Most of us assume that our health insurance is there to pay for our medical treatment regardless of the circumstances. That’s why so many people are surprised when they receive a subrogation letter in the mail after an accident. Like any legal document, the notice of subrogation can be confusing if you aren’t familiar with the term or the process. It’s important to know what the letter means and how it can impact your finances going forward.
What Is Subrogation?
The act of subrogation primarily occurs between your insurance company and that of another person’s insurance company. Most people have both auto insurance and health insurance, each of which can use subrogation. Sometimes the coverage from various policies overlaps. For example, your auto insurance might include medical coverage for another party injured during an accident. If you have $25,000 medical liability, it will pay up to that amount. If the damages exceed that amount, the at-fault party is responsible for paying the difference.
The issue of who is at-fault for an accident is a significant one in some states. Since California is an at-fault state, proving fault determines which party is responsible for paying recovery to the other. Of course, when you are injured in an accident and require treatment, the issue of fault doesn’t matter.
The most important thing is for you to get the medical care you need. This should always be your first priority. An injury that seems minor at the time of the accident could end up being serious. More severe injuries can require hospitalization, surgery, and ongoing therapy. You might require time off from work to heal. In severe cases, you might not be able to return to work at all.
Hospitals and doctor’s offices almost always demand payment at the time of treatment. If you have health insurance, you will use it to get the treatment you need. Other than the co-pays and deductibles you must pay out-of-pocket, a good health insurance policy will pay for your treatment regardless of what caused your injury.
If you receive a subrogation letter, it will be some time after the accident. Your insurance company will send the letter requesting details about the accident and your injuries. They want to know if a third party was involved, if your accident was work-related, and the name of the insurance company/adjuster for the at-fault party. They will also ask whether you have an attorney and will request their contact information.
The insurance company uses this information to determine if someone else is responsible for your medical bills. They will also learn if you plan to file a lawsuit against the other party.
If another party was at-fault for your injuries, they are responsible for paying for your medical treatment. Since your insurance company has already paid for your treatment, they will subrogate the at-fault party’s insurance company. This simply means that they are requesting the other party’s insurance company to reimburse them.
It doesn’t matter that you have paid the insurance company premiums to have insurance coverage. If someone else is liable, they will try to get their money back.
Understanding Your Insurance Policy
Subrogation is usually listed as a clause in your insurance policy. If your policy doesn’t specifically state that subrogation is allowed, the insurance company probably can’t file a claim. In some states, the laws don’t allow subrogation. Every person should know what is in their insurance policy before they make a claim. This includes health insurance policies paid by employers. Although subrogation is often handled with little input from you, it makes a difference if you have a personal injury claim against the at-fault party.
Your Personal Injury Case
People who are injured by the actions of another person or entity often file personal injury claims to get compensated for their damages. Medical bills are often one of the categories of damages listed in a personal injury case. The high cost of medical treatment makes it nearly impossible for any person to pay the entire cost of treatment. Any time another person or business is at-fault, they are legally liable for the cost.
If you have health insurance, it usually pays for treatment when it is needed. The patient pays the co-pays and deductibles while the health insurance company covers the rest. Meanwhile, they see a personal injury attorney about filing a claim. They sue for current and future medical costs and pain & suffering. If the injured party wins their case, the portion of treatment already paid by the insurance company must be repaid. However, in some states, attorney’s fees take precedence over the health insurance company’s claims. If both amounts are taken from the final settlement, the injured party could end up with very little compensation.
For example, you are in an accident with an at-fault driver with serious injuries that require surgery and a hospital stay. Your medical injuries come to $50,000 (on top of the co-pays you are responsible for), which your medical insurance pays for. You file a personal injury lawsuit against the at-fault driver for $80,000 to cover your medical bills and for pain and suffering. This covers your current medical bills, future medical treatment, and the loss of wages from your job. Your insurance company then subrogates to get the initial $50,000 they paid for your medical care. In addition, you pay your attorney 20% of your winnings which comes to $16,000. You end up with $14,000 to cover your bills.
The argument over who has the right to recover money from a personal injury settlement is an old one. In some cases, people are discouraged from filing personal injury claims because of the potential outcome. It simply doesn’t seem worth the effort when the insurance company is the party most likely to benefit.
California’s “Made Whole” Doctrine
In any case, where two parties are competing for recovery of limited resources, issues arise. The State of California observes a “Made Whole” doctrine, which provides for the insured to be ‘made whole’ for uninsured damages by the at-fault party. The rule provides recovery before the insurance company can subrogate from either the insured or the at-fault party.
