Introduction to Subrogation—Forced Payback to YOUR OWN Insurer From Your Personal Injury Award
What is it? Subrogation means YOUR OWN insurance company gets reimbursed right off the top of your personal injury insurance settlement—before you even see one dollar.
Insurance company subrogation against your personal injury insurance settlement is the means by which YOUR OWN insurer gets paid back for monies advanced to you during the insurance claims process (i.e. payment of your medical bills or wage loss). The right to insurance subrogation depends upon the laws of your own state: some states do not allow subrogation at all, whereas in other states there is no defense whatsoever against your insurer taking its lien off the top of your personal injury insurance settlement award. Most states do allow for some defenses to subrogation, depending upon the equities of the situation. Here are the basics:
1. Your own insurer—be it your auto insurer, your health insurer, your HMO, or any other insurer (or a governmental agency) that pays first party benefits because of losses you sustained in an accident caused by a tortfeasor—did not just "give" you the money it sent to pay for your doctor bills, lost wages, or other first party benefits. They “LOANED” it to you pending repayment when you get your insurance settlement, at which time they will insist upon being repaid in full.
2. Notice the key here: IF your insurer KNOWS that you were injured AND that you are pursuing a claim against a tortfeasor, then it will (with limited exemptions for some outstanding health insurers and HMOs) want to be paid back for the money it advanced when you settle with the tortfeasor’s insurance company.
3. Your own insurer will make contact with the tortfeasor’s insurance company and let its adjuster know that there is a claim for subrogation that they will assert against any insurance settlement or award that you may get. Thus, they are putting their hooks into your insurance settlement: they want to be paid off the top, before you even see a dime of your personal injury award.
4. There are some DEFENSES that can be raised against subrogation in five limited situations—depending upon whether you live in a “Blue State” (where the legislature has listened to trial lawyers on behalf of injured persons) or in a “Red State” (where the legislature is likely more influenced by the insurance industry lobby).
5. Some states so favor the citizenry that they do not even allow for subrogation, whereas in others, there is no defense allowed whatsoever to having to pay back your own insurer with your first dollars of your insurance settlement award. So you will want to FIRST CHECK with your state insurance commissioner to ascertain the rules for subrogation in your own state.
Among other things, you will want to ask whether or not your state allows the use of “equitable defenses” against the subrogation claims of insurance companies. If so, then there is a chance that you could reduce the subrogation claim that your own insurance will likely make against your insurance settlement award.
What is the big deal? Why shouldn’t injured people have to pay back what their own companies paid for their medical bills and lost wages?
OK, first consider that YOU PAID your insurance company to handle the risk of having to pay out medical expenses in the event of an accident. If the tortfeasor had NO insurance, there would be NO subrogation: the insurance company would pay out on its contract, just as it agreed to. And your own Uninsured Motorist (UIM) award would not be reduced one dime because of the medical and/or wage loss payments your PIP paid or your HMO paid.
Next, consider the case where the tortfeasor has plenty of insurance: you have a $75,000 claim and the third party insurance limit is $100,000. There is plenty of money to pay for your general damages as well as the subrogation claims of your auto insurer and your HMO. So, unless one of the defenses below is applicable, then you, as claimant should have no problem seeing some of the tortfeasor’s insurance coverage go to reimbursing your own company.
But what about the case where the tortfeasor’s policy limits are low and there is not enough money to go around? This is where you will appreciate a legislature that takes into account the arguments made by your state trial lawyers association, as opposed to those of the insurance industry.
It is not uncommon to become the victim of a tortfeasor who has just minimal policy limits. If she has no other assets and you settle for those insurance limits, your OWN INSURANCE COMPANY could end up with almost your entire insurance settlement award. For example, lets say that:
• You have medical special damages of $17,585, paid by your own PIP until you exhausted your limits of $10,000, and the balance of $7,585 paid by your health insurance or HMO.
• Both your own auto insurance and your health insurance filed subrogation claims with the third party carrier.
• The policy limits carried by the tortfeasor are $25,000, your state minimum.
