Subrogation...What is it Good For? Absolutely Nothing!
My sister, also a lawyer, gave me this great idea to write about subrogation. I couldn't think of any legal topic more boring and arcane to write about, and make fun of at the same time. She said I should call it "Subrogation Sucks" but I thought that might be a bit much.
What is subrogation you might ask? Why you would ask that is beyond me, but its basically when someone gives you money, and then wants it back later when you get money from someone else. Confused? You should be. Sounds like loan sharking. Its almost the same thing. Let me explain.
Say you are walking down the street and Joe Sixpack unfortunately drops a Steinway piano on your head. You have a lot of medical bills. You need a new head. Fortunately, you have health insurance to pay your medical bills. Let's say this health insurance company is called "Health Insurance Company" to keep things really simple here. Your medical bills total about 1 million dollars because they had to give you a new head.
You lawyer sues Joe Sixpack, the guy who dropped the piano on your head. Joe Sixpack has liability insurance with a company called...you guessed it..."Liability Insurance Company." Your lawyer gets very lucky and settles with Joe Sixpack's insurance company for one million dollars. Hurray! Happy days are here again! Well, not really. You might get nothing at all.
Here is where the subrogation thingy comes in. In Pennsylvania, Health Insurance Company is able to take some of your million dollar settlement from Liability Insurance Company to pay back the medical bills. A lot of my clients can't believe this. One insurance company is paying back another insurance company out of the settlement. Its just like a loan shark, right? More like two loan sharks fighting over my settlement. But, sadly, this is how the system works.
And don't think you can hide the settlement. You lawyer can't hide it from Health Insurance Company so don't even go there. There are federal laws on this, and let's just say that any attorney that does not pay back Health Insurance Company might possibly be doing time with Bernie Madoff.
It applies in other settings also, like worker's compensation. If you get hurt at work, and your lawyer settles a big case against someone else, you have to pay back most of the medical bills and lost wages that you received from worker's compensation to your employer (or the worker's compensation insurance company).
When you think about it, why does any insurance company get to be paid back, when it was already paid (in insurance premiums) to take that risk? Isn't the insurance company getting paid twice then? It charges you a premium for the health insurance, and then gets paid back when you settle. This is the system we have and we are stuck with it. Its good for nothing in my opinion, and sometimes, it ain't nothing but a heartbreak.