Insurance Law: What is a Subrogation Action?
Have you ever been accidentally injured, visited the emergency room for treatment, and submitted the bill to your health insurer for payment? Most people have had this experience, either themselves or with their children. Your health insurer will usually pay for the costs of treating your injuries. However, after making payment (and sometimes even before they submit the payment) your insurer may contact you to discuss how the injuries occurred. The insurer is probably trying to determine if someone (other than the injured person) is fully or partially to blame for the injuries. The insurer may even try to determine if you are planning on suing another party for the injuries you have received. Ultimately, the reason the insurer is asking these questions is to determine whether some third party may be responsible for paying for your injuries, thereby relieving some of the insurer's financial responsibility. The above example embodies the concept and reasoning behind insurance "subrogation."
Understanding Subrogation Rights and Interests
If you have been injured in an accident that has resulted in damages, at some point you will undoubtedly hear the term "subrogation." Literally, subrogation means one person or party stands in the place of another. Subrogation issues surface when a person has been injured and someone other than the person or party at fault pays for all or some of the damages resulting from the injury. By definition, a subrogation claim allows the innocent paying party, also known as a "collateral source," to stand in the shoes of the injured party. The collateral source asserting a subrogation claim will not be entitled to greater rights than those possessed by the person who was entitled to receive the initial benefits. Moreover, any legal defenses that could be used against the injured party may also be asserted against the collateral source provider.
Generally, a "collateral source" is a private entity, usually a private insurer, or a government agency, which makes payments to a party who has a personal injury claim. Subrogation issues involve the question of which part of a settlement or jury verdict must be used to repay the collateral source for payments made to the injured party. At the heart of this issue is the concept that an injured party should not be allowed a "double recovery." It is believed that injured parties should recover for the actual damages they have incurred, but should not be allowed to profit from their loss. For example, if the injured party's insurer paid $12,000 to the healthcare provider that treated an injured party, that party should not later be allowed to also collect $12,000 from the party causing the injury AND then be allowed to pocket the $12,000. This would result in a windfall to the injured party. Instead, the party's insurer should be allowed to collect the $12,000 payment either directly from the at-fault party or from the injured party. In turn, subrogation is supposed to help lower insurance rates.
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