What is “subrogation” and how does it affect my personal injury claim in Alabama?

SubrogationSubrogation is the right of a third party – usually a health, disability or automobile insurance company – to recover money paid to or on behalf of an injured person from any amount the injured person receives from a responsible party.  Subrogation is based on equitable principles and considerations that an injured person should not recover twice for a single injury and that the insurer should be reimbursed for payments it made that, in fairness, should be made by the wrongdoer.  Most insurance contracts include claims for reimbursement based on the contract and require that the injured person cooperate with the insurer, furnish information concerning the personal injury claim, and most importantly notify the insurer before filing suit or settling any claim.

If you suffer a personal injury and receive medical treatment that is paid for by your health insurance company they will often send a notice of subrogation.  This notice will request information about the incident and ask that you identify any person or insurance company that may be responsible for your injuries.   The initial notice of subrogation is often followed by a notice indicating the amount paid by the insurer and a specific claim for that amount.  This notice is commonly provided to the insurance company for the responsible party.

When it comes time to actually reimburse your health insurance provider for the medical bills they have paid, your attorney may be able to negotiate a reduced repayment amount.  Alabama state courts have applied equitable principles when interpreting contractual subrogation provisions.  The “made whole” doctrine and the “common fund” doctrine are the most prevalent.  When the “made whole” doctrine is applicable, insurers are not allowed to pursue their subrogation rights unless and until the injured party is “made whole” or fully compensated for all of his or her losses.  Where the amount recovered by the injured party is less than his or her loss (as is common when the responsible party is underinsured or uninsured) then the insured has not been made whole and the insurer may not pursue its subrogation claim.  Regrettably, recent decisions of our courts have allowed insurers to contractually avoid the application of the made whole doctrine in many cases.

The “common fund” doctrine requires an entity asserting subrogation to pay a pro rata share of the attorney’s fees and expenses incurred to obtain the settlement or judgment that allows for its reimbursement.   This requires the insurance company asserting a subrogation claim to pay its fair share of the attorneys’ fees and costs necessary to obtain a recovery from the responsible party.

If your health insurance is through a group plan, then the claim for subrogation or reimbursement will be governed by federal law.  Unfortunately, the federal courts and even the United States Supreme Court have ruled in favor of the healthcare plans and, as a result, injured persons often have to completely reimburse the plan for all benefits paid.  The plan may receive full reimbursement even when there is a limited recovery due to insufficient insurance or a compromise settlement.

At Siniard, Timberlake and League, P.C., our attorneys work hard to resolve subrogation claims in the personal injury cases we handle.  We are familiar with the complex law that governs these claims and do all that we can to minimize the repayment to insurance companies.  This increases the net recovery for our clients.  If you have been injured and have questions about subrogation claims, please call us.