Subrogation is one of those words that most people have heard, even though they might not be sure exactly what it means. Subrogation is an arrangement between insurance companies to prevent insured parties from receiving double compensation.
Preventing Double Recoveries
Suppose you suffer an injury after a car accident. While the issue of liability is still in question, you file a claim against your own health insurance policy to pay for your medical bills. Your health insurance company pays them. Later, you reach a settlement with the other driver’s liability insurance company, which also pays you compensation for the same injuries.
Without subrogation, you would have a double recovery, which is not fair to the insurance companies. In subrogation, your insurance company files a claim against the at-fault driver to recover what it paid to you. If the at-fault driver lacks sufficient financial resources to cover the claim, your insurance company will seek reimbursement from the at-fault driver’s liability insurance policy.
In most cases, you won’t be involved in the subrogation process. Your insurance provider should make a subrogation claim on its own. Subrogation can greatly affect you under certain circumstances, however.
How the Process Works
Your healthcare provider will issue an itemized list of the medical care they provided due to your accident. If you are relying on your own insurance company to pay the claim, your insurance company will send you a form asking you questions designed to determine if someone else should bear financial liability for your accident (the other driver, for example).
Your insurer must notify you if it intends to assert subrogation rights. Your insurance policy probably contains language that requires you to cooperate. This means you cannot sign any document or reach an agreement that would release the other driver from liability for the accident. The good news is that the insurance company will also seek reimbursement for your deductible. They will issue you a full or partial refund of your deductible if they win.
What Triggers the Subrogation Process?
Subrogation applies when an insurance company pays a party who was not primarily at fault for an accident. This can include the following types of insurance payments:
- Med Pay insurance: Med Pay insurance coverage is optional in many California auto insurance policies. It obligates your own auto insurance provider to pay your accident compensation. An insurance company can seek reimbursement for Med Pay payments out of your settlement with the at-fault party.
- Health insurance payments: If you file a claim against your health insurance company for treatment costs arising from accident-related injuries, the insurer has the right of subrogation. California limits the amount that your insurance company can recover from your settlement.
- Uninsured or underinsured motorist coverage: This coverage allows you to file a claim against your auto insurance carrier if the at-fault driver doesn’t have enough insurance to pay your claim. If your insurance provider makes these payments, they have subrogation rights against the at-fault driver.
The right of subrogation belongs to the insurance company, not you. For this reason, you cannot waive it on behalf of the insurance company.
California Laws That Regulate Subrogation Claims
You don’t pay subrogation claims yourself. You simply never receive a second compensation check, or you receive a smaller check than you might have expected. Your loss, if any, is indirect.
Nevertheless, you can take advantage of several California laws designed to prevent insurance companies from taking advantage of you:
- Section 3040 of the California Civil Code limits the amount of money that an insurance company can deduct from settlement payments paid to you for accident-related medical services. This limit is usually either the cost of your medical services or a percentage of your settlement (33.3% or 50%).
- The “Made Whole” Doctrine entails that you receive full compensation for your losses via your settlement before the insurance company can seek reimbursement. This might matter if the at-fault party lacks the financial resources to pay your claim. Be careful because some insurance policies include language that helps them wiggle their way around this restriction.
- The “Common Fund” Doctrine requires the insurer to pay part of the money it recovers to your attorney. Since your attorney must work to resolve your claim, thereby triggering subrogation rights, the insurance company must pay for this work.
These statutes are not the only ones that regulate the process of subrogation.
Should You Hire a Lawyer to Pursue Compensation for Your Injuries?
Should you hire a lawyer to help? The greater the size of your claim and the greater the uncertainty over liability, the greater your need for a lawyer. You will also need a lawyer if the accident was partly your fault. Don’t hesitate to weed out inadequate legal counsel because the longer you wait, the weaker your claim will become.
If you need legal assistance, contact our law firm by dialing (877) 300-4535, and one of our skilled personal injury attorneys at M&Y Personal Injury Lawyers will review your case.