Subrogation rights allow insurance companies to recover the money it paid to its policyholders from the people who injured them. This way, insurance companies can pay its policyholders right away and then pursue reimbursement of this money from the at-fault party.
Insurance companies commonly enforce their subrogation rights in the following situations:
- A driver with Nevada collision insurance coverage was hit by another driver;
- A driver with Nevada uninsured motorist insurance coverage was hit by a driver with no insurance; and
- An employee sustained an injury at work (“worker’s comp”)
However, Nevada law precludes subrogation of Med-Pay coverage. Nevada law also prohibits insurance companies from subrogation if their policyholders have not been fully reimbursed for their damages.
In this article, our Las Vegas Nevada personal injury attorneys discuss:
- 1. Subrogation definition
- 2. Bases of a subrogation claim
- 3. Areas where subrogation may apply
- 4. Med-Pay
- 5. Limitations on Subrogation
- 6. Health insurance reimbursements
- 7. The statute of limitations for subrogation
Subrogation is a legal right that allows insurance companies to recover money it previously paid out for a loss by suing the third party responsible for that loss. In other words, subrogation is a way for an insurance company to try to get reimbursed by the outside people that caused the carrier to pay out in the first place.1
Example: Jane gets into a car accident in Nevada with Marie, who was at fault. Jane’s insurance company pays Jane right away to repair the car. But since Marie was at fault, the insurance company then sues Marie’s insurance company to get reimbursed for the cost of repairs.
Had Jane in the above example been uninsured, she would be allowed to seek damages from Marie’s insurance company. Since Jane is insured, subrogation gives her insurance company the right to “stand in the shoes” of Jane and seek the damages she is entitled to.
Note that if Jane was at fault for the accident, then her insurance company would have no right of subrogation against Marie.
Also note that subrogation is not the same as “contributions” or “liens”: They are similar concepts that benefit insurance companies, but they do not permit the insurance company to “step into the shoes” of the policyholder and assume their rights.
There are three types of subrogation:
2.1. Contractual subrogation
Contractual subrogation arises from its written contract between an insurance company and its policyholder. In these cases, the parties spell out the unique terms of their subrogation agreement in the contract. Furthermore, the terms apply only to the named insurance company and policyholder in the contract.
Common examples of contractual subrogation include collision insurance. Scroll down to section 3 for more information.
2.2. Statutory subrogation
Statutory subrogation arises out of current laws that grant subrogation rights to certain parties in specific situations. Therefore, it does not depend on the terms of a contract: It extends to all insurance companies and accident victims that fit the specifications in the statute.2
A common example of statutory subrogation is workers’ compensation. Scroll down to section 3 for more information.
2.3. Equitable subrogation
Equitable subrogation — also called judicial subrogation — arises from court cases where parties do not agree on if and how subrogation is implemented. Here, the judge decides and looks to prior court precedents to determine how to resolve the case.3
In Nevada, equitable subrogation cases often involve mortgages.
Subrogation frequently factors into the following insurance claims:
- collision coverage
- uninsured or underinsured motorist
- worker’s compensation
When drivers carry collision coverage, their insurance company will quickly pay to repair their vehicle’s property damage no matter whose fault it is. But if someone other than the policyholder is at fault, then the insurance company will seek reimbursement (“subrogate”) for the money it paid through the at-fault driver’s insurance company.
Even though insurance companies never seek subrogation from their own policyholders if they are at fault for the collision, they may increase the insurance premiums. But as long as the policyholder is not at fault for the collision, the insurance company should not use the collision as an excuse to raise premiums.4
Uninsured motorist (UM) or underinsured motorist (UIM) coverage allows policyholders to recover money from their insurance company in the event that an uninsured or underinsured driver involves them in a car crash. Then the right of subrogation gives the insurance company the ability to “step into the shoes” of its policyholder and sue the uninsured or underinsured at-fault motorist to reimburse it.5
Example: Kerry carries no car insurance. One night she loses control of her vehicle and crashes into Jeff. Since Jeff carries IM insurance, Jeff’s insurance company pays all his medical bills and car repair bills. Then the insurance company sues Kerry for all the money it paid to Jeff.
Note that it makes no difference to Jeff in the above example if her insurance company is unsuccessful in getting Kerry to pay. Jeff gets to keep all the money he received through his UM claim irrespective of whether the insurance company ever gets reimbursed.
All employers are required to carry worker’s compensation insurance to pay employees in the event they get injured on the job. If someone other than the injured employee caused the accident, subrogation rights permit the insurance carrier to sue the at-fault person to reimburse it.
Note that injured workers are permitted to sue the at-fault party in a civil lawsuit in addition to filing a workers comp claim. But if the injured worker then wins money in the civil lawsuit, the workers’ comp carrier may have reimbursement rights to recover a portion of those winnings:6
Example: Paul delivers pizza for a living. One evening Jackie crashes into him, and Paul sustains a broken leg. Paul files a workers’ comp claim, and he receives $10,000 to pay his medical bills. Paul also sues Jackie, who pays him a $20,000 settlement, part of which is meant to go towards his medical bills. Since accident victims are not allowed to receive “double recovery” for the same expenses, the employer’s workers’ comp carrier can try to get its $10,000 back from Paul.
