- The term subrogation refers to the legal process of assigning one's rights to sue or collect to another party. In the insurance world, subrogation is what allows the insurer to go after someone who caused you damage or injury and who should rightly pay. The insurance company first pays you based on your policy and then, if they have the right to subrogate your claim, can step into your shoes and sue the other party as if they were you, to collect back what they paid to you.
- Workers' compensation insurance is a form of strict-liability, or no-fault, compensation. This means it is irrelevant who caused an accident or injury--the existence of a work-related injury triggers compensation under the workers' comp insurance policy. Under workers' comp, a worker is entitled to compensation for an injury regardless of whether the employer or some third party was at fault, or if the injury was caused by the worker's own negligence.
- The trade-off for workers' compensation insurance is subrogation of a worker's potential claims against the insurer. Though it is much more difficult and costly to prove an employer's negligence in court, the compensatory award could be considerably higher than what workers' comp would pay. In exchange for receiving some guaranteed compensation, workers sign away their right to sue the employer for negligence. This is what is known as waiver of subrogation.
- Payment under workers' compensation insurance is subject to state laws. Generally, the compensation is limited to actual medical bills and lost wages. There are also sometimes other protections that prevent a worker from being fired for filing a workers' comp claim. But, the damages that sometimes result in large jury verdicts, such as for pain and suffering or punitive damages, are not available in workers' compensation plans.
- As mentioned above, subrogation generally works to the benefit of an insurance company because it is able to receive compensation for what it paid to its insured. But if the worker has waived his right to sue the employer, there is no right to subrogate to the insurance company. Even though the worker's recovery is limited compared to what could be awarded by a jury, an insurer will still often try to seek reimbursement if the cause of the injury was not the worker or the employer. In some cases, insurers are able to limit the waiver of subrogation to these specific parties or companies and are able to sue on behalf of the worker for injury by a third party not on the subrogation list.
