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California Subrogation Laws

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Subrogation is an insurance term you may encounter after a personal injury accident in California. Subrogation is an action your insurance company can take to recover the amount it gave you to cover your medical expenses. The insurer will not request a subrogation payment from you, but rather from the party that caused your accident. Since your insurance company was not liable for your injuries, it has the right to seek compensation from the party that did cause them. A subrogation payment will come from a compensatory damage award you receive from the at-fault party during an injury claim.

Collecting Insurance Payments Before a Settlement or Verdict

Even a simple or straightforward insurance settlement after an accident can take around three months to complete. Many cases are much longer, with personal injury trials taking a year or more on average. An accident victim will need medical care long before the completion of an insurance claim or injury lawsuit. In these situations, the injured party’s insurance company may pay for the victim’s medical treatments up front, then file a subrogation claim with the defendant in the future for reimbursement.

California’s subrogation law gives insurance companies the right to seek reimbursement from the at-fault party of the amounts they spend on a claimant’s damages. The subrogation law holds that since the insurance company did not cause the accident, it should not be legally responsible for paying a victim’s damages. While most insurers will cover the immediate costs for the benefit of the policyholder, including medical bills and property repairs, they will have the right to seek subrogation later. After a successful case resolution, the insurance company generally expects repayment.

How Does Subrogation Work?

An insurance company only has the right to subrogation if someone other than its policyholder was at fault for the accident. If the policyholder caused the accident, the insurance company will not have grounds to seek subrogation payments from anyone. The insurer will have to cover the policyholder’s damages without reimbursement if the claimant has the correct type of insurance. An insurance company also cannot seek subrogation from the covered party. Since the policyholder pays for liability coverage, seeking money from the victim would defeat the purpose of having insurance.

If an insurance company has the right to seek subrogation pay, it will have three years from the date of the accident to file a claim, in most cases. As a victim, you and your personal injury lawyer can negotiate subrogation to ensure you receive your fair share. The insurance company will seek to take a portion of your settlement or verdict award to make up for what it spent on your medical bills, property damage repairs, lost wages and other expenses. More than one insurance company may have the right to request subrogation from your compensatory damage award.

Subrogation Limits

Although an insurance company has the legal right to request subrogation payments, the Made Whole Doctrine prevents the insurer from claiming 100% of your settlement or judgment award. An insurance company must give the first opportunity for reimbursement to you as the accident victim. The compensation award must make you whole or give you enough to cover your damages before an insurer can receive any money in subrogation. Note, however, that an insurance contract may have language that overrides the Made Whole Doctrine.

Other rules, such as the Common Fund Doctrine, may also limit an insurance company’s ability to obtain reimbursement. This law makes insurance companies give some money to the accident victim’s lawyer if the insurance company did not hire its own attorney to handle the subrogation. This doctrine can motivate your attorney to negotiate insurance subrogation. An attorney could help you understand the state’s subrogation law and how to handle this aspect of your claim after a serious personal injury in California.