Understanding where the money comes from in subrogation can make it easier to know what to expect as you navigate the insurance claims process following a personal injury accident. Subrogation is a complex legal issue even for lawyers, but it is common and important for any injury victim to understand.
In short, subrogation is the process under which an insurance company or another party pays for the losses the victim suffered and then tries to recover the money they spent from the liable party or their representative. You can read on to learn more about this process, how it works, and when you will most likely experience it.
What does Subrogation Mean?
A literal interpretation of the word “subrogation” is “to stand in the shoes of someone else.” Practically speaking, subrogation entails:
- A third party paying some of the expenses you incurred as a result of a negligence accident
- That third party seeking reimbursement from the defendant who acted negligently and caused your injury
When does Subrogation Occur?
Subrogation is most common when an insurance policy pays for medical care or other expenses that occurred due to an accident. This could happen with:
- Your auto insurance company
- Your health insurance provider
- Other insurers
- Other benefit providers
When considering what an insurance company does and how they may pay the costs based on someone else’s liability, the term “subrogation” makes sense. They are fronting the money to their policyholder and then seeking reimbursement from the liable party and/or their insurer.
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What Is the Purpose of Subrogation?
Subrogation has several purposes. They include:
- Preventing “double-recovery” or profiting off an accident
- Ensuring the liable party is held responsible
- Helping the victim get compensation as soon as possible
For example, imagine your health insurance paid a medical bill related to your traffic accident. While the defendant was liable, your healthcare coverage paying out allowed you to cover the bill. Then, your insurance company will use subrogation to seek reimbursement from the other driver’s insurer.
This ensures only the liable parties are stuck holding the bill. The insurer who paid the bill will aggressively pursue the money from the at-fault party and/or their auto liability insurance provider.
What Is a Collateral Source?
If you are talking about subrogation, it is also common to hear the phrase “collateral source.” Essentially, a collateral source is any third party that pays an accident-related expense on your behalf. These collateral sources stepped up to pay you and then stepped into your shoes as the claimant to hold the at-fault party responsible.
However, it is important to remember that a collateral source can only pursue compensation for the money damages they paid. This could mean they seek payment while the claimant seeks the remaining balance of their case value.
Common Examples of Subrogation
Subrogation frequently comes up in the following situations:
- Health insurance: For example, if your health insurer pays for an emergency room visit after an automobile accident, your insurance policy grants the insurance company subrogation rights to recover the cost of that visit from the adverse party.
- First-party auto insurance claims: An accident victim may file a claim to repair their vehicle after a crash with their own insurer, assuming they have collision insurance. Their insurer pays to repair or replace their car then goes after the money they spent from the at-fault party.
- Medicare, Medicaid, Veterans’ benefits: Like health insurance, when these government programs pay for expenses related to an accident for which someone else is liable, they will be a collateral source.
- Workers’ compensation: If a third party is responsible for your on-the-job injury, but workers’ compensation pays on your behalf, the insurer or your employer can pursue damages from the liable party for the amount of those benefits.
- Contractors after natural disasters: Contractors often begin to work on a house after a storm without requiring upfront payment. When they do this, they ask homeowners to sign a subrogation contract. Depending on the language of the contract and the insurance policy, this agreement gives the contractor all the rights the homeowner had to make a claim on the insurance policy.
How Subrogation Could Affect Your Injury Claim
Subrogation is a complex legal issue, and failing to understand who gets reimbursed for medical bills can sometimes result in personal liability for accident victims. If you were injured in an accident and have questions about how subrogation might affect your claim, you may want to speak with a car accident attorney.
Collateral sources are subject to the same defenses as the injured party, and thus, their recovery could be reduced if the accident victim is found to be partially at fault. Sometimes this means that collateral sources will be allies in fighting for a claim. On the other hand, if settlement means that not everyone will be fully paid, working on getting the consent of all collateral sources can sometimes stall negotiations.
Do You Have Questions About What Subrogation Means to Your Injury Claim?
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