section 3040, patients with legal representation fare better than those who represent themselves.

The Common Fund Doctrine

For purposes of reimbursement for what they paid on the insured person’s medical bills, nearly all insurance companies rely on their subrogation language and liens. Then, they sit on their hands and take no active role in pursuing reimbursement. It’s the insured person or his or her attorney who does all of the work to create a settlement or verdict fund that the insurer can draw on for reimbursement. If a claimant’s attorney created that fund, he or she can receive payment from by the insurer for creating its share of it.

For example, if an insured person’s auto insurer paid $9,000 in medical bills on his or her behalf, and the claimant’s attorney effectuated at $40,000 settlement, the insurer is participating in that settlement without doing any work. On that basis, the claimant’s attorney should receive $3,000 for his or her efforts. The insurer then only receives $6,000. California courts generally recognize the common fund doctrine.

The Made Whole Doctrine

Remember that the injured claimant and subrogating insurance company both want money from the same common fund, that fund being any gross settlement or verdict proceeds. According to the made whole doctrine, the claimant must receive full compensation for his or her injuries or damages before that subrogating insurance company can collect. It’s for that reason that insurance companies in California have added language to their policies giving them the right to pursue the full amount of the payments made on behalf of their insured person. The common fund doctrine will still apply though, so long as the claimant had attorney representation.

You don’t want to take on the insurance company of the person who caused your accident, injuries and damages along with your own auto or health insurance company at the same time. You’re likely to make mistakes in the process that will operate to significantly devalue your claim. The common fund doctrine won’t benefit you either if you create a fund without an attorney. Contact us at Maison Law for a free consultation and case evaluation after sustaining an injury due to the carelessness and negligence of somebody else. We’re happy to answer your questions and point you in the right direction. Upon retaining us, our objective is going to be to obtain the highest settlement or award that you deserve with the highest net proceeds in your pocket as possible.

Contact a California Personal Injury Lawyer Today

You deserve to receive strong representation and fair compensation for your injuries. With experience at some of the largest and most prestigious law firms in the country, founding partner Martin Gasparian, Esq. offers each client the experience of a large firm and the personalized attention to detail of a small business. We understand the tricks and games that big insurance companies like to play and we know how to stop them. We perform thorough investigations into your accident and injuries in order to work towards an ideal settlement or trial verdict.

Contact us today to find out what your case could be worth.

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