Subrogation: Why Your Insurance Company Could Take Your Settlement Money

by Staff Blogger | September 7th, 2020

Medical bills are some of the most expensive costs associated with a serious injury. If you’ve been hurt in an accident through no fault of your own, your auto or health insurance company might pay those medical bills, especially if the at-fault party’s insurance refuses to foot the bill.

However, if you file an injury claim against the party or person who caused your injury, you will be seeking damages for those same medical bills your insurer already paid.

If you’ve ever wondered how you can seek money for bills that were already covered by your insurance company or what happens when those financial obligations overlap, then you’ve stumbled onto an important topic that plays a part in most injury claims: subrogation.

What Is Subrogation?

Subrogation is what happens when an injured person’s insurance company reclaims the money it paid out for accident-related costs. It’s how your insurance company recoups costs that the defendant (the person you’re taking legal action against) owes you.

Subrogation clauses are a part of all insurance contracts. So, insurance companies have a legal right to be reimbursed for the money they pay out if those costs are part of a successful legal claim.

Subrogation only involves recouping payments that their policyholder receives from third parties. So, for example, if your case involves only your insurance company, as it would in an uninsured or underinsured motorist (UIM) claim, subrogation would not be applicable.

Where Does Subrogation Money Come From?

Essentially, the money the insurance company wants to recoup will come from the compensatory damages you received via settlement or judgment. The insurance company will often demand full repayment of the costs they’ve paid for your care once they discover you’ve received compensation from a third party.

How Does the Insurance Company Know About Your Injury Claim?

After a doctor or emergency room visit, you likely received a letter from the insurance company. This letter might include standard language about notifying the insurance company if you file a compensation claim or hire an attorney. That’s because insurance companies often rely on self-reporting from their policyholders about potential injury claims or lawsuits.

Your insurer isn’t necessarily keeping tabs on the cause of the injury that prompted your treatment, so it might not be aware that you are seeking payment via an injury claim or lawsuit.

But insurers sometimes take steps to make sure they aren’t missing opportunities to recoup costs through subrogation. An insurance company will often work with third-party companies to identify insurance claims that are related to ongoing lawsuits or settlement negotiations.

Once an insurance company knows that your injuries are part of a lawsuit or settlement negotiation, they might again rely on a third-party company to stay in touch with you to find out how the situation is being resolved.

Do You Have to Pay the Full Amount Being Sought by Insurers?

Legally, insurance companies have every right to subrogation. In most cases, there’s little room for the policyholder to get out of paying back an insurer.

However, though insurance contracts state that the insurance company has a right to subrogation, it’s often true that attorneys will negotiate on behalf of their clients regarding the amount of money paid back to insurance companies after judgments or settlements. This can save an injured person money and help reduce the amount of settlements or judgments paid out due to subrogation.

If You Need Legal Assistance After a Crash, Get Berg!

Subrogation is one of many topics policyholders and injured people must contend with after a serious accident. At Berg Injury Lawyers, we work hard to ease our clients’ worries about their accidents and injuries. In doing so, we walk them through every aspect of their cases and deal with uncooperative insurance companies on their behalves each step of the way.

Contact the California personal injury attorneys at Berg Injury Lawyers to schedule a free consultation with our team.