Why is subrogation allowed to exist?

Page 2 - Seeking answers? Join the AnandTech community: where nearly half-a-million members share solutions and discuss the latest tech.

1sikbITCH

Diamond Member
Jan 3, 2001
4,194
574
126
Originally posted by: peritusONE
My wife was in a pretty bad car accident last year, and racked up a pretty hefty sum in hospital bills (around $80k-$100k total). Our health insurance covered a great deal of it, although a much lower rate than if we would have had to pay out of pocket. Now that we've completed our settlement case against the at-fault insurance company, our health insurance gets to subrogate and take over a 3rd of our settlement to get back what they paid in. Considering the lawyer gets almost a 3rd cut as well, we barely made out with more money than the lawyer and subrogation. Had the lawyer not actually reduced his fee from the standard 33.3%, both parties would have gotten more than we got, and it's my wife who has the life-long injury to deal with for the next 40 or 50 years.

Why is it that I pay for health coverage out of every single check, and I FINALLY have to use it, only for the health insurance company be able to claim they are owed money back just because my wife and I got a settlement out of it? It's complete bullshit. Not only do they pay MUCH less to the hospital than what I would have had to pay had I not had insurance (the hospital wouldn't have let me pay half of the bill and walk away), but then they get their money back from what is supposed to help my wife and I cope with future complications. I should be able to ask for a significant portion of my premiums back if I don't use my coverage at the end of the year, that's only fair, right?

One thing I've learned over the past year, and this is a HUGE FYI to everyone reading this, if you don't have underinsured coverage on your own auto policy, get it. For the love of god, get it, even if it's an extra $10/month. Underinsured will give you access to more money from your own insurance if the at-fault insurance isn't covered for enough. Don't just sign up for insurance and get the lowest payment possible. Unfortunately, I was never properly taught to respect insurance and not to fuck around with it. In my case, it takes something like this to teach me.

/rant

Your attorney must not have explained the law to you properly if you have to ask this question. If someone else caused your injuries, THEIR insurance should have paid, not yours. So when you negotiate your settlement with their insurance company, part of that is the medical bills that they owe. Since you were lucky enough to have health insurance cover it while you negotiate the settlement, you did not have to face a year or more of bill collectors and lawsuits from the hospitals and doctors trying to get paid while you wait to settle your claim. Consider it a blessing; your credit could have been ruined and you could have been slapped with several judgments against you instead.
 

zerocool1

Diamond Member
Jun 7, 2002
4,487
1
81
femaven.blogspot.com
Originally posted by: SunnyD
The insurance company should then be responsible for half of the legal bill as well - since YOUR lawyer did all the work for them.

i believe with insurance contracts they will provide legal defense but if you waive it and seek your own lawyer, i'm not sure if they're pay for that. It should be in a section titled Duty to Defend or something like that.

Originally posted by: mugs
Originally posted by: Turin39789

When there is an accident the medical bills are the responsiblity of your car insurance.

The settlement would have been less if there hadn't been the medical bills to pay. Those damages were part of setting the settlement amount.

It could have been, but it sounds like the settlement was limited by the fact that he hit the max on the other person's insurance.
this sounds about right

subro prevents the op from turning around and suing the at fault insurance company/the other driver and gaining from this occurrence, which is in contrast to indemnity. Indemnity is the basis of insurance where insurer seeks to make the insured whole in the event of a loss.
 
Oct 19, 2000
17,861
4
81
Originally posted by: 1sikbITCH
Your attorney must not have explained the law to you properly if you have to ask this question. If someone else caused your injuries, THEIR insurance should have paid, not yours. So when you negotiate your settlement with their insurance company, part of that is the medical bills that they owe. Since you were lucky enough to have health insurance cover it while you negotiate the settlement, you did not have to face a year or more of bill collectors and lawsuits from the hospitals and doctors trying to get paid while you wait to settle your claim. Consider it a blessing; your credit could have been ruined and you could have been slapped with several judgments against you instead.

This makes the most sense to me, thanks for explaining it that way. My lawyer didn't really explain subrogation to me because I never asked. I just assumed it was a greedy health insurance company wanting a piece of the pie. But the way you explain it makes it a little easier to swallow.
 

daniel1113

Diamond Member
Jun 6, 2003
6,448
0
0
Originally posted by: peritusONE
Originally posted by: 1sikbITCH
Your attorney must not have explained the law to you properly if you have to ask this question. If someone else caused your injuries, THEIR insurance should have paid, not yours. So when you negotiate your settlement with their insurance company, part of that is the medical bills that they owe. Since you were lucky enough to have health insurance cover it while you negotiate the settlement, you did not have to face a year or more of bill collectors and lawsuits from the hospitals and doctors trying to get paid while you wait to settle your claim. Consider it a blessing; your credit could have been ruined and you could have been slapped with several judgments against you instead.

