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Insurance Reimbursement

Many contracts with health care insurance companies have provisions called reimbursement clauses and/or subrogation clauses. This allows the insurance company that has made payment on behalf of an injured party, because of the wrongful act of another, to seek reimbursement for those expenses. The insurance company is given the right to bring an action, in the name of the insured, to recover these funds (subrogation of rights).If the insured, the injured party, brings a claim, this reimbursement clause creates what is known as a lien on the recovery. This lien is a claim against the proceeds of the recovery that the insurance company has for reimbursement of the expenses paid as a result of someone’s wrongful conduct. The reasoning behind this is as follows: When you are hurt through no fault of another, your insurance company pays and seeks no reimbursement. That is what you have insurance for.

When someone else harms you and you get paid back for the amount spent on your behalf for medical treatment, then the insurance company wants to be reimbursed for the monies it spent on your behalf. In essence, it is willing to insure you for harm you cause to yourself, but if you are harmed by another and money can be collected from that person (third party), the insurance company wants reimbursement.

If you bring an action and recover the funds, the insurance company will almost always take a reduction, called compromising its lien, to reflect the time and expense (attorneys’ fees and costs) involved in recovering these damages. Reductions run from 0 to 80 percent or higher. The higher your comparative fault, the more the reduction as the law requires that the insurance company reduce its right to recovery by a percentage equal to your fault, if any.

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