Subrogation and Mediation of your Personal Injury Case
Insurance subrogation is a legal concept and process used in the insurance industry. It refers to the right of an insurance company to pursue a claim against a third party responsible for causing a loss or damage to the insured party. In simpler terms, when an insurance company pays out a claim to its policyholder for a covered loss, and that loss was caused by someone else's negligence or wrongful actions, the insurance company may seek reimbursement from the at-fault party. This process is known as subrogation.
Why you should address subrogation with your lawyer before mediation!
As a lawyer representing parties in mediation and as a mediator, I have been surprised at the frequency of parties coming to mediation (or attempting to resolve a case through negotiation) without understanding subrogation.
Negotiating Strategy: Understanding the concept of subrogation and its potential impact on your case allows you to develop a more informed negotiation strategy. You can anticipate how the insurance companies involved may seek reimbursement and factor this into your settlement discussions.
Realistic Expectations: Knowing that subrogation exists can help you set realistic expectations for mediation. You'll better understand the potential outcomes and how they might affect the final settlement if you know how much money you will be required to pay to an insurance company when you resolve your case.
Decision-Making: Awareness of subrogation can influence your decision-making during mediation. For instance, consider the possible impact on your compensation when evaluating settlement offers and deciding whether to accept or reject them.
Reduced Surprises: Being caught off guard by subrogation issues during mediation can lead to delays, frustration, and potential complications. Knowing in advance allows you to address these issues proactively and avoid surprises during the negotiation.
Efficiency: Understanding subrogation can make the mediation process more efficient. You can prepare relevant documents and information related to subrogation, which can streamline discussions and help settle more quickly.
Better Resolution: A thorough understanding of subrogation can lead to more favorable outcomes in mediation. You'll be better equipped to negotiate terms that consider the interests of all parties involved, including the insurance companies.
Subrogation and the law in Virginia and West Virginia
Now that we have an idea of what subrogation is and why it is crucial to consider it BEFORE you attend mediation or resolve a case, let's get into a little more detail. Here, we will examine the two states where I practice, Virginia and West Virginia, and federal law.
Federal law. When Medicare or any health insurance part of an ERISA plan pays a medical bill, the payor is entitled to reimbursement. In the case of Medicare, the reimbursement will generally be reduced by a pro-rata share of the attorney fees and costs incurred to get the resolution. With ERISA plans, they may not reduce the subrogation one dime. (You'll hear about my experience on this in a later post!) ERISA is a federal law that governs many employer-sponsored health insurance plans. In ERISA cases, federal law may take precedence over state anti-subrogation laws, allowing health insurance companies to assert subrogation rights. Be aware of this distinction. It can affect how much money you'll receive in a settlement!
Virginia. So long as we are talking about an insurance policy (auto or health) that paid medical bills in Virginia that is not ERISA or Medicare, there will typically NOT be subrogation. That means that any bills paid by your insurance won't be reimbursed to the insurance company when you settle.
West Virginia. As a general rule, in West Virginia, any medical bills that are paid by a health or auto insurance company are reimbursed from any settlement. Sometimes, parties feel like this isn't fair, but the concept is that if a person can collect the amount of a bill from their health insurance and a settlement, they are collecting twice for the same bill. There is an exception in West Virginia. In the West Virginia Supreme Court case of Kittle v. Icard, the court stated that the "made whole" doctrine could be applied in West Virginia when considering subrogation claims by health insurers. The "made whole" doctrine generally holds that lan an insured individual should be fully compensated for their losses (made whole) before an insurance company can seek reimbursement through subrogation. However, it's important to note that applying the "made whole" doctrine and other subrogation-related principles can still depend on the specific facts and circumstances of each case and the terms of the insurance policy in question.
To schedule a mediation in a personal injury matter or to contact our office with questions about subrogation, contact us.