This makes the most sense to me, thanks for explaining it that way. My lawyer didn't really explain subrogation to me because I never asked. I just assumed it was a greedy health insurance company wanting a piece of the pie. But the way you explain it makes it a little easier to swallow.

Yeah, that is a better way of saying it. Basically, your insurance company loaned you the money necessary to pay all of your medical bills so you wouldn't have to wait for the settlement which could take months or even years. Of course, this is assuming the other person had insurance. If the other party didn't have insurance, your insurance provider would accept the loss and pay your medical bills (of course, this probably depends on the terms of your insurance policy).

I do agree that it may not be the best method of collecting and distributing a settlement, but it does keep the number of lawsuits and court cases to a minimum by combining everything into one settlement. The alternative would be for both you and your insurance company to file separate claims/suits against the other person and his/her insurance company, which would probably take more time while accomplishing the same ends.
 

hanoverphist

Diamond Member
Dec 7, 2006
9,928
23
76
Originally posted by: daniel1113
Originally posted by: peritusONE
Originally posted by: 1sikbITCH
Your attorney must not have explained the law to you properly if you have to ask this question. If someone else caused your injuries, THEIR insurance should have paid, not yours. So when you negotiate your settlement with their insurance company, part of that is the medical bills that they owe. Since you were lucky enough to have health insurance cover it while you negotiate the settlement, you did not have to face a year or more of bill collectors and lawsuits from the hospitals and doctors trying to get paid while you wait to settle your claim. Consider it a blessing; your credit could have been ruined and you could have been slapped with several judgments against you instead.

This makes the most sense to me, thanks for explaining it that way. My lawyer didn't really explain subrogation to me because I never asked. I just assumed it was a greedy health insurance company wanting a piece of the pie. But the way you explain it makes it a little easier to swallow.

Yeah, that is a better way of saying it. Basically, your insurance company loaned you the money necessary to pay all of your medical bills so you wouldn't have to wait for the settlement which could take months or even years. Of course, this is assuming the other person had insurance. If the other party didn't have insurance, your insurance provider would accept the loss and pay your medical bills (of course, this probably depends on the terms of your insurance policy).

I do agree that it may not be the best method of collecting and distributing a settlement, but it does keep the number of lawsuits and court cases to a minimum by combining everything into one settlement. The alternative would be for both you and your insurance company to file separate claims/suits against the other person and his/her insurance company, which would probably take more time while accomplishing the same ends.

so in that situation, do they collect back what their actual cost was, or the "retail" cost that the general public would have been expected to pay? im all for them getting their cash back, but damn, if they are paying a discount rate and recovering more its bs.
 

MotionMan

Lifer
Jan 11, 2006
17,312
12
81
Originally posted by: zerocool1
Originally posted by: SunnyD
The insurance company should then be responsible for half of the legal bill as well - since YOUR lawyer did all the work for them.

i believe with insurance contracts they will provide legal defense but if you waive it and seek your own lawyer, i'm not sure if they're pay for that. It should be in a section titled Duty to Defend or something like that.

That is for the defense of a claim, not the prosecution of one. In this case, OP and his wife were the plaintiffs.

MotionMan
 

1sikbITCH

Diamond Member
Jan 3, 2001
4,194
574
126
Originally posted by: hanoverphist
Originally posted by: daniel1113
Originally posted by: peritusONE
Originally posted by: 1sikbITCH
Your attorney must not have explained the law to you properly if you have to ask this question. If someone else caused your injuries, THEIR insurance should have paid, not yours. So when you negotiate your settlement with their insurance company, part of that is the medical bills that they owe. Since you were lucky enough to have health insurance cover it while you negotiate the settlement, you did not have to face a year or more of bill collectors and lawsuits from the hospitals and doctors trying to get paid while you wait to settle your claim. Consider it a blessing; your credit could have been ruined and you could have been slapped with several judgments against you instead.

This makes the most sense to me, thanks for explaining it that way. My lawyer didn't really explain subrogation to me because I never asked. I just assumed it was a greedy health insurance company wanting a piece of the pie. But the way you explain it makes it a little easier to swallow.

Yeah, that is a better way of saying it. Basically, your insurance company loaned you the money necessary to pay all of your medical bills so you wouldn't have to wait for the settlement which could take months or even years. Of course, this is assuming the other person had insurance. If the other party didn't have insurance, your insurance provider would accept the loss and pay your medical bills (of course, this probably depends on the terms of your insurance policy).

