If you are injured in a car accident, slip and fall, or other incident due to someone else’s negligence, you may be able to recover compensation through your losses through a personal injury claim against the at-fault party. However, that process takes time. Meanwhile, you may be left scrambling to pay for unexpected hospital stays, surgical bills, and other expenses.
In some cases, you may be able to obtain funds from your own insurance company before you recover money from those responsible for your injuries. For example, you could file a claim with your auto insurer if you were injured in a crash or your homeowners insurance company if you suffered a dog bite.
Under California law, the party(s) at fault for your injuries and related losses can be held financially responsible for the benefits your insurance company pays you while your personal injury claim is pending. In certain circumstances, insurance companies have subrogation rights that allow them to recover the money they gave to you from the at-fault party(s) as well.
It’s important to understand subrogation in California personal injury claims because these payments are typically taken out of the compensation a party is awarded when the case resolves. To learn how subrogation could affect your claim, contact the experienced personal injury lawyers at Custodio & Dubey LLP for a free consultation.
What Is Subrogation?
In basic terms, subrogation protects you and your insurance provider from having to pay for damages that were not your fault. California’s subrogation laws allow insurance companies to seek reimbursement for what they paid to you from the party(s) responsible for your injuries.
An insurance company has subrogation rights as long as anyone other than its policyholder was at fault for an accident. The insurance provider has no subrogation rights that allow it to pay you money and later ask you to repay it. Insurance companies also do not have subrogation rights when their policyholders are at fault for accidents.
When Does Subrogation Apply?
Subrogation can apply any time an insurance provider makes a payment to someone who was not primarily at fault for an accident. This can include the following types of insurance payments:
- Med Pay insurance payments: Medical payments coverage is an optional part of many auto insurance policies that allows you to send your accident-related medical bills to your auto insurance provider for payment. Auto insurance companies can obtain reimbursement for Med Pay payments from the compensation you recover from the at-fault party.
- Uninsured/underinsured motorist (UM/UIM) payments: Uninsured or underinsured motorist coverage is another type of auto insurance coverage that allows you to seek funds from your own insurance provider if the at-fault driver has no or insufficient insurance. If your insurance provider makes UM or UIM payments, they have subrogation rights that allow them to seek reimbursement from the at-fault driver.
- Health insurance payments: If you turn to your health insurance provider to help cover the treatment costs for your accident-related injuries, the insurer has the right of subrogation. However, the California civil code places certain limits on the amount of money your insurance company can recover from your personal injury claim settlement.
Keep in mind that you can’t waive your insurance provider’s right to seek subrogation payments. You also can’t do anything that compromises an insurance company’s right to recover the money it originally paid to you.
How Long Does the Subrogation Process Take?
In most cases, you won’t be involved in the subrogation process at all. Your insurance provider should make a subrogation claim on its own.
There’s no way to tell exactly how long your insurance provider may take to complete the subrogation process. Much depends on the complexity of the claim. For example, if you were injured in an auto accident involving another driver who was both insured and clearly at fault, subrogation could be over relatively quickly. However, if the at-fault party does not carry insurance or it’s unclear who was to blame, the subrogation process could take much longer.
Statute of Limitations for Subrogation
Like all states, California has a statute of limitations that outlines the maximum amount of time parties have to take certain types of legal action, including filing subrogation claims. California law says insurance companies have three years to file a claim. The clock generally starts ticking on the date of the accident that caused your injuries.
How Will Subrogation Affect My Recovery?
Even though insurance companies do not take your money directly when they seek compensation through a subrogation claim, subrogation is still a process that reduces the amount of money you can recover from a personal injury claim. Fortunately, there are several laws that protect your right to the compensation you are paid.
California laws that limit the subrogation payments your insurance company can demand include:
- Cal. Civ. Code § 3040: Section 3040 of the California civil code places limits on the amount of money insurance companies can recover from settlement payments made to accident victims for medical services. Insurance providers are generally limited to recovering the lesser of either the cost of a victim’s medical services or a percentage of the victim’s eventual settlement. If an accident victim is represented by an attorney, insurers can recover up to one-third of a settlement’s value. If an accident victim does not have an attorney, insurers are limited to recovering up to one-half of a settlement’s value.
- California’s “Made Whole” Doctrine: The Made Whole Doctrine holds that an accident victim must be “made whole” by the funds from their settlement before an insurance company has the right to seek reimbursement. This doctrine may be important if an at-fault party does not have sufficient insurance to cover an accident victim’s losses. However, it’s important to know that some insurance contracts have language that can overrule the Made Whole Doctrine.
- California’s “Common Fund” Doctrine: If an insurance provider does not have legal representation of its own, the Common Fund Doctrine requires the insurer to pay part of the money it recovers in subrogation payments to the accident victim’s attorney. Since the attorney worked to resolve the victim’s claim and get the insurance company some or all of their money back, the law says that the attorney is entitled to a fee from the insurer’s proceeds for their efforts.
How Can a Personal Injury Lawyer Help Me?
The subrogation process does not happen automatically. With the help of a qualified personal injury lawyer, you can negotiate the limits of subrogation to make sure you receive a fair portion of the compensation from your settlement before the insurance company is reimbursed. Hiring an attorney who is familiar with subrogation is the best way to maximize your take-home compensation.
At Custodio & Dubey LLP, our attorneys have more than 40 years of experience working with California accident victims. We understand state subrogation laws and how they could affect your compensation. If you or a loved one was injured in an accident and is unsure of how subrogation works, call or contact us today for a free case review.