In Debt to Insurance Companies? Here’s What You Must Know!
Suppose you are in a car accident and your insurance pays for your medical treatment and to fix your vehicle. Later, you file a personal injury claim against the driver who hit you and are awarded money in excess of what the insurance company has paid. Do you have to pay back the insurance company for the expenses it has already paid? Can you keep the excess money? These are questions that fall under the doctrine of subrogation, which is a complex issue in California.
Equitable Subrogation—5 Tests
California law recognizes the doctrine of equitable subrogation, which allows a party who is behind other lienholders to step in front and claim priority for its expenses. Generally speaking, California law holds that there are five prerequisites required for a party to claim priority in subrogation:
1) The party seeking subrogation must have made a payment to protect its own interests;
2) The party seeking subrogation must not have acted as a volunteer;
3) The debt must have been paid for someone for whom the subrogating party was not primarily liable;
4) The entire debt must have been paid; and
5) The subrogation will not prejudice the rights of anyone else.
The question of subrogation generally arises in two instances: when a health insurance company places a lien on the proceeds of a lawsuit to recover medical payments it has advanced, and when a car insurance company places a lien on the proceeds for its payments to fix a vehicle.
While you may feel that it is your insurance company’s obligation to pay these bills due to your contract with them in which you exchange premium payments for coverage, it is not always quite that simple. If your contract with the insurance company specifies a subrogation clause, you may be forced to give up some of your proceeds to repay your insurance company. On the other hand, you may be able to opt out of subrogation when you sign up for your insurance. A discussion with your insurance agent can answer this question.
Finally, if you receive government benefits, such as Medicaid, you will likely be subject to subrogation for those medical claims, since they are made on your behalf at no cost to you.
If you have questions about subrogation and settling your insurance claims, speak to a knowledgeable personal injury attorney like Daniel M. Gilleon in San Diego.
