Subrogation in Third Party Accident Cases

"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.

What Happens When Both Drivers Are at Fault?

Most people understand the basic elements of liability in a car accident. If you hit someone, you’re responsible; if they hit you, they’re responsible. However in real life situations, things are usually not so clear cut. Real accidents have multiple causes and sometime it seems that no one, or everyone, is to blame. Historically the law has struggled with this dynamic, usually falling on the side of caution by choosing to assign the blame for a confusing accident to one of the involved parties under the theory that if you were mostly at fault, you should pay.

However, over the years this method lead to some inequitable results and California law has evolved to better assign rights and responsibilities in complicated tort situations. The modern theory, broadly called comparative fault, attempts to assign financial responsibility for an accident proportionally with actual responsibility. Sometimes called contributory negligence, this theory seeks to determine to what degree each party contributed to the incident and allows everyone to collect against, or deduct against any other party that added something to the accident.

Comparative Fault In California

Let’s say, for example, that Driver A and Driver B are involved in an accident. At trial it is determined that Driver B was 20% responsible and Driver A was 80% responsible. Let’s also say that both drivers suffered total damages $100,000 each. Under California law, Driver A is entitled to collect $80,000 from driver B; representing Driver B’s proportional contribution to the accident. Likewise, Driver B is entitled to collect $20,000 from Driver A, representing Driver A’s contribution to the accident. With offsets, Driver A will wind up with $60,000 from the incident (after paying their share of Driver B’s damages). In other words, both drivers are allowed to collect from each other relative to how they contributed to the incident.

Joint and Several Liability

A related concept addresses how multiple defendants, who each contributed to an accident, must share the financial responsibility of covering their victim’s damages. While this area of the law can sometimes get complex, the basics are as follows: Let’s say that Driver A is simultaneously hit by both Drivers B and C and incurs $100,000 in damages as a result. At trial, Driver B is determined to be 80% at fault and Driver C 20% at fault.

In theory, Driver C should only have to pay $20,000 of the damages; after all they only caused 20% of the accident. However, to spare Driver A, the victim, from the hassle of having to sue, and collect from, multiple difficult parties, the law demands that both Drivers B and C are liable to Driver A for the full amount of the damages until the entire $100,000 has been paid to Driver A (note: Driver A cannot collect more than $100,000 in total). Drivers B and C can later settle between themselves for any overpayment made by one of them, at which time they will be allowed to argue their relative contributions and responsibilities in a legal process called subrogation.

Even if you’re at fault…

The lesson, of course, is that even if your actions contributed to an accident, you may still be able to collect something for your damages. An experienced attorney will be able to help you determine exactly what your options are, allowing you to proceed armed with the information you need to protect your legal rights. Don’t delay, accident lawsuits are subject to a statute of limitations which means that if you wait too long you may jeopardize your rights.