Subrogation is the substitution of one person or group for another with respect to a debt or insurance claim accompanied by the transfer of any associated rights and duties.
Subrogation typically arises in property insurance claims and health insurance claims.
Health Insurance Subrogation
Your health insurance (including Medicare/Medicaid) will want reimbursement for the money it paid for your treatment.
This has to come from any money that you recover from your legal action. However, you or your personal injury attorney may be able to negotiate with them how much you pay back. It often depends on your insurance contract.
Subrogation Health Insurance Example
As a result of the same automobile crash, you are injured. When you go to the doctor, you present your health insurance card to receive treatment for your injuries.
The total cost for medical treatment in your case is more than $150,000.
Because the crash was caused by someone else, your healthcare carrier is subrogated to your rights against the offending driver for the amount of medical expenses it paid (more than $150,000).
That means if you recover money from the other party or their insurance carrier, $150,000 must be repaid from that money to your health insurance company. (Suddenly, those big amounts that are flashed on the "Get a Check" commercials don't seem quite as large!)
Short-Term or Long-Term Disability Subrogation
Another often forgotten subrogation claim - any short-term or long-term disability company that paid you (like AFLAC or CIGNA or sometimes your own employer) for missed time from work.
They are entitled to recover that money from any money that you receive from a settlement.
Your Own Insurance Company Subrogation
If you have MedPay coverage and filed a claim, your auto insurance company may want reimbursement when you recover from another party.
Also, if your car insurer pays for your property damage repair or replacement while awaiting payment from the other party, they will be entitled to the money that you recover from the at-fault party.
Car Insurance Subrogation Example
You are involved in a car crash that damages your brand-new truck. The damage costs $25,000 to repair. You file a claim, and your insurance company pays to get your truck repaired quickly.
Your carrier is now subrogated to your right to sue the other party and/or their insurance carrier for the $25,000 it paid to you and will seek reimbursement when you receive payment from the at-fault driver's insurance.
The Takeaway
When considering a settlement offer, consider the subrogation process and all of the money that may be owed or subrogated to other parties.
You need to ensure that an offer covers all of your expenses and any money owed to other parties. What initially seems like a huge amount may not cover all of the money owed to other parties seeking compensation.
