Subrogation is the substitution of one person in the place of another with respect to a lawful claim, demand or right against a third party, so that the substituted party succeeds to the rights of the other, or "stands in the shoes of" the other, with respect to the claim against the third party. A person's right to be subrogated to the rights of another generally arises when that person, acting pursuant to some obligation, pays the debt of the other. The doctrine of subrogation is based on considerations of equity and good conscience and is granted as a means of placing the ultimate burden of the debt on the person who should bear it. The right to subrogation may be established by contract or founded upon equitable considerations, but in either event, the right is generally regarded as being based upon and governed by equitable principles. The doctrine of subrogation has long been utilized by insurance companies who are obligated under their policies to pay their insureds for property damage or casualty losses which the insureds have sustained. In those situations where the damages appear to have been caused by the negligence or fault of third parties, insurance companies have traditionally exercised their right of subrogation to pursue claims against the alleged tortfeasors. By virtue of their right to subrogation, the insurance companies have "stood in the shoes of" their insureds and brought suit against the tortious wrongdoers. Because the tortfeasors who caused the injuries are the persons who should bear the burden for such injuries, the insurance companies' subrogation rights have generally entitled them to recover.
A related right exercised by insurance companies has been the right to reimbursement from their insureds in those instances where the insureds have already recovered from the tortious wrongdoers. Insurance policies entitling insurers to such reimbursement prevent the insureds from a double recovery at the expense of their insurance company.
Health plan documents usually contain subrogation provisions which grant the plan both the right to subrogate against third parties and the right to reimbursement where there has already been a recovery against a third party. Plans are now recognizing the value of exercising their subrogation and reimbursement rights. Although many payments of medical benefits are made in situations where the plan beneficiary has no claim against a third party, where the beneficiary does have such a claim, the plans will usually benefit by asserting a right of subrogation or a right of reimbursement.
Find out more:
- Why is Subrogation Important To Health Care Plans?
- The Importance of Well Crafted Plan Language
- Subrogation And Reimbursement Provisions
- Read Our Subrogation Administration Brochure
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(1) 29 U.S.C. §1001 et seq.
(2) See Morris V. Crete Carrier Corp., 105 F.3d 279 (6th Cir. 1997); Greater N.Y. Mutual Ins. Co. v. The North River Ins. Co., 85 F.3d 1088 (3d Cir. 1996); Black's Law Dictionary, 1427 (6th ed. 1990).
(3) See Greater N.Y. Mutual Ins. Co. V.The North River Ins. Co. 85 F.3d 1088 (3d Cir. 1996) Restatement of Restitution, §16 (1937).
(4) See Greater N.Y. Mutual Ins. Co. V. The North River Ins. Co., 85 F.3d 1088 (3d Cir. 1996); Gibbs V. Hawaiian Eugenia Corp., 966 F.2d 101 (2d Cir. 1992).
(5) See Greater N.Y. Mutual Ins. Co. V. The North River Ins. Co. 85 F.3d 1088 (3d Cir. 1996).
