When pursuing a personal injury lawsuit, it is important to temper your expectations and remember that insurance companies and healthcare providers may be entitled to recoup part of your settlement in order to pay for services that were provided as part of your recovery. In many cases where an injured person receives a claim from an insurance company, that company will exercise what is referred to as its subrogation rights if the person receives a settlement or judgment in a personal injury lawsuit.
Subrogation is the ability of a third party to receive a portion of any compensation that is collected during litigation for the purpose of reimbursement for funds paid as part of an insurance claim. The concept is based on the premise that a person should not be able to receive compensation two times for the same accident or injury.
Who Has the Right to Subrogation?
It is often the victim’s health insurance, automotive insurance or any other insurance that a claim is filed against that maintains the right to subrogation. Insurance companies claiming subrogation rights seek a portion of compensation equivalent to the amount of money paid out as part of a claim for medical bills or property damage. If a person files a lawsuit and it is determined that another party is liable for damages, the insurance company will argue that the financial burden rests on the at fault party and that party’s insurance to cover the cost of medical bills, lost wages and any pain and suffering that was endured.
How Subrogation Can Negatively Impact Your Settlement
While it is reasonable for insurance companies to demand repayment for paid claims in the event that the insured party receives a settlement or judgment in his or her favor, this can have damaging effects if the amount of compensation received is not sufficient to cover all of the costs incurred. This may happen if the defendant is uninsured, has poor coverage or lacks the ability to pay the judgment. Unfortunately, insurance companies will often still claim rights to subrogation even if the victim did not receive adequate compensation to cover all of his or her financial needs.
It can be argued that insurance companies should not be allowed to enact their subrogation rights until the victim has been “made whole”. This is called the made whole doctrine and is meant to allow the plaintiff in a lawsuit to collect compensation in the full amount of his or her medical bills, lost wages and pain and suffering before an insurance company is able to demand a portion of the settlement. Recent federal cases have ruled in favor of the insurance companies when considering the made whole doctrine, unfortunately, but it is possible for an experienced personal injury attorney to negotiate favorable terms with an insurance company so that the plaintiff is able to avoid incurring an undue financial burden as a result of his or her injuries.