California adopted the Made Whole Doctrine in 1974, precluding insurers from recovering third-party funds until the insured is ‘made whole’ for their loss. All fifty states have adopted the Made Whole Doctrine but, again, there are differences in how the rule is applied to the topic of subrogation.
If you receive a subrogation letter, talk to your personal injury attorney about the potential outcomes for your case. Find out which factors make your case a good one to pursue. The laws in your state and the terms of your health insurance determine whether a lawsuit is worth your time and effort. Some states give priority to the personal injury case while others allow for the subrogation.
Therefore, you need to hire a personal injury attorney familiar with these laws in your state. Never assume that the insurance company has the right to intercede your case. There are some things you can do to help your case. Start by getting a copy of your health insurance policy before you have occasion to receive a subrogation letter.
Check the Insurance Laws in Your State
Some states restrict or prohibit subrogation by health insurance companies. The idea behind the process is to prevent accident victims from collecting twice for the same injury. Even so, some states limit the options insurance companies have to recoup their losses.
Look into Your Company’s Self-Insured Plan
Some large companies self-insure their employees. If this is the case with your plan, the state laws might not apply. This could leave you vulnerable to subrogation even if it isn’t allowed in your state. To learn more about self-insured healthcare plans, ask an attorney or read about ERISA.
Request a Reduction in Your Financial Obligation
One way to do this is by asking to have your attorney’s fees deducted from the reimbursement claim. If your health plan doesn’t state that attorney’s fees aren’t covered, you could have a large chunk of the total reimbursement amount deducted.
You can also request to have unrelated claims eliminated from the claim. This includes any medical care that you’ve obtained unrelated to the accident. Obtain an itemized list of related benefits paid from the insurance adjuster or claims administrator. Make sure there aren’t any that don’t belong.
When You Are the At-Fault Party
Subrogation allows insurance companies to get reimbursement from the at-fault party. If you are at-fault, then the other party’s insurance company will subrogate your insurance company. But what happens when the at-fault driver doesn’t have insurance?
Subrogation usually results from a car accident. If you have liability coverage, your insurance will pay up to the amount of your maximum coverage. If you don’t have liability or the amount of damages is more than your liability coverage, the insurance company will try to collect from you personally.
Accidents with Uninsured Motorists
Although drivers are legally required to have insurance, sometimes drivers fail to have the required coverage. When the at-fault driver is uninsured, it’s up to your insurance company to pay your damages. Your car insurance includes uninsured motorist coverage to pay for your damages. If the amount of coverage on your insurance policy doesn’t meet the amount of your damages, recovery depends on the finances of the other driver. Even if you sue the other driver and win, you can’t collect money that they don’t have.
If you are in an accident with an uninsured driver, start by talking with your insurance company about how they handle uninsured motorist cases. You should also contact a personal injury attorney to help with your car accident claim. They have the experience to know where to look for financial recovery outside of the insurance company.
What to Do When You Receive a Subrogation Letter
Be prepared before an accident happens. If you don’t have a copy of your health insurance policy, request one. Find out what it says about subrogation. If you aren’t sure, ask an attorney. Also, make sure there aren’t any clauses in your policy that could interfere with your rights to get recovery. Find out if your health insurance is as good as you think it is. Some of the best health insurance policies have clauses that could hurt you at the worst possible time!
The subrogation letter might be sent directly from your health insurance company or from a second party company that handles their subrogation. Don’t ignore the letter without finding out the details of the insurance company’s plans. At the same time, avoid communicating directly with the company. You could provide information that they will use against you without realizing it. This is especially true if you are planning to file a personal injury claim.
Read the letter carefully. Keep in mind that it is a notice of the insurance company’s intentions. They don’t need your permission to proceed with the subrogation. At the same time, you don’t want to provide too much information. Initially, you need to find an attorney to tell you if the claim is legitimate and, if it is, what happens next. You are legally obligated to cooperate with the insurance company but within limits. You don’t want to give the insurance company more information than you must.
It’s always better to deal with the situation head-on. Responding to the subrogation letter may be the only part you play in the process. The insurance company is just requesting information from you. But if you fail to respond, you won’t have the chance to follow the tips above on how to reduce their claim on your recovery. You will also miss the chance to make sure the claim is legitimate.
Get an Attorney to Protect Your Rights
People are often confused when they receive a subrogation letter for the first time. An attorney who handles personal injury cases knows exactly what the text in the letter means. They know how to use laws like the Made Whole Doctrine to your advantage.
If you’ve been injured in an accident that someone else caused, you deserve compensation for your injuries. If you’ve received a subrogation letter from your insurance company, don’t let them act on your behalf. Contact Batta Fulkerson and get the experienced and compassionate legal guidance you need to protect your rights.