Subrogation in Insurance Law
Subrogation is a concept in the insurance and legal industry in which an insurance company, after covering a person's losses or injuries, seeks to be reimbursed by the party that caused the damages. It is the method by which insurance companies hold third parties accountable for the claims the company paid out. There are particular areas of the law where insurance subrogation plays an important role.
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Subrogation and Contracts
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Not all insurance companies have subrogation clauses in their contracts. However, most do. The only way to know whether your company requires subrogation from a third party is to check the contract. The contract will dictate exactly how subrogation works, including the time frame for seeking subrogation.
Damages in a Lawsuit
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States differ as to whether payments by a third party, including insurance payments, will offset the amount of money a plaintiff can recover from a defendant in a lawsuit. For example, if you are injured in a car accident and an insurance company pays for your medical bills, states such as California will not allow evidence of payments by a third person to reach the jury. Thus, the jury cannot consider insurance payments to deduct from the amount of money the injuring party must pay. The defendant is responsible for all damages regardless of third-party payments. The only exception in California is in medical malpractice cases. Some states, however, do allow an offset for damages.
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Medicaid and Medicare Subrogation
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Medicaid and Medicare are payers of last resort. Thus, anytime those public insurance companies cover an injury for which the injured party later receives compensation by the culpable party, the injured party must reimburse Medicaid or Medicare.
Insurance Company in Your Shoes
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What happens if you chose not to bring a lawsuit against the person who injured you? Some insurance contracts allow the insurance company to stand in your shoes to bring the lawsuit against the injuring party. The injured party may be asked to sign a subrogation form prior to the insurance company's filing the case.
Subrogation as a Legal Specialty
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Subrogation is such a complex area of law that it has evolved into a specialty practice area. There are also professional organizations that deal with subrogation issues--for example, the National Association of Subrogation Professionals. The NASP provides educational events and an annual conference.
Disclaimer
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Insurance claims and the law surrounding them is very complex. If you have been in or caused an accident, seek advice from an attorney licensed in your jurisdiction. This article is for educational purposes only and should not be construed as legal advice.
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References
- Photo Credit injury image by Andrey Kiselev from Fotolia.com
