In Alabama, if you are injured due to the fault of another person or company and require medical treatment paid by your health insurance, your health insurance carrier or workers compensation insurance carrier is entitled to recover any amounts they paid out on your behalf. For example, if you are in a car wreck and the other party's car insurance pays you $25,000, Blue Cross and Blue Shield is entitled to recover any amounts they paid on behalf of you for your medical treatment from the $25,000.
What if I have an attorney?
If you have an attorney, that attorney will handle all of the subrogation issues for you. In the case above, if Blue Cross and Blue Shield paid $10,000 for your medical treatment, your attorney will work with Blue Cross to satisfy their subrogation claim. If your fee agreement with your attorney is 40%, Blue Cross will typically take $6,000 ($10,000 less the 40%) to settle their claim because your attorney was instrumental in getting them their money. Usually, we can negotiate that further to about $5,000 or $5,500. In extreme circumstances, they will sometimes waive their subrogation claim.
What if my car insurance pays for medical treatment?
If you have car insurance, you usually have what is called Medical Payment benefits. If those are used to pay your medical treatment, your car insurance company has a right of subrogation. However, let's say you have State Farm, and the person at fault also has State Farm. You are in luck. Alabama law says a company cannot subrogate against itself. So, if State Farm paid $5,000 of medical benefits and you get $25,000 from the other person's insurance with State Farm, State Farm is not entitled to recover it's $5,000 out of the $25,000.
What if my medical bills are greater than the amount of insurance available?
Sometimes, they will waive their subrogation claim. However, if they won't, you don't need an attorney because you will end up with nothing, i.e.: the subrogation claim is $30,000, and there is only $25,000 of insurance available. If the attorney fee is 40%, you will owe $18,000 in subrogation, but you will only get $15,000 from the settlement ($25,000 less 40%). An attorney should not put you in this position.
What the law used to be.
Alabama used to have the "Made whole" rule. That said that subrogation was not allowed until the person was "made whole". So, in the example above, the person would obviously not be made whole if they owe more in subrogation than they received. In the example in step four, the health insurance company would not have been able to subrogate because a person with $30,000 in a subrogation claim probably had $50,000-$70,000 in medical bills, and $15,000 would not make that person whole when you consider their injuries and pain and suffering.
For some reason, Alabama courts abolished the "made whole" rule which creates some really unjust situations. If you agree, write your legislators and tell them. You could be the person on the receiving end of this unjust ruling.
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