What is ‘subrogation’ and how does it figure into a Pennsylvania injury case?
Subrogation is a process by which someone who pays another’s debts may recover their money from a third party who was responsible for the debt in the first place. It’s most commonly employed by insurance companies and public assistance agencies (like DPW or Medicare) who pay medical bills for injuries caused by someone other than the insured.
For example, assume that you have health insurance with Blue Diamond Health Insurance Company. Assume also that you break your ankle in a Pennsylvania slip and fall accident because the store you were visiting (Gigantic Raptor Grocery Store) neglected to warn you that they’d just put down a super-slippery wax on the floor. Blue Diamond will pay all of your medical bills, but they will also have a right to recover the money from Gigantic Raptor Grocery Store.
Understand? Good. Because that’s the easy part. From here, subrogation gets downright difficult.
The right to subrogation flows through the injured person. Consider our Blue Diamond/Gigantic Raptor scenario. Blue Diamond acquires your right to recover the portion of the money that you are entitled to legally recover, with that portion representing the medical bills paid by Blue Diamond. So, let’s assume that you bring a lawsuit against Gigantic Raptor for your injuries. You recover $15,000 in medical bills (which had been paid by Blue Diamond); $10,000 in lost wages; and $20,000 in pain and suffering for a total recovery of $45,000. Blue Diamond may be entitled to take $15,000 of your recovery (less their share of fees and costs). Further, you may have an obligation to protect Blue Diamond’s subrogation rights. So you probably can’t just enter into a settlement agreement for the parts of your claim that you are entitled to recover without also making sure that you’ve protected Blue Diamond’s right to recover the bills they paid on your behalf.
Further complicating matters: not all payors have the same subrogation rights. Medicare, DPW, and worker’s compensation insurers, for example, have “super” rights because state or federal laws give them rights beyond what an ordinary insurance company would have. Further, Pennsylvania laws limit subrogation rights in some particular kinds of Pennsylvania injury lawsuits, including Pennsylvania car accident cases and Pennsylvania medical malpractice cases. Even in those cases, however, there are exceptions. For example, insurers subject to federal regulation (like certain ERISA-qualified plans) may not be subject to state laws because federal law preempts state law.
Pennsylvania subrogation law is a complicated backwater of Pennsylvania injury law and it is one that presents hidden dangers to people who would represent themselves, or to the lawyer who does not routinely handle Pennsylvania personal injury cases.