• Your wage loss and general damages total $57,415, and thus the TOTAL VALUE of your personal injury claim is $75,000 (adding all medical costs, lost wages, and general damages gives you the total value of your claim).
Unless you use the www.SettlementCentral.Com letters on subrogation defense from our MEMBERS’ SUBROGATION MODULE, here is how your settlement with the tortfeasor will pay out. You will receive only $7,415 out of a $25,000 settlement.
Policy Limits of Third Party:
Less PIP subrogation claim (you exhausted $10K limits):
Less Your HMO or Health Insurance Subrogation
Net Residual to YOU:
What can YOU, THE CLAIMANT do about defending against a subrogation claim by your insurer? What do we have for you in www.SettlementCentral.Com's members’ side? Read on, because while this is part puffing about our site, we will give you the idea behind the five possible subrogation defenses.
We want our members to become informed on the topic of subrogation so the NEW SUBROGATION MODULE purposes are the following four:
FIRST, we educate our members about subrogation in general, what it is and how it works. Next, subrogation defenses at www.SettlementCentral.Com's members’ side include both the general rules regarding defenses to the subrogation claim made by your own insurer AND useful letter formats to download. In other words, how to go about beating their claim or at least getting a reduction of the amount that they can take from your insurance settlement.
SECOND, you should know about the defenses to a subrogation claim:
• You will be trying to defend against the claim of subrogation that your insurer has filed with the tortfeasor's insurance carrier. How can you do this? We have five suggestions, but of course, none of them can be guaranteed. Often you will just be seeking some accommodation, some reduction in the amount of the subrogation.
• We will look at the FIVE most viable defenses to a subrogation claim:
(1) Disputed Liability. If the tortfeasor fights liability, why should your insurer be able to sit on the sidelines and collect its in full claim without having to share in the costs of the battle?
(2) Proven Comparative Negligence. If you were partially at fault, reduce subrogation accordingly.
(3) Low Tortfeasor Policy Limits Settlement. If you cannot be “made whole”, then reduce subrogation.
(4) Medical Treatments Not Accident Related. If the tortfeasor claimed some treatments were not at all accident-related, then fight subrogation on those items.
(5) Attorney’s Fees Incurred. If you did hire an attorney at one time, spread those costs of your victory to your insurer?
THIRD, we want you to have an idea of how to work this issue to your advantage should you decide to hire an attorney.
• Most attorneys will just settle the underlying tort claim, without pursuing any subrogation reduction. Why not include a clause in the professional services agreement to the effect that they will pursue a subrogation reduction via at least two letters without charging any additional attorney's fees?
And FOURTH, we want to give you some sample letters to use, and the confidence to use them in an effort to save a few or a lot of subrogation dollars.
• Don't think that these are "magic" that will make your insurance company's subrogation claim disappear. The chances are that this entire effort is only a long shot. But why not try? Even if you do not succeed, you could at least end up with SOME reduction in the subrogation claim. And every dollar you save is another dollar directly in your pocket.
Choose Where to Submit Your First Party Claim—or Do You Use Third Party Coverage?
Your choice of which insurance company to use for making your first party interim payments can impact the amount of the subrogation claims of the companies at the time of your bodily injury insurance settlement.
PIP Versus Third Party Versus HMO Insurance Company Payment of Medical Expenses as Incurred
Medical Care Choices and Documentation
Managing Medical Care After Auto Accident Personal Injuries
Use a Confidential Personal Injury Diary for
TOP DOLLAR Insurance Claim Settlements
"No medicine: no money"; medical costs incurred by claimant will increase the worth of personal injury insurance claims>
IF YOU SUFFERED PERSONAL INJURIES in the auto accident, then here are some links to www.SettlementCentral.Com's do it yourself insurance claim help:
• Overview Tort Law Personal Injury Legal Claims
• 5 Easy Steps to Do-it-Yourself Insurance Claim Settlement
• www.SettlementCentral.Com shows How Through Medical Care Documentation YOU have-the KEY to "Successful Personal Injury Insurance Claim Settlements."