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Subrogated Claims from Private Insurers

Many victims of personal injury have the good fortune to have disability or other insurance coverage, that allows them to continue paying their bills and put food on the table while they are unable to continue with their usual employment. In some cases, the private insurer will have, as part of its contract or policy, a provision that allows it to recover some or all of the money it has paid out to the injured victim, in the event the injured victim recovers some or all of their losses from a third party. The concept is similar to Workers’ Compensation Board (WCB) and Alberta Health policies, but there are significant differences in practice. WCB and Alberta Health claims are governed by statutes which set out the process in some detail, while private insurers must rely on their policy wording, or on the common law right of subrogation.

The legal concept of “subrogation” is a complicated one in personal injury cases. The wording in insurance contracts is highly variable and there is always a question as to how a court would interpret the contractual wording in the event of a dispute. The concept of subrogation often depends on what kind of personal injury action it is, how much money is recovered in settlement and for what kind of damages. Further, settlements are often reached that include a discount from the full value of the claim, to take into account the risk that the claim may be dismissed such that the insured victim is not achieving a complete recovery. Is the insurer entitled to recover when the victim is not “fully indemnified”? The victim will normally be required to pay a portion of the settlement to the lawyer who is assisting them, which factors into the question as to whether the insurer is entitled to be paid out of what is remaining and, if so, how much.

The reality is that when the insurer pays benefits for income losses and those losses are then recovered from the wrongdoer, it makes sense that the insurer would want to be repaid at least some the benefits. The question as to whether they are entitled to repayment is complicated and requires examination of the terms of the settlement and the contractual provisions, if any. These can be very significant questions for an injured victim of medical malpractice and can have a big impact on their bottom line recovery.