Subrogation & Reimbursement

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Most of the time when you get hurt in a car crash, your insurance will be paying your medical bills. Whether you have PIP coverage or health insurance, when you settle your case you will have to pay them back.

Every PIP or health insurance policy I have ever seen includes a clause requiring you to pay back your insurance company out of your settlement. This is called a reimbursement clause.

The contracts also have a "subrogation" clause that says, if you do not pursue a claim against the at fault driver, your insurance company can do so in your name to get their money back.

The genesis of this rule is that the person responsible for the crash should pay for the damages. So while your insurance company pays for your medical bills, you will also recover damages from the at fault driver for those same medical bills. Then your insurance company gets their money back and the person ultimately footing the bill is the person who caused the damage in the first place.

There are a couple of principles that apply which often protect the ability of injured victims to keep their settlements.

Full Compensation. This rule was created by the Washington State Supreme Court in a famous ruling in Thiringer v. American Motors Insurance. The rule says that the duty to reimburse an insurance company out of your settlement does not arise until the injured person has been fully compensated for their injury. This protects an injured victim in case there is not enough insurance money to pay for all of their damages. However, this rule applies only in some circumstances (it does not apply to Medicare, self-funded employee benefits plans, Apple Health), if you have questions you should consult an attorney.

Attorney Fees. When you hire an attorney to help you settle a case, you have to pay that attorney out of your settlement. Because your insurance company, also benefits from your settlement (they get their money back), they have to contribute to your attorney fee. When you reimburse your insurance company, the amount owed will be reduced by a proportionate share of the attorney fee you have to pay. This rule applies much more broadly and most insurance companies will take this reduction (even Medicare and Apple Health), but not all. Again if you have questions you should consult an attorney.
Subrogation is a complicated area of law and even many attorneys do not really understand it. That's why you should also get advice from an attorney who specializes in car crash cases.