You Can’t Have Your Cake and Eat It Too: An Insurer’s Right to Subrogation
I think personal injury lawyers are partly to blame for a misconception that is common among injured clients with little experience in the legal system. Commercials featuring car accident victims with hundred dollar bills floating from the sky lead many to the mistaken belief that their misfortune of being involved in a car wreck will result in a financial windfall. I can also understand why a client could be lured into this way of thinking. The client’s health insurance has paid your medical bills, her short-term disability policy that has compensated her for her lost income, so anything a jury could award her should be icing on the cake!
This is not the usually the case because of a legal concept called “subrogation.” Subrogation is a fancy-sounding word, which simply means “the right to be paid back.” So, if one’s insurance company has already paid her for injuries or property damage it would not reason to pay, but-for some other driver’s carelessness, chances are that her own insurer has a right of subrogation. It is the client’s obligation to satisfy these subrogation claims out of the proceeds of any car accident case she may pursue.
Your insurer’s right to be repaid from a client’s settlement proceeds usually originates in either a contract or a legislative statue. Most of the time, it does not matter whether an insurer’s subrogation right is statutory or contractual. However, in some instances, an insurer’s contractual right of subrogation can be defeated, usually when a client is significantly injured and few additional sources of recovery are available to her. Subrogation claims arising under statute, like reimbursement of payments made by Medicaid, Medicare, or Worker’s Compensation, are not typically avoidable. However, a skilled lawyer should be able to significantly reduce one’s exposure to most subrogation claims
From the very first time a client walks into my office, I am very clear with her about her responsibility to satisfy subrogation claims. The law rarely allows for a “double recovery.” Subrogation is one feature built into the law that prevents a client from recovering twice for the same injury. A client who does not fully appreciate the importance of subrogation claims could find themselves on the receiving-end of a lawsuit from their own insurance company, looking for its money back.