February 24, 2021
So, you got a letter or notice in the mail. It mentions “subrogation,” and you are left scratching your head, wondering what’s this all about? Am I in trouble? Do I need a lawyer?
Maybe. But it would help if you understood subrogation and considered how it applies in your particular circumstances.
First, let’s look at the word itself. It is defined as follows:
Subrogation (səb-rə-gay-shən) n. (15c) 1. The substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor…. Subrogation most commonly arises in relation to insurance policies. 2. The equitable remedy by which such a substitution takes place. 3. The principle under which an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy.
SUBROGATION, Black’s Law Dictionary (11th ed. 2019).
This definition is too technical for most people, but the idea is this: If someone else, usually an insurance company, has paid a debt that you owe, that company usually has a right to get back what it paid on your behalf if someone else is legally obligated to compensate you.
Still confused? I don’t blame you. Let me use a couple of examples to explain.
Suppose you were in an auto accident and you were injured. Your health insurance company has paid your medical bills. The health insurer may be writing to you in order to find out about the circumstances of your accident.
Why does it care? Because, if the other driver is legally responsible for your injuries, your health insurer has a legal right to collect what it paid for you from that driver (or the driver’s liability insurance company).
How are you involved? First, the insurance company needs to understand the facts to evaluate the claim. Second, if it has a claim, that claim arises from your legal right to recover your damages from that other driver. So the health insurer may be trying to find out whether you intend to pursue your claim yourself. If you do, your health insurer will likely wait for you to do that and then demand that you pay back what it paid on your behalf, less a share of your costs of recovery.
If you don’t plan to take steps to recover your damages from the other driver, your health insurer may choose to sue in your name!
Should you talk to a lawyer about such a notice? Probably. If your health insurer thinks you have a right to recover your damages, maybe you should pursue them on your own. You may have broader damages – such as for pain and suffering — than your health insurer would. You might want to think about pursuing the claim yourself.
There are other, similar situations where an insurance company might have a right to pursue a claim based on what it has paid for your benefit, such as for damage to your car. It works the same way.
If you were injured, you can probably find a lawyer who will meet with you to discuss the situation without charging you a fee. Most personal injury lawyers don’t charge for initial consultations.
Another common situation in which you might hear the term “subrogation,” is if the shoe is on the other foot. That is to say, if it is alleged that you caused damage. The other party’s insurance company may be threatening to sue you to recover for benefits because of that damage. Or it may actually be suing you for such damages.
In that situation, if you have liability insurance, you should notify your insurance carrier right away. If you don’t have insurance, you’ll almost certainly have to hire a lawyer, unless you are prepared to pay the claim. If you get sued and a judgment is awarded against you, it will harm your credit rating, your wages may be garnished, and in some states, your driver’s license may be suspended until you pay the judgement off.
Of course, there are other situations where subrogation comes into play. But hopefully, thanks to Rich Cassidy Law, you now understand the basics.