What is Subrogation & Why Should I Care?

“I was hurt in a wreck, a now my health insurance company sent me a letter seeking something called, ‘subrogation.’”

“What on earth is this?”

“Can they take part of my settlement?”

We often hear this from clients who have been hurt in a car wreck and who have health insurance through their employers or “medical payments” (“med pay”) coverage on their auto insurance policies.

Subrogation is an ugly word and an ugly legal concept created by insurance companies to fatten their wallets. It is akin to a bait and switch sales technique.

Subrogation is a legal concept that permits an insurance company to recover payments it has made on behalf of its insured for injuries the insured has received in a wreck/other accident that is the fault of another. So, in the traditional car wreck case, if the injured party has health insurance from one of the big health insurance companies, the health insurance company will most likely assert a right to recover payments it has made on behalf of its insured. The company will assert this right against its insured and seek to attach its “subrogation right” or “right of reimbursement” to any settlement the insured obtains from the defendant who caused the injury.

In other words, subrogation is a bait and switch. The insured pays good money for premiums for health insurance. The insured acts reasonably in doing so and expects the coverage to be there when they are hurt by the negligence of another. When the insured goes to settle their case, the health insurance company expects its money back, despite the insured having paid separate premiums for the coverage to begin with. The “bait” is that the coverage will be there when you are hurt. The “switch” is that the coverage is not really there as you may have to pay back your health insurance company, despite you paying premiums for such coverage to begin with.

The same concept applies to med pay riders on auto insurance policies. To the uninitiated, med pay is a type of coverage on an auto policy where your auto insurance company will pay for medical bills for you and your passengers resulting from a wreck. Med pay also seeks subrogation in the same “bait and switch” fashion as major health insurance companies.

It was in recognition of the basic unfairness of subrogation that the Georgia legislature passed its anti-subrogation statute, OCGA 33-24-56.1. This statute bars subrogation as a matter of state law and codifies an anti-subrogation doctrine, “the made whole doctrine.”

The made whole doctrine is so basic and fundamental that it is already ingrained in the sense of fairness of many clients that I have talked to. I will hear in client meetings that the client just wants to be “made whole” after a wreck or wants to be “put back to where I was before the wreck.” This is the guiding force of the doctrine. The doctrine says that there can be no subrogation without the injured party first being “made whole.” Since any settlement involves compromise, it is very unlikely an injured party could be made whole by a pre-verdict settlement. In fact, probably the only time an injured party can be said to be made whole is after a jury verdict awarding damages.

The sad news it that the Supreme Court of the United States, the Eleventh Circuit Court of Appeals, and many state legislatures have, for the most part, rejected the made whole doctrine and permitted the unfair practice of subrogation to occur. Generally speaking, if you have a health insurance plan through your employer, they will most likely have a subrogation right against your settlement if the health insurance pays medical bills resulting from the wreck. The same holds true for med pay in states that do not recognize the made whole doctrine, such as Alabama. However, there are other doctrines and defenses to subrogation that an experienced personal injury lawyer can use to defeat or diminish a subrogation claim. Therefore, if you are hurt in a wreck and have health insurance, your best bet to avoid the bait and switch is to hire an experienced personal injury attorney who can appropriately advise you.