Note that there are various ways that a workers’ comp carrier can go about recovering money, including joining the lawsuit or filing a lien. Injured workers are advised to retain an attorney to protect their interests and ensure that workers’ comp carriers are not taking back any more money than they are legally entitled to.
Some auto insurance policies provide Med-Pay coverage (short for Medical Pay), which pays a policyholder’s medical bills following an accident. Nevada is one of the few states which prohibits subrogation of Med-Pay coverage:
The Nevada Supreme Court reasoned that it is a violation of public policy to let a car insurance company collect Med-Pay premiums and then deny the benefit to policyholders whenever they receive money for their injuries from other sources, such as a health insurance policy. The Court acknowledged that in many cases, accident victims’ medical bills far exceed whatever money they may receive from Med-Pay and other sources.7
The risk of subrogation is that the insurance company recoups too much money, leaving policyholders with less than they are legally entitled to. The “Made Whole” doctrine and “Common Fund” doctrine help to offset these risks to policyholders.
The Made Whole doctrine prohibits insurance companies from subrogation until its policyholder has been fully reimbursed — “made whole” — for its losses.
Example: Helen’s car sustains $30,000 in damage after Jack crashes into her car. Helen’s car insurance carrier pays her $10,000 to repair the damage. Helen also receives $5,000 from Jack. Since Helen is still short of the money required to repair her car, her car insurance company cannot try to recover the money that Jack paid her.
Note that parties to a contract in Nevada are allowed to include a clause that excludes the Made Whole doctrine as a possible defense against subrogation. If Helen’s insurance company in the above example had such a clause, then it may be able to recover some money from Helen.8
The Common Fund doctrine kicks in when an insurance company’s policyholder recovers money from a personal injury lawsuit: The doctrine requires the insurance company to pay a portion of the monies it recovers through subrogation to its policyholder’s personal injury attorney.
The reasoning behind the Common Fund doctrine is that the insurance company should help pay for the policyholder’s personal injury attorney since the attorney did all the work in litigating the lawsuit and recovering damages.9
When a health insurance carrier pays money to an injured policyholder, the carrier may have a “reimbursement” provision in its policy that allows it to get that money back: This policy kicks in if the policyholder receives money from the at-fault party meant to pay for the medical bills.10
Example: Norman is walking down the street when Ashley crashes into him, breaking his harm. Norman’s health insurance company pays $10,000 to cover all his medical bills. Ashley has bodily injury liability coverage, so her car insurance company pays Norman $10,000 in compensatory damages to cover all his medical bills. If Norman’s health insurance policy contained a reimbursement agreement, his health insurance company may recover its $10,000.
Had Ashley’s car insurance company paid Norman less than $10,000, then Norman’s health insurance company would only be able to recover the difference of $10,000 minus the amount Ashley paid. Note that a right or reimbursement is slightly different from a right of subrogation because reimbursement does not permit the insurance company to “step into the shoes” of the policyholder and exercise his/her rights.
In general, insurance companies have two (2) years from the date of the policyholder’s injury to seek subrogation.11
In California? Read our article about California subrogation laws.
- NRS 17.275. Subrogation of insurer. A liability insurer, who by payment has discharged in full or in part the liability of a tortfeasor and has thereby discharged in full its obligation as insurer, is subrogated to the tortfeasor’s right of contribution to the extent of the amount it has paid in excess of the tortfeasor’s equitable share of the common liability. This provision does not limit or impair any right of subrogation arising from any other relationship.
- See, e.g., NRS 687B.145.
- See, e.g., Wilmington Trust FSB v. A1 Concrete Cutting & Demolition, LLC (In re Fontainebleau Las Vegas Holdings, LLC), 128 Nev. 556, 289 P.3d 1199 (2012).
- See, e.g., “What is Subrogation and why is it important?“, AMIS Insurance.
- See, e.g., St. Paul Fire & Marine Ins. Co. v. Emplrs Ins. Co., 122 Nev. 991, 146 P.3d 258 (2006); NRS 687B.145.
- See, e.g., Breen v. Caesars Palace, 102 Nev. 79, 715 P.2d 1070 (1986); Poremba v. Southern Nevada Paving, 2017 WL 396094 (Nev. 2017); NRS 616C.215.
- Maxwell v. Allstate Ins. Co., 728 P.2d 812 (Nev. 1986).
- Canfora v. Coast Hotels & Casino, Inc., 121 Nev. 771, 121 P.3d 599 (2005).
- State Dep’t of Hum. Resources v. Elcano, 106 Nev. 449, 794 P.2d 725 (1990).
- Canfora v. Coast Hotels & Casino, Inc., 121 Nev. 771, 121 P.3d 599 (2005).
- State Farm v. Wharton, 88 Nev. 183, 495 P.2d 359 (1972).