Subrogation: perfectly legal for employer to claim your claim
Imagine getting seriously injured in an accident and winning a court settlement, only to have your employer take back some or all of the money.
"It could happen here and does happen here," said Christine Bremer Muggli, president-elect of the Wisconsin Academy of Trial Lawyers.
It's called subrogation and is perfectly legal in Wisconsin, along with every other state.
Subrogation refers to an insurance company or other party seeking reimbursement from the person or entity legally responsible for an accident. The general rule is that, after paying a claim, an insurer is "subrogated" to the rights of your policy and can "step into your shoes" to go after or sue the negligent party on your behalf.
"It's a well-established part of tort law," says Eric Englund of the Wisconsin Insurance Alliance.
Englund said insurance companies - or employers who pay health benefits - have every right to try and recover their costs.
"When you win money in a settlement, it's supposed to go toward your medical bills, not so you can go out and buy a steak dinner," he said.
But the concept also applies to cases where an injured person has already won a settlement on their own, such as the Wal-Mart case that recently went before the U.S. Supreme Court.
Bremer Muggli said in those cases, an employer or insurance company can't expect to just sit back and collect after someone else has done all the work, especially as it applies to collecting legal fees.
"The courts have been pretty clear about that," she said.
Englund said almost everyone covered by health insurance at their place of employment may have already experienced subrogation to a certain percent. For example, if you sprain an ankle and go to the doctor, you'll likely get a notice from your company's health insurance administrator in a couple of weeks inquiring if someone else was responsible for causing the injury.
"They are going to ask around to see if there is a third party responsible for hurting you," he said.
Subrogation can also be used when an insurer settles a collision claim for damage to a vehicle caused by another driver's negligence. Generally, an insurer will have a customer sign a subrogation release that assigns the right of recovery to the insurance company.
But insurers are not allowed to stall on settling a claim until they get paid from the person at fault. In fact, subrogation usually occurs some time after the original claim is settled, as in the case of the woman in the Wal-Mart case.