Repaying your insurance company after settlement
When your claim against a party who is at fault for your injuries is settled or otherwise resolved, your own insurance companies are often entitled to be repaid. The insurance company for the at-fault party (the person who caused the injury) is primarily liable. Your PIP coverage and health insurers are secondarily liable. Secondarily liable insurance carriers who have paid treatment or wage loss are usually entitled to be repaid when a settlement is had with the primarily liable insurance carrier for the at-fault party. Auto policies usually create the right to repayment. If not, there is an equitable doctrine in the law that is called subrogation, which requires repayment under most circumstances.
The law on repayment or subrogation differs at least a little from State to State. In Washington, there is no right to repayment unless the injured party is “made whole” by the settlement with the at-fault party. If the injured person negotiates a settlement, the injured person is generally made whole in the eyes of the law. However, if the only insurance proceeds that are available are the limits of the at-fault party’s insurance policy, the injured party is generally not considered made-whole with the receipt of the at-fault’s policy limits. In those instances, a secondarily liable insurance carrier is not entitled to subrogation or repayment.
On the other hand, in automobile cases in Oregon the secondarily liable carrier is ordinarily entitled to elect whether to seek direct repayment from the primarily liable carrier or to assert a lien against the injured party’s settlement, and be paid from the injured person’s settlement proceeds.
What is really the difference between Washington and Oregon on this? In Washington, the secondarily liable carrier only had a lien and cannot directly negotiate with the primarily liable carrier if the injured person is seeking to recover directly from the at-fault party. Furthermore, the secondarily liable carrier must contribute to the injured person’s attorneys fees and costs to obtain a settlement or jury verdict from the at-fault party.
In Oregon, if the secondarily liable carrier seeks direct repayment, there is no obligation to contribute to the injured person’s attorneys fees and costs. However, if the secondary carrier elects to collect under a lien on the injured person’s Oregon claim, then the secondary carrier must contribute pro rata to the injured person’s attorneys fees, similar to the situation in the State of Washington.
Oregon’s system confers an advantage on secondarily liable insurance companies if they seek to collect reimbursement directly from the at-fault party’s insurer. Generally, the primarily liable company that insures the at-fault party will not pay the full amount owed to the secondarily liable carrier until there is a settlement of the injured person’s claim against the at-fault party. If the secondarily liable carriers can wait until that point they get repaid in full with no contribution to the injured person’s attorneys fees and costs. In other words they get a free ride. If they try and get repayment sooner, they may have to take a discounted amount.
The disadvantage to the injured person is that if the secondarily liable carrier gets direct payment, the injured person may not be made whole if there are limited insurance proceeds. For instance, if there is a $25,000 insurance policy on the at-fault party, and the injured party’s treatment cost $20,000, in Oregon the injured party would get $5,000 minus attorneys fees and costs although the injured party’s damages are likely worth far more money. In Washington under these same circumstances, the secondarily liable carrier would probably not be entitled to any repayment from the $25,000 because the injured party would not otherwise have been made whole.
>> Part 2 of 2 - Repaying Your Insurance Company After Settlement
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