The most common example of subrogation happens in auto accidents. Often, a person injured in an accident will have a portion of their medical bills and lost wages paid for by their own health or auto insurance company. If the injured person collected any money from the person that caused the accident, the injured person is obligated to pay back their insurers any money paid due to the accident.
Without subrogation, a person could get a "double recovery" - getting paid twice for the same bill. Proponents of modifying or repealing the collateral source rule don't always discuss the effects of subrogation.
Subrogation usually means that one party will sue instead of the injured party. Here's a good example: I had a car worked on by a large automotive repair shop. The work they did was faulty, and the car caught fire and was totaled. My insurance company paid me for the value of the car and became subrogated; the insurance company took over my right to sue the repair shop.
Subrogation makes sure that injured people don't get paid twice for the same bill. It also makes sure that a defendant is forced to fully pay for any injuries it caused a plaintiff, thus discouraging bad behavior.
Subrogation can slow down settlements in injury cases, particularly if Medicare or Medicaid is involved. If a plaintiff forgets to account for subrogation in a settlement, it may get less money than anticipated, or may even be sued by its own insurer.
Subrogation is a complex area of law. Different states have different standards as to:
- Who can be subrogated.
- Whether a subrogated party should get paid out of a settlement before the injured party, or after.
- Whether deductibles are included in subrogation.
There are other even more complex issues in subrogation. The best way to find out whether and how subrogation may apply to you would be to discuss your situation with a lawyer.
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