A person will most likely hear the term subrogation in the course of dealing with insurance companies after an accident. In its essence, subrogation is when an insurer seeks reimbursement for any claims they have paid on your behalf, when a third party is held responsible for your injuries. The issue is not usually whether they’ve made payments, but rather how much of those payments they should be reimbursed. Subrogation can be a confusing and frustrating matter, for even the most skilled litigators. However, there are a few basic subrogation issues that arise frequently and are important in almost every case.
The most common issue arising out of subrogation claims is what expenses, if any, the subrogated party should be reimbursed for. This can be most easily understood in a car accident scenario. Imagine you’ve been in a car accident that was not your fault. Your health insurance company pays for your medical expenses and asserts a claim that should be reimbursed for those expenses related to the accident. Whether the expenses a subrogated party seeks to be reimbursed for are related to the accident is not always clear, especially in instances where injured parties have pre-existing medical conditions or injuries from prior to the accident.
Issues with subrogation can also arise where an insurance company claims a right to reimbursement but the injured party has not been “made whole”. In Wisconsin, the made whole rule is a legal doctrine that requires an injured party to be made whole before any insurer can recover anything. Garrity v. Rural Mut. Ins. Co., 253 N.W. 2d 512 (Wis. 1977). Thus, in situations where an injured party’s damages exceed the limited pool of funds from which he or she can recover, the injured party is given priority over the subrogated party. The made whole doctrine is an important rule of recovery for an injured party faced with a situation where the funds are available to compensate them for damages sustained in an accident are limited. However, there are also situations where the made whole doctrine may not apply.
One such situation arises when an insurance policy is governed by the Employee Retirement Income Security Act of 1974 (ERISA). ERISA was enacted as a means of protecting workers by establishing a minimum set of standards for employee-offered pension and health plans in the private industry. However, it has served as a harmful barrier for many injured in accidents where a third party has been at fault.
Only certain types of plans are governed, and thereby protected, by the federal ERISA law. Self-funded plans offered through an employer to their employees are governed entirely by federal law. A self-funded plan is one in which the employer literally self-funds the insurance for their employees, rather than obtaining coverage through an insurance company. While they are not considered an insurer, they do control the financial aspects of the plan’s coverage. In contrast, a fully-insured plan is governed by state laws, which vary between states. Some plans fall in between. In these situations, they could be partially governed by both, with federal law superseding the comparable state laws.
When a health plan is governed by the federal ERISA law, they are often not required to reduce their subrogation interest in your personal injury claim or abide by the made whole doctrine. In other words, no matter what transpires in your case, even if you were struck by an uninsured driver or die from your injuries, they can be entitled to a full recovery of the payments they’ve made on your behalf before you recover anything.
Most insurers will claim a subrogation interest. Regardless of what type of plan you may have, they will assert their right for a full recovery. So, what can you do? First and foremost, it is critical to understand your plan. Know whether it is self-funded or insured and understand what the plan mandates out in terms of recovery. Understanding your plan and whether it is state or federal law will make a tremendous difference in your ability to negotiate a reduced governed repayment. Some plans will allow for the consideration, at least in part, of attorneys’ fees or related legal expenses. Additionally, some plans will restrict the means in which a recovery can be asserted.
Although self-funded ERISA plans are not required to do so, an insurer may consider a reduction of their interest under certain circumstances. Despite your attorney’s best efforts, however, a reduction is not guaranteed.
If you’ve been injured in an accident, contact the qualified attorneys of Doar, Drill & Skow and let our team take care of you. With over 130 years of personal injury legal experience, we are equipped with the knowledge and skill to fight for your rights for a full recovery.