Once we have agreed to settle with the negligent party’s insurance company we address the settlement proceeds. Here we deal with potential subrogation interests of our client’s insurance company. In a personal injury case a subrogation interest arises when our client’s insurance company has made payments for accident related expenses.

Components of Case Value. To understand subrogation we must recognize a personal injury case recovery is usually based on different components that added together equal case value. These components include our client’s past and future medical bills, past and future economic loss, and general damages (disability, pain and suffering, loss of enjoyment of life and disfigurement). The components that may give rise to a subrogation interest are past medical bills and past wage loss.

If our client’s insurance company has made payments for medical bills and/or wage loss it will make a subrogation claim for the return of of its payments from the case recovery. It is not automatic our client’s insurance company will have an enforceable subrogation interest.

Made Whole Doctrine. First our client must be “made whole” before a right of subrogation arises. This means our client must receive the full value of all case components that are unique to her alone. These are the general damage components. To illustrate if our client’s case has a total value of $150,000 with past medical bills of $30,000 and lost wages of $15,000 this means the combination of future medical, future wage loss and general damages total $105,000. If the negligent party has only $100,000 in insurance coverage there is insufficient insurance to pay the $105,000 necessary to “make our client whole.” When this happens there is often no subrogation right for our client’s insurer.

Insurer Stands in Shoes of Client. The subrogation right of our client’s insurance company can be no better then our client’s right of recovery against the negligent party’s insurer. When our client’s recovery is reduced by the comparative negligence percentage of our client then the subrogation amount must be reduced by the same percentage.

PIP IME. Often our client’s auto insurance company has done a PIP IME. When the PIP IME doctor states our client received medical care that was unnecessary and/or not accident related then we use the IME against our client’s insurance company. We discount its subrogation interest by all amounts its IME doctor states were not necessary for treatment.

ERISA. The Employment Income Security Act (ERISA) is federal law that often gives absolute subrogation rights to the client’s health insurance company. Before agreeing a ERISA plan has absolute subrogation rights we get the plan language. We read the plan to see if the made whole doctrine applies under the plan, or if there is language allowing a credit for attorneys spent by our client. Even when there is a rock solid ERISA plan allowing for complete recovery of the subrogation interest we request the plan review our case and agree to payment of attorney’s fees.

Attorney’s Fees. Washington and many other states require the insurance company with a subrogation interest to pay a portion of the client’s attorney’s fees. This translates to a discount of about one third of the subrogation interest. We pass this discount to our client so she receives a greater recovery. In all cases our goal is to maximize the net recovery to our client. This can only be done by thoroughly dealing with the subrogation claim of our client’s insurance company.

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