I do agree that it may not be the best method of collecting and distributing a settlement, but it does keep the number of lawsuits and court cases to a minimum by combining everything into one settlement. The alternative would be for both you and your insurance company to file separate claims/suits against the other person and his/her insurance company, which would probably take more time while accomplishing the same ends.

so in that situation, do they collect back what their actual cost was, or the "retail" cost that the general public would have been expected to pay? im all for them getting their cash back, but damn, if they are paying a discount rate and recovering more its bs.

I believe (not 100% sure) they are only entitled to 2/3 of their actual costs back. At least that is the law here in Maryland. So in the end, he really pays a lot less than if he had to reimburse the doctors their total bill directly out of the settlement.

And to peritusONE, you are welcome. I have given that speech many times (I work for a PI firm as a paralegal).
 

FelixDeCat

Lifer
Aug 4, 2000
29,233
2,074
126
I think Im going to form FelixDeKat Healthcare Company. I will "insure" and collect premiums from you only if you have no preexisting conditions, have full auto insurance coverage, homeowners insurance, etc. I will pay your bills up front, but I wont ever really be out of pocket, because if I ever have to pay any claims on your behalf, Im going to take any money from your other insurance companies, any lawsuits you win, or just sue you to recover my losses from your existing policies. It will be in the fine print. Ill call it "subrogation".

Ill pretend to be taking a risk to insure your health, when my capital is not really at risk at all. Ill then pocket all the premiums and live a lavish lifestyle.

Pretty sweet, huh?
 

MotionMan

Lifer
Jan 11, 2006
17,312
12
81
Originally posted by: FelixDeKat
I think Im going to form FelixDeKat Healthcare Company. I will "insure" and collect premiums from you only if you have no preexisting conditions, have full auto insurance coverage, homeowners insurance, etc. I will pay your bills up front, but I wont ever really be out of pocket, because if I ever have to pay any claims on your behalf, Im going to take any money from your other insurance companies, any lawsuits you win, or just sue you to recover my losses from your existing policies. It will be in the fine print. Ill call it "subrogation".

Ill pretend to be taking a risk to insure your health, when my capital is not really at risk at all. Ill then pocket all the premiums and live a lavish lifestyle.

Pretty sweet, huh?

Not every one (or necessarily most) of your insured is going to be reimbursed by third parties.

Of course, people could not report claims to their insurers and hope that they get a big settlement.

There is a lot of risk balancing going on. Insurance is all about gambling and risk balancing.

MotionMan
 

FelixDeCat

Lifer
Aug 4, 2000
29,233
2,074
126
Originally posted by: MotionMan
Originally posted by: FelixDeKat
I think Im going to form FelixDeKat Healthcare Company. I will "insure" and collect premiums from you only if you have no preexisting conditions, have full auto insurance coverage, homeowners insurance, etc. I will pay your bills up front, but I wont ever really be out of pocket, because if I ever have to pay any claims on your behalf, Im going to take any money from your other insurance companies, any lawsuits you win, or just sue you to recover my losses from your existing policies. It will be in the fine print. Ill call it "subrogation".

Ill pretend to be taking a risk to insure your health, when my capital is not really at risk at all. Ill then pocket all the premiums and live a lavish lifestyle.

Pretty sweet, huh?

Not every one (or necessarily most) of your insured is going to be reimbursed by third parties.

Of course, people could not report claims to their insurers and hope that they get a big settlement.

There is a lot of risk balancing going on. Insurance is all about gambling and risk balancing.

MotionMan


Did you see my post above where United Healthcare tried to force me to submit a claim on my auto insurance? Sure it makes sense to them, but it didnt to me and I told them I would not because it was my fault, not my auto insurance companies fault. But it took a big fight because the subrogation company they hired probably gets a slice of whatever they could swindle out of me.

I take a dim view of this business practice since it is relatively new (less than 10 years). And as I mentioned above, Ill bet dollars to doughnuts it was cooked up by "consultants" who told the insurance companies to "go for it". Sure enough, they did.

I didnt realize how bad this subrogation racket was until I read a few horror stories in the Wall Street Journal in 2007.
 

MotionMan

Lifer
Jan 11, 2006
17,312
12
81
Originally posted by: FelixDeKat
Originally posted by: MotionMan
Originally posted by: FelixDeKat
I think Im going to form FelixDeKat Healthcare Company. I will "insure" and collect premiums from you only if you have no preexisting conditions, have full auto insurance coverage, homeowners insurance, etc. I will pay your bills up front, but I wont ever really be out of pocket, because if I ever have to pay any claims on your behalf, Im going to take any money from your other insurance companies, any lawsuits you win, or just sue you to recover my losses from your existing policies. It will be in the fine print. Ill call it "subrogation".

