Unless you have been involved in an accident where your health or auto insurer was reimbursed for payments it made, you probably do not know what a subrogation claim is—but here is why you should.
The term “subrogation” literally means that one person stands in the place of another with regard to a debt. When a person or entity pays a debt that ultimately is the responsibility of someone else, the one who paid may be entitled to reimbursement from the one who owed the debt in the first place. Entitlement to that reimbursement, especially in the case of insurance situations, is called “the right of subrogation.”
In the context of car accidents and other personal injury claims, subrogation is the process by which your own insurance company or health plan recoups what it paid for medical bills or disability benefits. If your insurance company pays for damages you sustained from an accident that was not your fault, it typically has the right under your policy to be paid back if you collect anything from the party who was at fault.
When your insurance company pays benefits under circumstances suggesting a third party is responsible for your loss, it will put the insurance company for the at-fault party on notice of its subrogation claim. Later, satisfying the subrogation claim is one of the final steps in the insurance claims process. Why should you care?
Why Do Subrogation Claims Matter in Personal Injury Cases?
Because your insurance company or health plan’s subrogation claim is treated as a lien against the proceeds of any settlement or verdict you may hope to collect, and when you settle with the at-fault party’s insurance company, the settlement must be shared with your insurance company or health plan. In fact, under South Dakota insurance law, insurance companies with subrogation claims actually have priority over their own insureds when it comes to distributing the proceeds of a settlement.
If your car insurance and health insurance companies have large enough subrogation claims, compared to the amount of liability insurance covering the negligent driver or other careless person who caused your losses, your settlement could be entirely consumed by your insurance companies’ subrogation claims. Years ago, the South Dakota Legislature passed a law providing that insurers could collect subrogation only after their insureds had been fully compensated or “made whole.” However, then-Governor Mike Rounds vetoed the bill, so insurance companies in this state still go to the front of the line and stand in front of their own policyholders in cases of limited settlement proceeds.
Why You Need Good Legal Representation
A skilled, knowledgeable personal injury attorney can deal with subrogation claims to maximize the net recovery you put in your pocket at settlement. An attorney who understands insurance law and rather technical aspects of subrogation rules can help you avoid paying subrogation you don’t really owe. And if your personal injury attorney works with your insurance company and health plan from the beginning, he or she may be able to work out arrangements favorable to you even on those subrogation claims you do owe.
This is where an attorney can help to make certain that your rights as an injured person are protected.
Sometimes your insurer can be persuaded to reduce a subrogation claim to facilitate settlement and resolve the case. At the least, it may agree at the outset to bear its own share of legal fees and costs, so you don’t have to reimburse it for every dollar it spent. In some cases, you may have differing legal claims arising from the same incident, with some claims not subject to a subrogation lien; the right attorney can help you choose the best claims to make to maximize the net amount you personally recover on your legal claim.
Do you want to know more details about what a subrogation claim means for your personal injury case? Contact the Turbak Law Office, P.C. at 605-886-8361 to speak with a South Dakota personal injury lawyer who can help you with this process.