Understanding Insurance Subrogation after a Car Accident

After a car accident you’re bound to hope that everything in the process of settling your insurance claim goes smoothly. If you’re among the wisest accident victims, you’ve had your injuries treated medically, and you’ve retained a personal injury lawyer to help you settle the claim for an amount that covers your injuries and your losses. Unfortunately, it is at this point that another wrinkle often develops. That new wrinkle is called insurance subrogation.

In this article we’ll try to answer some of the questions you may have about insurance subrogation. We’ll tell you how it works, when it applies, what it means to you, and why you’ll be better off if you have it handled by a qualified professional.

  • What is insurance subrogation?
  • Do all claims involve subrogation?
  • Who will pay the attorney fees and court costs?
  • How can I protect myself from subrogation surprises?

What is Insurance Subrogation?

Essentially, insurance subrogation is a term that describes what happens when one insurance company has to pay for the injuries caused by another insurance provider’s insured. It goes like this.
Sally was injured when Tom rear-ended her car while she was stopped at an intersection. When Sally was taken to the hospital for treatment of her broken hip, the hospital billed her personal medical insurance. Sally was treated and eventually released.

The problem with this is Sally’s injuries were the fault of another driver. The bill ought to be paid by the at-fault driver’s insurance company, not Sally’s medical insurance. Her medical insurance company has notified Sally that, according to the language of her policy, they have a subrogation lien against her accident claim settlement for the full hospital bill of $19,852.

Not only is Sally shocked when the notification arrives, she is also totally unaware that she signed anything that would create an obligation like this one. Perhaps Sally didn’t read all the fine print. This situation is not at all unusual.

Do all accident claims involve subrogation?

It depends upon who pays the bills in the first place and whether they have a contractual or statutory right to be reimbursed.

You can have a contractual obligation to repay your own insurance carrier in the event your insurer pays bills when somebody else’s negligence causes you to be injured. If you were hurt or your personal property damaged in a car wreck which was caused by somebody else’s negligence, and your insurance company makes payment for all or part of your medical care, you may be required to repay your carrier if you get a settlement from the other party’s insurance. This is subrogation.

There may be other instances in which reimbursement or subrogation may be required. Very common situations are claims for health coverage reimbursement as in Sally’s case, physicians or hospital practice liens. This can also happens when the injured receives benefits from the government. This would include Medicare and/or Medicaid liens, as well as Worker’s Compensation liens and claims that come under the Federal Medical Care Recovery Act.

Not all everyone who is looking for subrogation from your injury case is entitled to it. Identifying who may be looking to share your settlement and whether that company or government entity is entitled to do so is one of the skills possessed by a good personal injury attorney. Making a subrogation mistake can cost you big if you end up paying a claim that was not enforceable. On the other hand, failing to honor a valid subrogation claim can result in big problems and financial losses to you and your lawyer.

The sooner you know about any liens or reimbursement rights, the better it is for you. Having the big picture of your settlement claim earlier can help you retain more of your settlement. Unfortunately, most people have no idea that reimbursement demands that might come against their accident settlement until after the claim has been entirely settled. This can significantly impact the amount of settlement money you end up with.

Probably the most complicated and difficult situation comes when the Employee Retirement Income Security Act of 1974 or ERISA is involved.

In some instances, what can be collected by an insurance company is limited. Under Georgia law, some insurance policies only allow the insurance company that pays your medical bills to recover if you have been “made whole*. [*Made Whole: According to Georgia law, an accident victim may be made whole when “[t]he amount of the recovery exceeds the sum of all economic and noneconomic losses incurred as a result of the injury, exclusive of losses for which reimbursement is sought.” O.C.G.A. § 33-24-56.1(b) (1).]

This simply means that the amount of the settlement exceeds the sum of all economic and noneconomic losses incurred as a result of the injury. You’ve been “made whole,” by your settlement IF you have been reimbursed for everything you lost. If the accident cost you more than you received from your settlement, an insurance company is unlikely to try to recover from you. On the other hand, health insurance plans governed by ERISA are often not subject to Georgia’s “made whole” doctrine, and must be reimbursed a greater portion of what the insurer paid out.

Discovering and knowing whether your insurance plan falls under the made-whole doctrine can make the difference between keeping your settlement or paying a large portion (if not all of it) to an insurance company or Medicare/Medicaid. This alone is can be a good reason to hire a personal injury attorney, because most insurance companies will not be honest with you and tell you about “made whole” – they will insist upon reimbursement even if not entitled to it.

How can I protect myself from subrogation surprises?

As we said earlier, subrogation and reimbursement demands can seriously carve into your settlement. The old saying that tells us that “being forewarned is being forearmed” is absolutely true here. Unfortunately, not all lay-folks understand what they’re up against in an accident claim.

It is not unusual for accident victims to ignore or dismiss subrogation notices from their insurance companies because they didn’t read the policy and its fine print in the first place. The best protection you can have in an accident claim is a clear picture of what lies ahead. Read your health insurance policy to see whether the insurer has a right to claim part of your settlement. If you have questions about that, consult with an attorney. Don’t take the insurance company’s word for it.

If you have not yet chosen a lawyer to represent you in your claim, give us a call today. Allow us to review your case and help you determine how to proceed. You’ll be glad you did.