Tuesday, January 29, 2008

Will Insurers of 35W Victims Cash In?

SUBROGATION is the word that worries survivors of the 35W bridge collapse and their attorneys. Are you familiar with it?

1 : an equitable doctrine holding that when a third party pays a creditor or obligee the third party succeeds to the creditor's rights against the debtor or obligor; also : a doctrine holding that when an insurance company pays an insured's claim of loss due to another's tort the insurer succeeds to the insured's rights (as the right to sue for damages) against the tortfeasor called also equitable subrogation
2 : an act or instance of subrogating
NOTE: Subrogation can take place either by operation of law or by contractual agreement.
Merriam-Webster's Dictionary of Law at dictionary.com.

I'll give it to you in laymen's terms.

Say you're driving along the highway. A large semi is in front of you. All of a sudden, the doors at the back of the semi swing open, spilling boxes onto the highway. Your car is hit, you swerve and your car rolls. You end up in the hospital with multiple injuries. You're out of work for months and will have to endure many months more of physical therapy. Your insurance pays most of the medical expenses.

At least the company that owned the semi is paying you compensation for pain and suffering. It's a good thing. You didn't know how you were going to get by. You get paid a reasonable settlement.

This is where subrogation steps in. If your insurance falls under federal regulations your insurance company can lay claims to your settlement. They can require that you repay them out of your settlement money.

That's the problem that's wracking the brains and legal knowledge of Minnesota state representatives and attorneys for the 35W bridge victims. They want to compensate them, but they don't want it to go to the insurance companies, waiting like sharks in the bloody waters below.

So... not only do health insurance companies charge you through the nose, refuse to pay for preventative and necessary treatments, and drop you for sneezing the wrong way - now they can take your settlements as repayment, too.

Sick. Absolutely sick.

Read the Star Tribune article, "Will insurers go after 35W bridge victims' awards?" by Pam Louwagie that got me ranting at 700am.


Marie said...

It is sick. Why do insurance companies feel they have to be reimbursed for everything? We pay insurance so that we're covered if the time ever comes. If we have to give settlement money back to the insurers, why are we giving them money in the first place? It's like having another bank loan out. FUCKERS!

I was in the Walmart parking lot 3 weeks ago when some whore-on-a-cell-phone-driving-an-SUV backed into my car, doing $2,300 worth of damager. She took responsibility for the accident, and her insurance company sent me a check for the damages and said they'd spot me $26/day for a car.

Now, my insurance, State Farm, said they would pay me $13/day for a car, or, $10/day if I choose to not take the car.

I chose "B", not take the car. I'd rather have $70 to blow at Sex World. But State Farm said they would SUBROGATE the $70 back to the other insurer.

Granted, the accident wasn't my fault, so neither me, nor State Farm should have to fork out any cash, but still. They used the "word". SUBROGATE.

GeekGoddess said...

The kicker is that insurance companies are allowed to do this under federal regulation. The excuse is that it's to protect everyone else that's covered.

Um... yeah.

So what's the point in having insurance again?

Teresa said...

If they're going to do business this way, they should be honest. Instead of calling it "buying insurance" they should call it "pre-paying temporary rent on the CEO's performance bonus"

GeekGoddess said...

Even more vulture companies have sprung up around this, creating their own little industry. Much like companies that perform collections, these deal only in subrogation. Nothing like making money off of other people's misery.

Avindair said...

But enough about the producers of "American Idol"...

(I kid, I kid...)

GeekGoddess said...

If there's ever a reason to stop drinking Coke, I'd say that American Idol is IT for sponsoring them! :-)

new-iconoclast said...

I wish it were all this easy.

In reality, subrogation is a good thing for all of us. Not in the sense of the Strib article, maybe, but in the normal, everyday sense in which it is always used in the insurance industry.

Let's take a hypothetical auto accident. Cell Phone Whore rear-ends me. Her fault - her company pays (under state law, a rear-end accident is almost always the rear-ender's fault, 100%). But while the details are being hacked out, my company covers me. It then subrogates its costs; in other words, reclaims them from CPW's company. I have no right to recover from both companies; if CPW's company sends me a check as well, my company has every right to recover from me.

The purpose of insurance is not to enrich but to indemnify - to make whole again. It would be a very dangerous precedent to set if every time there was a fender-bender, the victim came out money ahead. There would probably be a lot more fender-benders. "Oops." That would really jack the price of insurance for everyone, like any other form of adverse selection.

That's why insurance companies don't pay pain and suffering damages, and no one else does either unless ordered to do so by a sympathetic jury. Your health insurance will cover your surgery, your anesthetic, and your painkillers, but it won't throw in a few thousand to make it up to you because it hurts for awhile. Pain and suffering damages are purely punitive, and have nothing to do with indemnification. They are not an actual economic harm that someone suffers as the result of an accident.

In this particular case, I don't favor allowing insurance companies to lay claim to pain and suffering damages, either - they paid for what they contracted to pay for when they covered the loss. However, I would hate to see the concept of subrogation as a whole be eliminated, because the unintended consequences would be really unpleasant.

GeekGoddess said...

Thanks for that point of view. Reading your comment, I can understand the original basis for subrogation. Unfortunately, it's been altered to allow insurance companies to claim settlement money that was given to victims for pain, suffering, loss of income, etc.

Once again, something meant for the greater good twisted into an opportunity for those with the most power.

Thanks for that insights, Ike.

David said...

"Kenneth Feinberg, who calculated victim payments as special master to the federal government's 9/11 fund, said he took into account what was owed to insurers and gave victims enough to cover that, plus what victims were owed.

Under both I-35 bridge fund bills, however, the money would be capped in some way.

Ultimately, some hope health plans and employers will yield to political pressure and realize the bad publicity they could face by going after bridge victims for the money."

Interesting. So if the state would simply make the fund big enough as was done for 9/11, everyone gets paid.

But instead, it's hoped the health plans will cave in.

So who's the real bad guy here?