Understanding Subrogation: What is It, and How to Protect Yourself
Hello,
For the average person, receiving a subrogation letter in the mail comes as a surprise. This letter is often received after an accident that causes injuries requiring medical treatment. In most cases, people with access to healthcare and insurance coverage assume that their insurance will cover their medical needs, regardless of the cause. However, the process isn't always as straightforward as it seems.
What Is Subrogation?
Subrogation is a term that refers to a legal right that insurance companies have to recover expenses incurred from a third party. In the simplest terms, subrogation occurs when an insurance company pays for its client's losses and injuries and then sues the at-fault party's insurance company to reimburse their expenses. This act of subrogation is much more complex than it may initially appear.
Common Scenarios
Subrogation typically occurs in car accidents where both auto and medical insurances are involved. Most people are insured for both, with overlapping coverage. This means that your auto insurance policy might cover medical expenses for someone else injured in an accident, up to a specified amount. This doesn't mean that the accident victim can collect twice for the same injuries. Instead, the auto insurance only covers up to the stated amount of coverage. Any costs exceeding this amount must be paid by the at-fault party.
Protection Against Subrogation
Car accidents are unexpected and traumatic events, and the process that follows can be even more stressful if the accident victim is not prepared. Being informed about your state's laws and your insurance policies can better protect you during this process.
Understanding Your Insurance Policies
Every person should know what is included in their insurance policies. In some states, the minimum requirement for bodily injury coverage may only be $5,000 or $10,000. This amount is often insufficient to cover the costs of treating a serious injury, especially when multiple victims are involved. Don't assume that the minimum coverage is enough. Explore your options for taking out additional personal insurance to cover potential medical expenses.
Employee Health Plans and Subrogation
If the company you or your employee works for has a self-insured plan, it could affect your rights. Employees should familiarize themselves with their healthcare plans before receiving a subrogation letter. Self-insured businesses pay for their employees' premiums and handle claims in place of third-party insurers. Some self-insured plans contain subrogation provisions to recover benefits paid to an employee or their beneficiary. These provisions might still apply in states where subrogation is not commonly permitted. Consulting with an attorney can clarify your rights and help prevent unexpected deductions.
Handling Subrogation Claims
Requesting deductions for attorney’s fees from the reimbursement claim can significantly reduce the amount you have to pay back. Additionally, it is important to identify and remove any unrelated claims from your claim to avoid overpayment. The subrogation letter might come directly from the insurance company or a secondary company. It is usually an acknowledgment of the insurance company's attempt to recover their expenses and does not require any immediate action on the recipient's part.
Conclusion
Understanding subrogation and its implications is crucial for accident victims and those dealing with insurance claims. Being well-informed empowers you to navigate the process more effectively, protect your rights, and avoid unnecessary financial burden.
References
[1] National Highway Traffic Safety Administration. (2020). State Bodily Injury Limits.
[2] American Bar Association. (2021). Subrogation in Employee Health Plans.
[3] Lawline. (2023). Subrogation: Definition, Rights, and Duties.