Subrogation

What it is

Subrogation lets the party that paid a loss collect it from the party that caused it. When a client's own insurer pays for a crash, it may pursue the at-fault driver directly or claim a share of the client's recovery. A related right, reimbursement, is a claim against the client's recovery itself; many plans and policies include both.

The California rules

• UM carriers that pay a claim are subrogated to the insured's rights against the uninsured driver (Insurance Code 11580.2).
• Health plans and health insurers governed by state law recover through liens limited by Civil Code 3040 to what they paid and, when the client has a lawyer, to one-third of the recovery.
• Workers' comp carriers and employers can sue the third party or claim a lien on the employee's recovery for benefits paid (Labor Code 3852 and 3856).
• Self-funded ERISA plans follow their written plan terms (see ERISA lien).
• Medicare and Medi-Cal have statutory recovery rights (see Medicare conditional payment).

Why it matters to a plaintiff firm

Every payer with a subrogation or reimbursement right is a claim against the client's net, and some can come after the firm if it disburses without paying them. Firms identify every payer at intake, send notice before settling, read the actual contract or plan language, and negotiate reductions for the payer's share of fees and costs. A settlement that ignores a known subrogation interest can come apart.