What is Subrogation?
In the state of Michigan, there is a legal concept called “subrogation.” Subrogation is especially relevant in personal injury cases. So, what is it?
The legal definition of subrogation is “the assumption by a third party of another’s legal right to collect a debt or damages.” This definition is still full of legal jargon, so in this blog post, we’re going to break it down. We’ll explain what subrogation is and where it comes into play within your legal case.
Breaking it Down
The “Third Party”
In the definition given, the first thing we’re going to break down is the “third party.” In a personal injury case, this third party will be your insurance company. When you suffer a personal injury due to someone’s negligence, a large portion, if not all of, your medical bills will be paid by your insurance company. Subrogation typically applies when health insurance, auto insurance, or government programs (Medicare/Medicaid) pay for medical bills after an injury.
The “Debt or Damages”
Second, the “debt or damages” discussed in the definition is the settlement you may receive by filing a personal injury claim. When you win a personal injury case, the negligent party’s insurance company will pay an agreed upon settlement amount. Because your insurance company has paid toward your medical expenses, you are required by subrogation laws to pay these expenses back to your insurance company from your settlement amount. The expenses you pay back to your insurance company is called a “lien.”
The “Lien”
At this point, you may be thinking “what the heck? I went through a lawsuit just to pay my insurance company back?” or “what’s left for me?”. Let’s go back a little bit and talk about the “lien.” Lien is a legal term used to describe the money from your personal injury settlement that you pay to your insurance company. Subrogation law allows for your insurance company to receive money from your settlement to pay for the expenses that they incurred due to your injury.
This concept can seem scary because often in personal injury cases, your medical bills amount to thousands of dollars. However, most personal injury attorneys, including our office, have dedicated staff that negotiate with the insurance company to reduce your lien. This means that you will only be responsible for paying a portion of the medical bills back to your insurance company.
Additionally, when we work on a personal injury case, the lien is taken into account when we are trying to negotiate your settlement. This means that we are trying to negotiate an amount that will allow you to have a portion of your settlement leftover after legal fees and lien.
Please note: Insurance companies do not legally have to reduce their lien and often will not, regardless of attempts from your attorney’s team.
An Example
As stated above, our office happens to have a dedicated staff that will work on attempting to reduce your lien. The lien is negotiated based on an itemized list that is sent over to our office from your insurance company. This list includes all of the medical treatments that you had after your date of injury through the settlement date.
We had a client whose medical lien came out to $122,000 after their lawsuit settled. This client had pre-existing back pain, and it was re-aggravated as a result of their accident. Our team went through the itemization to identify the treatments given during the period of time between the injury and the settlement. From there, we were able to negotiate with the insurance company to reduce the lien by removing the charges for treatment related to the client’s back pain. Because it was a pre-existing condition that was aggravated by the accident, the insurance company removed those charges, and the final lien came to $38,000.
Please note: Each insurance company negotiates differently and some insurance companies do not negotiate at all. Our office will attempt to negotiate on your behalf, but unfortunately, we cannot guarantee a reduction in your lien.
Final Thoughts
Let’s summarize:
- Subrogation is a legal concept that requires you to pay your insurance company back for the medical bills that they covered after your injury.
- The lien is an itemized statement of all of your medical bills from the date of your injury to your settlement date.
- Our office will attempt to negotiate this lien, but there is no guarantee that the insurance company will be willing to decrease the amount.
- Our office takes subrogation/lien into account when negotiating settlement offers. We always want to get the best settlement offer possible for you.
Hopefully this guide helped you understand more about subrogation law, liens, and how they factor into your settlement amount. If you hire an experienced Michigan personal injury attorney, they should be able to help you navigate these processes.