Why Do I Have To Pay Back My Health Insurance Out Of My Car Accident Settlement Money?
When the time comes to settle a Maryland car accident case, or when the judge or jury has returned the verdict, and the award is announced- many people take surprise at the fact that they are required under the terms of their health insurance policy to reimburse their healthcare provider for amounts that the insurance company paid for medical expenses related to the accident. The thought is that As Attorney Eric T. Kirk will tell you.
The thought makes sense, but, the obligation to reimburse in these situations is clear and well recognized. The law calls this type of claim a subrogation claim. The concept is that, if one have a right to collect payment for medical bills from an at-fault party which one incurred as a result of the car accident, and your insurance company pays those bills for you, they in effect step into your shoes, and can raise that claim directly against the at-fault party. Now, health insurance companies are typically not going to get involved in every car accident case in Maryland. The most common scenario to protect this interest is to insert into the policy itself right to reimbursement clause. It is overwhelmingly likely that in your health insurance policy, and almost certainly if it’s a policy that you’ve gotten as a result of your employment, there is a provision that dictates that as a condition of accepting benefits pursuant to that policy, you agree, on behalf of yourself and anyone insured under that:
The reality is that when someone starts a job, and gets employee introductory package with the insurance manual, they do not read it. It is unlikely that the HR representative that provides orientation for the new hires tells them that if they are involved in a accident, they will have to reimburse the health insurance if they get a settlement. It just doesn’t come up. The concept comes as a shock to many who have done some detailed calculations about what they plan to do with their settlement money, but have neglected to take the health care lien into account.
How to Understand Subrogation A Simple Guide to a Complex Term
At its core, subrogation is the legal right of an insurance company to “step into the shoes” of its policyholder to recover money from the person or party who was actually at fault for a loss. It’s a behind-the-scenes process that allows your insurer to seek reimbursement for a claim they have already paid out to you. In essence, subrogation is a fundamental mechanism for efficiency in the insurance system. It ensures you are made whole quickly after a loss, while also holding the responsible party financially accountable in a streamlined way, and helping to control overall insurance costs. It’s a complicated word for a simple concept: making sure the right person pays the bill.
- How-to Teaching Example: The Baltimore Lawnmower Incident
Imagine your neighbor borrows your expensive lawnmower and breaks it. A kind friend steps in and immediately gives you the money to buy a new one so you aren’t stuck without it. Your friend then turns to your neighbor and says, “You broke the lawnmower, so you need to pay me back for the new one I bought.” In the world of insurance, that process might be called subrogation.
- How Subrogation May Work in Real Life
Let’s use a common car accident as an example. Say another driver runs a red light and hits your car, causing $5,000 in damage. You need your car fixed right away, so you file a claim under your own policy’s collision coverage. Your insurance company pays the body shop directly (minus your deductible, say $500), and you get your car back quickly.
Your immediate problem is solved. But your insurance company is now out $4,500 for a crash that wasn’t your fault. This is where subrogation kicks in. Your insurer will then typically contact the at-fault driver’s insurance company and demand reimbursement for the $4,500 they paid. If their driver was clearly at fault, that company will pay your insurer back.
This same principle can often apply to other types of insurance. If a faulty appliance floods your kitchen, your homeowner’s insurance might pay for the repairs and then “subrogate” against the appliance manufacturer. If you are injured in a slip-and-fall at a store, your health insurance may pay your medical bills and then seek reimbursement from the store’s liability insurance. - How Does Subrogation Matter to You?
Subrogation might seem like an internal affair between insurance companies, but it has been suggested there are two direct benefits for you, the policyholder:
It Helps Keep Insurance Premiums Down? By successfully recovering money from the responsible parties, insurance companies may offset their losses. This financial recovery would help them maintain stability and, in theory, reduces the pressure to raise premiums for everyone. It ensures that the financial burden ultimately falls on those who cause the losses, not the innocent policyholders.
You Can Get Your Deductible Back. In our car accident example, you were out $500 for your deductible. When your insurance company successfully subrogates and recovers the full amount of the damage from the other insurer, they are legally required to refund your deductible to you.
Beyond that basic premise, the law in this area can become complex. An experienced personal injury attorney with knowledge of the applicable rules regulations and laws can play a big role in maximizing your recovery in these situations. Most states, including Maryland, have enacted legislation that either attempts to preclude these claims altogether, or to limit the effect of these subrogation provisions. Many insurers take the position that state legislation that limits their rights is not applicable under a federal legal doctrine called preemption. There are other judicially created or supported arguments that a skilled personal injury attorney can use in these situations, in an attempt to limit the amount the health insurance company seeks for reimbursement.
A surprising number of people that are the recipients of either Medicaid or Medicare benefits from the government consider those benefits to be private health insurance. Although such government provided and funded benefits are not considered traditional private health insurance, there are similar rules that apply to the rights of reimbursement for those entities. Medicare and Medicaid rights to recovery can be sophisticated, and are dealt with in another chapter of these legal guides.
I’ve resolved hundreds of reimbursement claims for my clients over the years. I extend a no-cost, no-obligation case analysis and personal, confidential conference and strategy session to all prospective clients. Contact me today. 410 591 2835, or simply complete the online form at the bottom of the page.
- Baltimore Personal Injury Trial Lawyer Eric T. Kirk
- Legal Analysis & Case Studies
- Baltimore Insurance Claims Denial Lawyer
For over three decades, I have battled against the nation’s largest insurance companies, always endeavoring to ensure my clients receive the compensation they deserve. As lead counsel in thousands of cases across Maryland, New York, and Florida, I have recovered millions for clients whose claims were wrongfully denied and delayed. Whether denying fair compensation for a personal injury victim or denying benefits to a homeowner, Insurance companies employ policy exclusions, technicalities, and lowball offers to deny and defeat claims. They also hire very good lawyers to fight you in court. So should you. When an insurance company unfairly rejects a claim, I stop them.
