What is Subrogation, and How Does It Work?

There are certain legal terms that most of us never hear until they apply to a situation we’re a part of. Subrogation is one of those terms. However, if you start seeing that term applied to any legal matters that concern you or a loved one, it’s definitely time to start reading the fine print to be sure that you’re on top of the issue.

What Is Subrogation, Anyway?

The short version is that subrogation is the legal right of an insurance company to be paid back once you receive a settlement after an accident. Since paying back an insurance company sounds like the opposite of how insurance is supposed to work, though, let’s use an example to illustrate how this process works.

Let’s say that you were in a personal injury accident, and you wound up needing medical treatment as a result. Maybe you broke your leg, or fractured a hip, and so your medical insurance kicks in to cover the bills. Normally, that would be the end of it, and you’d move on with your life. However, if your injury was caused by an accident and you receive a settlement, then you have to pay back your insurance provider for the costs they put into your medical bills before you spend any of your settlement on anything else.

In short, if someone else is at fault for your accident, then it was not your insurance company’s responsibility to cover your bills. Under their contract with you, they need to be repaid for your accident related bills because someone else is responsible for causing your injury.  If you recover money the health insurer will want to balance the books and wash their hands of the whole issue.

When Does Subrogation Apply?

Subrogation is not a universal requirement in insurance policies, though it is commonly written into policies, and it can apply to everything from medical and auto insurance, to Medicare, to short and even long-term disability payments made to you. Subrogation usually does not apply to no-fault insurance coverage, but that is about the only situation where subrogation doesn’t apply to accident bills.  Subrogation is most commonly found in auto insurance policies, but there are other policies that can claim a right of repayment.  No fault benefits typically remain paid regardless of whether someone was or wasn’t at fault in your case, and you never have to worry about having to square up with an insurance company afterward.

When it comes to any other form of plan, there are particular phrases you need to look for. Generally there will be a phrase like, “The Plan will be reimbursed from any recovery before any payment of any existing claims…”

In plain language, that line means that before you get money or pay any other bills with a settlement you receive, you have to pay back anything the insurance company spent covering your medical bills. Even if you have immediate problems like co-pays or a damaged car, the insurance company may have a right to be paid back first whenever you have a phrase like this in your policy.

How Does Subrogation Work?

In theory, subrogation should be a fairly simple process. Your insurer will have your current case available, and they can tell you how much they’ve spent on all of your bills. Once you have your settlement awarded, you can then pay the insurance company back so they can close the claim, and you can move on with your life.

However, the process is often significantly more complicated than this.

As an example, government health benefits like Medicare present special concerns.  Failure to follow the rules about repayment of government benefits can jeopardize future medical payments, and the rules for government plans can be very complex.  Handling this tricky issue right the first time is very important so you don’t end up with no coverage for a future illness.

If your lawyer is paid a percentage of your settlement as their fee, then you may also find that issue complicated by subrogation. Typically the attorney is paid on the total settlement, and most injury attorneys will negotiate with the health insurers to have them reduce the amount they are asking to be repaid.

Subrogation is made even more complicated if you try to go into the process on your own, and you’re not familiar with how it’s all supposed to work. Every company will have their own policies in place, and while you may want to get everything resolved cleanly and neatly it can take some time for the wheels to start turning, and for your case to get fully processed.

You Don’t Have To Go It Alone

Most people wouldn’t dream of walking into a courtroom to argue their own case, because they know it’s better to have someone with experience at your side if you hope to come out a winner when a decision is made. That same mindset can make getting through the subrogation process a lot easier on you, and on your pocket book.

Just as a lawyer will advise you on the smartest course of action during a trial, a representative familiar with subrogation can keep you abreast of what’s going on, explain your obligations in terms you can understand, and act as the go-between with you and your insurance company. In many circumstances your representative may even be able to negotiate with the insurer, helping to make sure that you pay back the smallest amount possible based on the law and on the language of your health insurance policy.

When you’ve already had to go through the pain, suffering, and disruption to your life caused by an accident, there’s no reason to stack additional challenges on top of that. You’ve got a life to get back to, and you should make sure you’re allowed to do that as quickly as possible.

If you find yourself dealing with subrogation claims, and you need help figuring out what’s going on and what actions you should take, simply contact us today! Our experienced legal professionals are here to help you, and to help you put all of this firmly behind you.