Ill pretend to be taking a risk to insure your health, when my capital is not really at risk at all. Ill then pocket all the premiums and live a lavish lifestyle.

Pretty sweet, huh?

Not every one (or necessarily most) of your insured is going to be reimbursed by third parties.

Of course, people could not report claims to their insurers and hope that they get a big settlement.

There is a lot of risk balancing going on. Insurance is all about gambling and risk balancing.

MotionMan


Did you see my post above where United Healthcare tried to force me to submit a claim on my auto insurance? Sure it makes sense to them, but it didnt to me and I told them I would not because it was my fault, not my auto insurance companies fault. But it took a big fight because the subrogation company they hired probably gets a slice of whatever they could swindle out of me.

I take a dim view of this business practice since it is relatively new (less than 10 years). And as I mentioned above, Ill bet dollars to doughnuts it was cooked up by "consultants" who told the insurance companies to "go for it". Sure enough, they did.

I didnt realize how bad this subrogation racket was until I read a few horror stories in the Wall Street Journal in 2007.

Yeah, I read your story. It does not change my opinion.

MotionMan
 

Eli

Super Moderator | Elite Member
Oct 9, 1999
50,422
8
81
I was not aware of this practice. WTF?

If I'm paying good money for insurance coverage, I expect to be covered! What the hell?

If some dude runs into my house and causes 50k in damage and I file a homeowners insurance claim and get 50k back, it is completely within my right to sue the fucktard that hit my home for whatever I please. If I win, that's great, I'll split it with my lawyer. How is it legal for the insurance company to even stick a finger into that pie?

I'm totally confused.
 

Eli

Super Moderator | Elite Member
Oct 9, 1999
50,422
8
81
Originally posted by: mugs
Originally posted by: Eli
I'm totally confused.

Yes.

So explain? How is my scenario wrong? If I'm paying for homeowners insurance and file a claim, that is their problem.

If I then decide to sue the party that caused the damage and win, how do you figure they are entitled to any of that money? I won. Not them.

??????
 

MrDudeMan

Lifer
Jan 15, 2001
15,069
92
91
Originally posted by: Eli
I was not aware of this practice. WTF?

If I'm paying good money for insurance coverage, I expect to be covered! What the hell?

If some dude runs into my house and causes 50k in damage and I file a homeowners insurance claim and get 50k back, it is completely within my right to sue the fucktard that hit my home for whatever I please. If I win, that's great, I'll split it with my lawyer. How is it legal for the insurance company to even stick a finger into that pie?

I'm totally confused.

You are misunderstanding pretty badly I think. The insurance company is recouping losses that it paid for you if possible. They aren't taking a gigantic chunk for no reason. They paid for you regardless of if you won a settlement, but if you do happen to win they are taking what they paid so you aren't covered twice for the same damages.
 

MotionMan

Lifer
Jan 11, 2006
17,312
12
81
Originally posted by: Eli
Originally posted by: mugs
Originally posted by: Eli
I'm totally confused.

Yes.

So explain? How is my scenario wrong? If I'm paying for homeowners insurance and file a claim, that is their problem.

If I then decide to sue the party that caused the damage and win, how do you figure they are entitled to any of that money? I won. Not them.

??????

It is in your insurance contract. If you do not understand your insurance contract, seek assistance form your agent, broker or the insurance company.

See these for more information:

http://insurance.freeadvice.co...mation/auto/article/50

http://en.wikipedia.org/wiki/Subrogation

http://www.progressive.com/und...at-is-subrogation.aspx

MotionMan
 

Safeway

Lifer
Jun 22, 2004
12,081
9
81
As a law student, I'm glad I will eventually get a large chunk of settlements. For the clients, it is a necessary reduction -- you wouldn't have any money at all if you hadn't hired the attorney.
 

mugs

Lifer
Apr 29, 2003
48,924
45
91
Originally posted by: Eli
Originally posted by: mugs
Originally posted by: Eli
I'm totally confused.

Yes.

So explain? How is my scenario wrong? If I'm paying for homeowners insurance and file a claim, that is their problem.

If I then decide to sue the party that caused the damage and win, how do you figure they are entitled to any of that money? I won. Not them.

??????

It hasn't been explained enough times already?

