THAT FUNNY THING CALLED SUBROGATION
If you are a personal injury client of ours or have been in the past, you have likely heard the term “subrogation”. You may have looked it up in the dictionary or on the internet but it seems as if the word doesn’t exist! Your attorney or one of their legal assistants may have attempted to explain it to you, but it was still baffling! After all, why after paying good money towards health insurance and/or PIP medical benefits, would you have to pay the insurance company back for medical expenses it paid to your medical providers? Isn’t that what you pay premiums for? The assistants here at Ladenburg McKasy Durkin Inc. P.S. are asked these questions quite frequently and in this article, we will try to answer those questions in simpler terms.
In your policy with your auto and health insurance companies it specifically references the “right to reimbursement” or “subrogation claim.” Regardless of if it is your own auto insurance paying for the medical bills or your health insurer, if we are successful in settling your claim and that settlement compensates you fully or “makes you whole” for all of your damages caused by the injury event, your insurance company is entitled under your policy or contract with that insurer to be reimbursed up to the exact dollar amount it paid out for medical bills on your behalf. The reason your insurer has a right to be reimbursed those benefits is that when you have been paid in full satisfaction of your personal injury claim by the person or entity responsible for your injuries or damages, part of your settlement proceeds are compensating you for your “special damages” which in part are your related medical bills. If you did not pay back your insurer for the medical benefits they paid on your behalf, in essence it would be as if you were “double dipping” or getting paid twice for your medical expenses because you are recovering those medical expenses from your settlement that are to cover those medical benefits your insurance has paid.
On the other hand, if your settlement does not fully compensate you for the entire value of your claim (sometimes meaning in excess of the policy limits), your insurer does not have the right to be reimbursed for the benefits it paid out on your behalf until the time that you do recover fully from a monetary recovery, if ever.
Often at the time of your settlement, our firm is able to negotiate a reduction of the “subrogation” or reimbursement amount to one or all of your medical insurers. The reason we are successful at reducing what you have to pay back to your auto insurance or health insurance company is that under Washington law an insurer must pay a proportionate share of attorney fees and costs since your attorney in essence recovered the medical expenses for the insurance company through a settlement of the claim. Your insurance company did not have to extend any effort or resources to get reimbursed. However, if you have an ERISA health insurance policy, under federal law, most likely you must pay the insurance company back its subrogated interest dollar for dollar.
Hopefully that gives you a clearer picture of what “subrogation” means. If you need more clarification of what “subrogation” is, we are here to help!