Navigating The Tricky World Of Subrogation

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So you have been in an accident and are thinking about hiring a competent personal injury lawyer to help you sue for property damage or medical bills. Before you start getting wild ideas about the amount of compensation you will receive for your personal injury case, you should know about one area of the law that might prevent you from getting as much money as you believe you will get or are entitled to. This law is called subrogation.  

What is Subrogation?

Subrogation is a legal concept wherein the rights of the insured are passed onto the insurer. For example if an individual, John, has an insurance policy insuring his car against theft and then John's car is stolen and he files a claim with his insurance company and gets a payment from his insurance agency for the total value of his car.

Later on John's car is recovered from the thief. According to the legal concept of subrogation, the car is now the property of John's insurance company. Even though the car has been recovered, John no longer has any legal right to the car, as the insurance company paid him for the value of the car after he filed his claim. When the insurance company paid out, in the eyes of the law, John relinquished his rights to the ownership of the car.

Another example would be if there was damage to the car. For example, if instead of John's car being stolen it was involved in an accident, which was the fault of another individual, Tom. When John files his claim with his insurance to get the paid for the value of the car that was destroyed by Tom, he is relinquishing his rights to the car. Depending on local state laws regarding subrogation, he may also be relinquishing any rights to pursue claims against Tom. Any further claims against Tom would be pursued by John's insurance agency and not by John.

The concept of subrogation exists to prevent something called "unjust enrichment". Unjust enrichment would occur if John had been paid for the value of the car by his insurance company and then proceeds to get his car returned to him after recovery from the thief. If that were to happen, John would have the cash value of the car from the insurance company and the whole car returned to him as well.  

Collateral Source

Collateral source is a related concept whereby in legal cases, if John had been compensated by his insurance company, then the fact that he received compensation from his insurance company would not be admissible in court. Therefore, John could still sue Tom and not have his compensation mentioned in court. Collateral source is largely in place to encourage people to purchase insurance. If the insurance payment is not large enough, then John could sue Tom in court, allowing him to get double compensation for his losses.

However, many insurance companies have a subrogation agreement written into their contracts. Usually this agreement states that if the insurance company pays you out, and then you get compensated from the party that caused the damage, you are required to pay the insurance company back for the money that they issued to you.

How Can I Avoid Subrogation?

Subrogation can be avoided by making sure that any contract between yourself and your insurance has clear rules that prevent subrogation. Many states also have laws that limit subrogation. Click for more info or consult with your personal injury lawyer to help you get the most money from your case, as they are better able to navigate the tricky laws of subrogation