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Updated May 4, 2022
After an insurance company pays you for your claims, it sometimes has the right to seek reimbursement for those payments from the at-fault party. This is called subrogation.
For example, when you’re in a car accident and you weren’t at fault, your insurance company may step in to pay for your vehicle repairs. After paying for the repairs, the insurance company may “subrogate” by seeking reimbursement for its payments from the other driver or their insurance company.
Should the insurance company notify you that your case is in subrogation, it means they are pursuing payment for your accident from the at-fault party. All money received goes to the insurance company because you have likely already been paid.
By definition, subrogation means one party is able to make demands in place of another party. For insurance companies, this happens when a person is injured in an accident and another individual or group pays for the damages or injuries caused by the at-fault party.
Subrogation involves a third party who stands in for the injured party. A subrogating insurance company is not entitled to a greater legal standing than the party it is representing. In fact, it can attain no more compensation than what it has already paid to the injured party.
Collateral sources are typically third parties (i.e., not the at-fault party) who provide payment to an injured party. They are often an insurer or governmental agencies, such as Medicaid.
So, which part of the settlement must be used to repay a collateral source? It is understood that a victim should not receive double compensation. A victim has the right to be made whole for their loss, but should not receive a windfall.
Let’s say an insured party has $10,000 in vehicle repairs. That party should not receive coverage of $10,000 for repairs and then pocket an additional $10,000 for no reason.
In cases where someone is injured at work, it is common for another employee to be held liable for those injuries. Legally, the at-fault employee becomes known as the liable third party.
Workers’ compensation will pay damages towards a worker’s work-related losses.
Subrogation allows the workers’ compensation provider to step in and garner losses from the liable third party. As a result, the injured employee recovers their losses and anything beyond that which is related to a workers’ compensation claim is awarded to the employer.
As outlined above, issues involving a liable third party can complicate the subrogation process. It may seem strange that both the injured party and the collateral source can make claims against an at-fault party. And in cases with multiple claimants, the injured parties will receive a global settlement from the at-fault party.
Because many people are unfamiliar with subrogation, injured parties who win big in cases are often surprised to learn they can’t keep all of the compensation for themselves. This means they may accept a smaller settlement than they originally expected.
Sometimes an injured party mistakenly accepts an offer that prevents an insurance company from providing further benefits or monetary support. The right to receive any ongoing benefits is the direct result of the collateral source’s right to subrogation.
Every state has its own laws covering how insurance companies can pursue subrogation. States also have laws about how subrogation can affect liable third parties. If your employer is part of the Employee Retirement Income Security Act, they must adhere to federal law.
We strongly advise you to reach out to one of our experienced attorneys here at WKW if you are facing a barrage of subrogation claims after an accident. We can help you understand your rights and figure out the next steps.
A waiver of subrogation allows you to prevent your insurance company from standing in on your behalf and collecting monies from the at-fault party. These types of waivers are awarded when an injured party wants to settle a case without their insurer’s involvement.
Make sure you are aware of every clause in the waiver before signing. After you sign a waiver of subrogation, your insurance company cannot step in to help if something were to go wrong because the waiver has prevented them from interfering in any way.
It is important to alert your insurance company before signing a waiver of subrogation.
Adam and Rachel collided in a car accident. Adam’s vehicle was damaged and needs $5,000 in repairs. Adam has insurance, which will cover this damage. The accident investigation proved that Rachel was the at-fault party because she was speeding. For this reason, Adam’s insurance company wants to recover losses from Rachel.
Adam’s insurance company can use the laws of subrogation to recover their losses. All of this leads to Adam’s insurance company representing Adam in court when they sue Rachel. The only way to prevent this subrogation process is by signing a waiver of subrogation.
If you are struggling to receive compensation from an insurance company, contact the Indianapolis insurance and injury attorneys at Wilson Kehoe Winingham. Our firm can help you get the compensation you deserve.
Call 317.920.6400 or fill out an online contact form for a free, no-obligation case evaluation.
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