Subrogation is the substitution of one’s rights to another. The concept of subrogation has existed since the 1700s, when it was created in English law by Lord Mansfield. It has been recognized by common law and equity, and exists specifically in most insurance contracts in the United States. Subrogation exists in many lines of insurance, including auto, health, property and workers’ compensation.
Subrogation enables the insurance company to make a claim against the manufacturer of faulty equipment or a person who caused an accident. Subrogation issues surface when a person has been injured and someone other than the person or party at fault pays for all or some of the damages resulting from the injury. When you go to the hospital for treatment, your health insurer will usually pay for the costs of treating your injuries. Your insurer may contact you to discuss how the injuries occurred, because they are trying to determine if someone else is fully or partially to blame for the injuries. The insurer may even try to determine if you are planning on suing another party for the injuries you have received. Ultimately, the reason the insurer is asking these questions is to determine whether some third party may be responsible for paying for your injuries, thereby relieving some of the insurer’s financial responsibility.
At the heart of this issue is the concept that an injured party should not be allowed a “double recovery.” It is believed that injured parties should recover for the actual damages they have incurred, but should not be allowed to profit from their loss. Subrogation is supposed to help lower insurance rates. Because many subrogation claims require involvement and cooperation of the insureds, it is imperative that they understand how the right is derived. To the insured, it is easiest to refer to the language of the insurance policy and the clause that requires the insured to cooperate with the carrier in its subrogation efforts.
Understanding subrogation interests can be difficult. Failing to obtain such an understanding, however, may prove to be costly for an injured party. Hiring an attorney who knows the subrogation laws in your state will help protect you from the unintended outcomes that can otherwise happen when a subrogation claim exists. If you are receiving benefits from a collateral source, subrogation issues can affect any settlement or lawsuit you may have against a third party. For this reason, it is important to work with an attorney who has experience dealing with the complications that subrogation issues can present.