You understand that it's not the insurance company's fault that the guy crashed into your house, right? So they're entitled to sue the guy who crashed into your house and get their money back from him. How are they going to do that if you've already gotten a judgment against him? Thus they have to get their money out of what he paid you. Normally they would sue him directly.
 

Eli

Super Moderator | Elite Member
Oct 9, 1999
50,422
8
81
Originally posted by: Safeway
As a law student, I'm glad I will eventually get a large chunk of settlements. For the clients, it is a necessary reduction -- you wouldn't have any money at all if you hadn't hired the attorney.

I have no problem paying my lawyer. That's not what's in question here

Reading links....
 

Eli

Super Moderator | Elite Member
Oct 9, 1999
50,422
8
81
Originally posted by: mugs
Originally posted by: Eli
Originally posted by: mugs
Originally posted by: Eli
I'm totally confused.

Yes.

So explain? How is my scenario wrong? If I'm paying for homeowners insurance and file a claim, that is their problem.

If I then decide to sue the party that caused the damage and win, how do you figure they are entitled to any of that money? I won. Not them.

??????

It hasn't been explained enough times already?

You understand that it's not the insurance company's fault that the guy crashed into your house, right? So they're entitled to sue the guy who crashed into your house and get their money back from him. How are they going to do that if you've already gotten a judgment against him? Thus they have to get their money out of what he paid you. Normally they would sue him directly.

Ahh.. I see. Now it's starting to make sense. I still don't quite understand though.

If I sue him and win, what's stopping them from suing him and winning too? Are two parties not allowed to sue one party for the same thing or something?
 

Safeway

Lifer
Jun 22, 2004
12,081
9
81
Eli, your situation is double recovery. You file a claim with your insurance for your damage. That is what your premiums bought you.

When you then sue whoever caused the damage, you have already recovered for the damage. The insurance company felt the burden of the accident, so they are legally able to recover from the defendant. Rather than suing the defendant directly, they can tack on to your claim and get money. Twisted, I know.

Edit: mugs said it better. I'm still in training.
 

Bignate603

Lifer
Sep 5, 2000
13,897
1
0
Originally posted by: Eli
Originally posted by: mugs
Originally posted by: Eli
I'm totally confused.

Yes.

So explain? How is my scenario wrong? If I'm paying for homeowners insurance and file a claim, that is their problem.

If I then decide to sue the party that caused the damage and win, how do you figure they are entitled to any of that money? I won. Not them.

??????

You're legally entitled to be made whole again, basically your home should be restored to how it was before. You aren't within your rights to get your homeowners insurance to pay for it and then sue for the same damages, effectively getting paid double for the same thing, without giving money back to your homeowner's insurance that paid for the damages in the first place.

Insurance is supposed to protect you from loss, not to be a way to make money.
 

Eli

Super Moderator | Elite Member
Oct 9, 1999
50,422
8
81
Originally posted by: Bignate603
Originally posted by: Eli
Originally posted by: mugs
Originally posted by: Eli
I'm totally confused.

Yes.

So explain? How is my scenario wrong? If I'm paying for homeowners insurance and file a claim, that is their problem.

If I then decide to sue the party that caused the damage and win, how do you figure they are entitled to any of that money? I won. Not them.

??????

You're legally entitled to be made whole again, basically your home should be restored to how it was before. You aren't within your rights to get your homeowners insurance to pay for it and then sue for the same damages, effectively getting paid double for the same thing, without giving money back to your homeowner's insurance that paid for the damages in the first place.

Insurance is supposed to protect you from loss, not to be a way to make money.

Huh. But if I sue him and win, what does that have to do with them? Can't they sue him too?

I guess a car hitting your home is a bad example.. I'm more worried about bodily harm.

OK. If someone gets into a car accident with me and causes me great, long lasting bodily harm... I can sue them for emotional distress, etc, right? Wouldn't that be a separate suit from the insurance aspect?

If I won that suit, how would the insurance company be entitled to anything from that?

Maybe the confusion is that I'm talking about a civil suit, not an insurance related suite? I dunno.
 

Vic

Elite Member
Jun 12, 2001
50,415
14,307
136
Originally posted by: mugs
Because the damages you were being compensated for in the settlement include the initial medical care. The insurance company already paid for the initial medical care. The settlement compensated you for something that the insurance company paid for.

TANSTAAFL
 

Safeway

Lifer
Jun 22, 2004
12,081
9
81
Originally posted by: Vic
Originally posted by: mugs
Because the damages you were being compensated for in the settlement include the initial medical care. The insurance company already paid for the initial medical care. The settlement compensated you for something that the insurance company paid for.

TANSTAAFL

I had to good that one. :beer: