What is Subrogation?

When another party acts negligently and causes an accident in which you sustain injuries, you may think that the other party’s insurance company should pay for your medical bills as they accrue. In practice, however, this rarely occurs. Rather, your health insurance company and auto insurance company, if applicable, will pay its portion of your medical treatment and expenses that are related to your injuries in the accident. However, if you receive a personal injury settlement or award after a trial, your health insurance and auto insurance companies typically have the right to recoup the medical costs that they paid out for you. This is the insurance company’s right of subrogation.

A right of subrogation is usually written into the terms and conditions of your insurance policy. While the language of this provision may vary from policy to policy, the meaning of the provision is the same. If you are injured and receive payment for your injuries from a third party, a subrogation clause will require you to repay your insurance company for any expenses related to your injuries that they covered.

There are two basic types of subrogation. Common law subrogation requires you to pay back your insurer after receiving a personal injury settlement or award only if the amount of money that you receive makes you “whole.” This means that the financial settlement or award puts you back in the same position as you were prior to the accident that caused your injuries. Arguably, then, if the money you receive does not make you whole, then your insurance company should have a reduced right to subrogation, or even no right to subrogation at all.

Insurance plans that fall under the Employee Retirement Security Income Act (ERISA), however, are different. While provisions may vary from one plan to the next, ERISA plans generally require that any funds that they expended on your behalf be paid back in full from the financial settlement or award that you receive. With an ERISA plan, you have much less room to negotiate a lesser payment to your insurer.

Subrogation can be a difficult legal concept for injury victims to understand and process. Having a skilled and experienced injury lawyer on your side to help you navigate the legal system is an essential piece of obtaining compensation for your losses. For more information about how to properly handle your personal injury claim, contact the Wisconsin personal injury lawyers of Boller & Vaughan today.


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