"Good news: your case has settled." The client asks in response, "When do you think I will get my portion of the settlement?" There is a pause over the phone. The personal injury attorney -- experienced and familiar with post-settlement -- was expecting the question. "We cannot disburse any funds until the liens are satisfied." "When will that be?" The lawyer's answer did not satisfy the client: "it depends..."
The general public is unfamiliar with the term, "subrogation." However, it is an important concept to attorneys and insurers. Subrogation allows insurers to recover costs that they may have expended on behalf of their insureds. Simply put, when there is a third party accident, the first party's insurance carrier is able to recover monies from the third party who is at fault. The insurer steps into the shoes of the insured and gets the right to be paid what it has lost.
An example may help. Let's say Frank, the first party who was injured, retained Adam the attorney. Frank was hurt in an accident, so he needed medical treatment. Frank went to his primary care provider for help. All of the medical bills from his primary care provider were sent to Frank's health insurance carrier, "HealthIns." HealthIns was made aware by Adam, Frank's attorney, that the treatment was related to a motor vehicle accident.
Meanwhile, Adam was able to prove that Tom, the third party, was at fault for the accident. Tom's insurance policy had a liability limit of $15,000. Due to the extent of injuries to Frank, Tom's liability insurer offered to settle Frank's claim for the full amount of $15,000. Adam relays the offer to Frank, and Frank accepts.
There is now $15,000 in settlement funds. Before the funds are disbursed, however, HealthIns reminds Adam that it will enforce its right to subrogation. HealthIns paid $5,000 to Frank's medical provider. Adam and HealthIns must now settle the subrogation lien prior to the disbursement of funds to Frank.
Sometimes it can take months for a case to be closed after it has been settled. It is frustrating but it is the law. In some circumstances, the insurer will not be able entitled to subrogation.
A health insurer may not be entitled to subrogation if the insured was "not made whole." The "made whole doctrine" is an equitable principle that states, absent an agreement to the contrary, an insurance company may not subrogate until the insured has been fully compensated for his or her injuries, or "made whole." See Sapiano v. Williamsburg Natl. Ins. Co. (1994) 28 Cal.App.4th 533. This principle will sometimes apply when there is a catastrophic injury and a low liability policy.
Needless to say it is obvious that personal injury law is complex. It is best to retain, or consult, with an experienced personal injury attorney after an accident. Not only should the attorney be able to recover a settlement or judgment, he or she will be able to advise on the intricacies of subrogation, liens, and rights to reimbursement.