What is Subrogation?
If insurance, Medicare, Medicaid, or a similar provider paid medical bills and expenses related to your personal injury or medical malpractice claim, you may have to reimburse the payer, to some degree, for these costs if you are able successfully to recover on your claim. The right to recover these costs from your recovery is called the right to subrogation. Those with the right to subrogate may assert a lien related to their expenditures, which attaches to any judgment or settlement.
What exactly can and do these lienholders recover? They can assert a lien for expenses borne out of the treatment and care of the injuries sustained due to the tortious conduct of a defendant. Because the lien is asserted for both immediate treatment as well recovery, the expenses that may comprise the lien can relate to treatment for a number of providers over years. Depending on the severity of your injury, the lien can become quite substantial. But the lienholders are not entitled to recover for any and all medical expenses following an inciting incident, such as an accident. Unrelated expenses, such as routine dental care, are often exempt. It is important to determine what is reasonably related to your injuries and ensure that a lien covers only those expenses.
The lienholder may only recover if you recover, much like an lawyer working on a contingency basis. And even if the lienholder is entitled to recover because you have settled your case, the lienholder will not necessarily receive the full amount of the asserted lien. In reaching the settlement, your lawyer will have expended great time, resources, and money, something the lienholder likely will not have done. Recognizing this inequity, the recovering party is entitled to an equitable distribution of the funds, which oftentimes results in a deduction of the amount under the lien.
Nevertheless, the fairness of this system is subject to debate and scrutiny. When a plaintiff is subjected to a lien held by a private insurer, that plaintiff obtained that coverage either through the payment of premiums or through their labor. They earned the right to have an insurance company cover their medical expenses in the event of catastrophe. When that calamity unfortunately struck, the plaintiff suffered but, luckily, had the foresight to plan for such an event. However, the insurance company maintains a right to subrogation, which allows it to claw back a portion of their insured’s recovery. Remember, the money provided to a plaintiff either by settlement or verdict is intended to make them whole, to help them recover from the negligent behavior of a tortfeasor. Instead, a portion of that money will reimburse the insurance company for covering medical expenses, coverage that the insured already paid for through their premiums.