Subrogation in its most basic terms means that someone or some company has the right to collect money on behalf of another person. The way subrogation typically begins in a personal injury case is when an injured person’s medical payments are covered under their personal motor vehicle insurance or, more likely, a health insurance company pays medical bills and benefits on behalf of the injured person. The health insurance company’s contract with the injured person allows the company to be reimbursed from the recovery obtained from the person who caused the injuries. Subrogation can also arise when a workers’ compensation carrier pays benefits for a person injured on the job by a third party. The basic idea is that the companies have the right to be repaid for the money expended when a recovery is obtained from the third person.
How much money do you have to repay from your settlement? The answer is it depends. Most of the time subrogation will be reduced by the amount of attorney’s fees incurred in obtaining the recovery from the third party. With a typical one third contingency fee agreement, subrogation rights are reduced by a third. For example, if the insurance company paid out $12,000 in medical bills, then they will have the right to be paid back $8,000 from your recovery. This is because in most states the insurance company is required to share in the injured person’s attorney’s fees and costs. Also, in some situations, the insurance company will agree to take even less money. In situations where the third party does not have adequate insurance to compensate you fully, your insurance company may sometimes agree to very significant reductions to allow you to at least put some money in your pocket.
Beware of ERISA health care plans. If you have health insurance through a fully funded ERISA plan, then you may be required to repay up to 100% of the money you recover from the third party. This is because Congress made a law that specifically allows fully funded ERISA plans full subrogation rights. This can make pursuing a claim against a third party financially pointless for you if your insurance company insists on taking all of the money you expect to recover. In this given situation, it is very important to have an experienced injury attorney to help you negotiate with your own insurance company and the third party’s insurance company. There is no guarantee that an ERISA plan will agree to reduce their subrogation rights but having an experienced ERISA attorney will at least give you a fighting chance to put some money in your pocket at the end of your claim.
Regardless of whether you are dealing with a regular health insurance company or a fully funded ERISA plan, subrogation claims are complicated and you may find it helpful to discuss your situation with a knowledgeable attorney. When you have been injured by the negligence of another, you need an experienced injury lawyer to help ensure that your claim is handled fairly and that you put as much money in your pocket as possible at the end of your case.