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What is Insurance Subrogation?

Insurance subrogation is often a victim’s worst nightmare. Unfortunately, many people do not know what the term “subrogation” means, unless they work in the insurance industry or have already been involved in an accident. Imagine you are hurt in an accident, and your insurance company pays all of the medical, emergency, and treatment costs. You then subsequently settle your lawsuit against the tortfeasor who injured you, and receive the monetary damages from his or her insurance company. Insurance subrogation occurs when your insurance company then demands to be paid back for all the medical costs they paid on your behalf prior to receiving your settlement. If you do not pay up, they will serve you with a lawsuit.

Can insurance companies do that?

Legal Definition

On its face, subrogation is the ‘substitution’ of one person’s rights for another. In the insurance context, it is the legal right that allows one party (ie. insurer) to make payments that are actually owed by another (ie. the tortfeasor’s insurance company). In subrogation lawsuits, the insurer/insurance company is called the subrogee because they are the party with the legal right to collect the claim of another. The insured client is called the subroger.

Last year, in a tragedy that shook national headlines, a man named Bryan Stow had his $18 million damage award from the Los Angeles taken away from his insurance company. Back in 2011, Stow was viciously assaulted and nearly beaten to death by a pair of Giants fans merely for being a Dodgers fan. He was put into a coma, hospitalized for seven months, and will spend the rest of his life in a wheelchair. The Dodgers’ liability insurer – ACE Property and Casualty Insurance Company – is also estimated to gain $1.6 million from the subrogation, even though Stow’s lifetime medical and caregiving costs are predicted to exceed $30 million.

Yes, This is All Legal.

Insurance subrogation is not a new concept. It has existed in English common law since the 18th century, and is explicitly mentioned in almost all insurance contracts in the United States. It comes from the idea that one should not double-recover, once from the tortfeasor from a settlement, and once from the insurance company itself. American courts granted insurers the right to reimbursement to prevent these windfalls, but it does not always play out justly. Additionally, a 2007 law gave Medicare and Tenncare those same rights as private insurance companies.

Tennessee Insurance Disputes Litigation Attorneys

The Nashville attorneys at Calhoun Law, PLC are well-versed in insurance litigation. As attorneys who have worked on behalf of insurance firms, we know the tactics used to limit recovery, claims, and damages. Subrogation is complex. If your insurance company is threatening to sue you to recover costs, contact us today. We will do everything we can to negotiate a reduction, so you can just concentrate on healing.

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