Most Missourians know that after you’re involved in an auto accident, you file an insurance claim. If the accident was someone else’s fault, you file a claim with their insurance company, and if you’re injured, they should pay for your medical costs. However, a process called subrogation could affect your settlement amount. What is subrogation, and how might it affect your claim? Scroll down to find out.
Understanding Subrogation
What is subrogation? In the insurance context, it is the process by which one party is substituted for a different one in the duty to pay damages. An insurance company might pay your damages instead of the liable party and then will have the right to collect money from that party. In the context of auto accidents, your medical insurer might cover your treatment minus your deductibles and co-pays while you wait for your claim to be resolved. After you reach a settlement agreement, your medical insurer may then file a claim to recover money from your settlement to reimburse it for what it paid. However, not all health insurers have a right to subrogation of personal injury claims in Missouri. Only those that are allowed to do so under federal law can subrogate claims, including Medicaid, Medicare, Tricare, and ERISA plans.
Why Is Subrogation Used?
Subrogation is used for several reasons, including preventing a double recovery, keeping insurance costs affordable, and making sure injured victims receive prompt medical care. Let’s explore these reasons in a little more detail.
Preventing a Double Recovery
Injury law is meant to make plaintiffs “whole,” which means it aims to restore them to the position they were in before the accident. It is not designed to give plaintiffs a windfall or allow them to recover twice for the same damages.
For example, if you are injured in an accident because the other driver was texting while driving and crashed into you after running a stop sign, you likely have a strong claim for damages. However, imagine the insurance company doesn’t agree to a fair settlement offer, forcing you to litigate your claim. While you wait for your case to be resolved, you still need to seek and receive medical treatment for your injuries.
If your medical bills amount to $20,000, your medical insurance company will cover the costs. However, if you negotiate a settlement several months later with the at-fault driver’s auto insurer for $70,000 in damages, your medical insurer can file a subrogation claim to recover the $20,000 it paid for your medical care out of your settlement amount. In this case, your net settlement minus your medical costs would be $50,000.
You don’t get to keep the entire amount because you would have been paid twice for your injuries. Because of this, the law allows your medical insurer to subrogate your settlement to collect its $20,000.
Keeping Insurance Costs Affordable
Another reason for subrogation is to keep insurance costs affordable. If subrogation wasn’t allowed, an insurance company could be forced to pay several settlements for the same accident. Since this would increase the insurance company’s costs, it would pass on the increased costs to their insureds by charging higher rates.
Making Sure You Receive Medical Care When You Need It
Subrogation encourages insurance companies to pay for claims quickly. Without subrogation, insurance companies would have to fully investigate a claim to verify their duty to pay before they would pay a claim. Subrogation allows them to pay claims quickly because they can subrogate later if they discover the other party is liable.
Parties that Can Subrogate Claims
Your medical insurer is not the only party that can subrogate your settlement. Any of the following parties can subrogate:
- An auto insurer that pays your claim when a different insurer should pay
- Medicare or Medicaid when they cover treatment costs for accidents
- Employer-sponsored health insurance plans under ERISA
What to Do
There are several things you can do to reduce the impact of subrogation on your settlement. First, carefully review your medical bills and statements from your insurer. Keep all documents you receive so your attorney can go over them. Not all health insurance companies can subrogate claims, so if you receive a letter from your company stating its intention to file a subrogation claim, bring it to your lawyer for review. Some insurers also try to subrogate claims for more than what they are entitled to receive. For example, an insurer may try to recover the full amount of service when they negotiate a lower rate with the medical provider.
Talk to Our Attorneys
What is subrogation? Now that you understand this process and how it might impact your settlement, you should reach out to the experienced attorneys at the Law Offices of Bryan Musgrave for advice. Our lawyers can explain whether subrogation is likely to factor into your case and the steps to take to minimize its impact. Call us today at 417-322-2222 to request a free consultation or contact us online.