Two common questions we receive from our clients on a regular basis are what is “subrogation” and how does it impact my case? It is important for our clients to understand subrogation claims early in their cases, including how these claims affect a financial recovery at the end of a case.

Let us start with a hypothetical scenario: Albert purchased car insurance from Big Insurance Company. Albert was involved in a car crash with Carol, who had purchased her car insurance from Driver’s Insurance Company.

Albert’s car needed $1,500 in repairs from the crash. In order to get his car fixed more quickly, Albert filed a claim with his own car insurance, Big Insurance Company. Albert had to pay his $500 deductible and Big Insurance Company paid the remaining $1,000.

As time went on, it was eventually determined by the insurance companies that the collision was Carol’s fault. Carol’s insurance company, Driver’s Insurance Company, paid $1,500 for the damages to Albert’s car. After receiving payment from Driver’s Insurance Company, Big Insurance Company would then refund Albert the $500 he paid originally paid for his deductible and would keep the remaining $1,000 as reimbursement for the money that it paid to have Albert’s car repaired.

If, however, Albert was required to file a lawsuit to determine the collision was Carol’s fault, Big Insurance Company would have a subrogation claim on Albert’s recovery against Carol (or her insurer Driver’s Insurance Company). If Albert is successful in his lawsuit, there would be a $1,500 recovery for the property damage. However, Big Insurance Company would have a subrogation claim on the recovery for the money that it initially paid to have Albert’s car repaired, which was $1,000. Therefore, Albert would be reimbursed for the $500 deductible he paid but would not get to keep the rest of the money. Due to the subrogation claim, $1,000 would go to Big Insurance Company to reimburse it for the money it paid because the crash was the fault of a “third party” (Carol) and not their “insured” (Albert).

There are other circumstances where a subrogation lien might also arise. One such example is with your health insurance. If you used your health insurance for any of your medical treatment, your health insurance company may have a legal right to seek reimbursement. In this subrogation example, your health insurance company may be entitled to recover the costs that it paid for your medical treatment. However, not all health insurance companies have this right and it depends on the provisions of your specific health plan.

Generally speaking, as shown in the above examples, subrogation is an insurance company’s right to be reimbursed from a portion of an injured person’s recovery for money paid out for injuries or damages caused by someone else. This means that when it comes time to settle or resolve your case, your attorney will need to account for any potential subrogation liens that may exist, because that will ultimately impact your net recovery from the case.

We hope that this information is helpful in both understanding what subrogation claims are and how these claims can impact your case. If you have been in a collision and would like help navigating the process, please contact us today.