Recently, I got a call from a nice man who was injured in an automobile collision.\u00a0 His injuries were significant and his medical bills were high. Fortunately, his health insurer paid most of the medical bills, because the person who hit him was uninsured.\u00a0 Unfortunately, this man didn\u2019t have much \u201cunderinsured motorist\u201d coverage on his own insurance policy. Because his injuries were significant and the collision was clearly not his fault, his own automobile insurer paid the entire amount of his policy benefits under his \u201cunderinsured motorist\u201d coverage immediately.<\/p>\n
It seemed that his claim was working out fine. His auto insurer agreed to pay him and he hadn\u2019t even needed to hire an attorney. However, shortly after he got his check, he got a notice from his health insurer demanding that he<\/i><\/b> repay all of the money the insurer paid for his medical bills and that he pay it from the money he got from his auto insurer!<\/i>\u00a0 His health insurer had paid over $80,000 for his medical care and his auto insurer had only paid him $100,000 (because that was the amount of coverage he purchased). He wanted to know if this really meant he had to pay back his health insurer. Could his health insurer really leave him with less than $20,000– when he had a permanent injury?!\u00a0 Unfortunately, the answer is probably \u201cyes.\u201d<\/p>\n
But, why is that? How can it be? The answer is \u201csubrogation.\u201d This is a legal term that refers to when one insurer or entity pays benefits for you that should ultimately be paid by someone else. It requires that, when the ultimately responsible party pays you, you have to pay back the insurer who \u201cadvanced the payment\u201d on your behalf.\u00a0 In this scenario, it meant that his health insurer \u201cadvanced\u201d the payment of his medical bills up front (because their insurance policy requires this), but then expected to get paid back when this man\u2019s auto insurer paid him for his claim.<\/p>\n
Subrogation is legal and it is enforceable. Nearly all insurance policies have some sort of a subrogation clause. Sometimes it is referred to as \u201csubrogation,\u201d other times it is referenced under clauses such as \u201cPayments by Others,\u201d \u201cPayments by Third Parties,\u201d \u201cInjuries by Third Parties,\u201d etc.\u00a0 Regardless of the phraseology, it all means the same thing \u201cif we pay you immediately, but someone else ultimately owes you money for this, you have to pay us back when you recover.\u201d<\/p>\n
Underinsured motorist coverage is a type of insurance you can purchase as part of your automobile insurance policy that will pay you benefits if the person who injures you with their car does not have any (or enough) automobile insurance to fully compensate you. This insurance will pay you if you are in your own car, in someone else\u2019s car, on your bicycle, or a pedestrian when you are injured.\u00a0If you do not have underinsured motorist coverage, buy it immediately<\/strong>\u00a0and<\/span>\u00a0buy as much coverage as you can afford!<\/strong>\u00a0It is essential to have this type of insurance coverage.<\/p>\n Some insurance policies require that you pay them back immediately \u201cfrom your first dollar,\u201d meaning that, those insurance companies don\u2019t care if you get any money at all. They will take 100 percent of what you get, if their bills are higher than what you receive. Those insurance policies are generally governed by a Federal law known as ERISA. This occurs most often with health insurance policies. However, the Personal Injury Protection insurance you may have in your automobile policy also has a provision requiring you to pay them back.<\/p>\n So, how can you possibly protect yourself?\u00a0<\/strong><\/p>\n