By Jim Moss
Editor's note: Jim Moss is a Colorado-based attorney who represents bike and accessory manufacturers.
Generally, to file a lawsuit, you have to have been injured by the person you are suing. If it was a product that injured you, you sue the product manufacturer. If it was an individual, you sue the person. If it was a bad repair, you sue the person who failed to repair the product. A person is suing another person.
However, in State Farm suing Rad Power Bikes for damages after its insured's e-bike caught fire, State Farm is not the injured party; its client was. Yet, State Farm, which was not injured by the bike and as a legal entity could not be injured by a bike, is suing.
Subrogation
The general thought is that plaintiffs' lawsuits are taking over the court systems. That every time someone is hurt, a person will sue for whatever reason to recover money. However, that is not the case. Plaintiff lawsuits are two types, and you might have never heard of the second type: subrogation claims and litigation.
In every insurance policy written in the U.S., there is the Subrogation Clause, giving your insurance company the right to sue anyone who caused the injuries that created the payout on your behalf by the insurance company. The clause states that the insurance company can sue on your behalf, using your name to collect any money that may be legally owed by the person causing your damages. So, you may be sitting in a hospital bed having no thought of suing for your injuries when a lawsuit is filed in your name against the person who allegedly caused the injury.
In every insurance policy written in the U.S., there is the Subrogation Clause, giving your insurance company the right to sue anyone who caused the injuries that created the payout on your behalf by the insurance company.
That could be from your automobile policy if you were injured in a car accident that was not your fault or from your health insurance policy paying your medical bills if you tripped in someone's house. A big group that uses subrogation extensively is worker's compensation insurers. If you were hurt at work, worker's compensation pays your medical bills no matter how you were hurt or who was at fault, as long as you were working. However, the delivery truck that backed into you at work causing your injuries may be sued to recover the lost wages and medical bills your worker's compensation is paying to make you well.
You may be contacted about the claim and in some cases asked if you would like to participate by adding additional claims. Meaning, if it is an automobile accident subrogation, the law firm representing your insurance company and you may add your deductible claim to the lawsuit. However, claims not covered by your insurance company can’t be added. So, if you want to receive damages for pain and suffering, you will have to find your own attorney to represent you in the original lawsuit to recover those types of damages.
An easy hint if you are being sued for a subrogation claim may be there are two attorneys representing the injured party suing. However, many times one attorney will take the lead and be the face of the lawsuit for both the injured insured and the insurance company.
How large is this industry, and how many lawsuits are filed like this?
Millions.
The third largest law firm in Colorado only does subrogation. Most law firms tackle dozens of different areas of the law; subrogation firms usually only tackle one: getting money back for their clients and insurance companies.
How large is this industry, and how many lawsuits are filed like this? Millions.
So, what happens if you do not want to sue your cousin for backing into you and sending you to the hospital? You do not have to allow the subrogation, but if you don't, you have to give back all the money paid on your behalf and pay your medical bills yourself. There are dozens of situations like this, when two friends are suing each other or the lawsuit just seems wrong.
It probably is; however, there is nothing either party can do because it is a subrogation claim being pushed by an insurance company.
Remember the story about the aunt who sued her nephew over a hug that knocked them down, breaking her wrist? At the time, it seemed mean to sue your nephew over a hug. After the lawsuit, it came out that the aunt was not suing, but her health insurance company was suing the nephew's homeowner's insurance company to recover the medical bills the aunt's insurance company paid out. That is a subrogation claim. The lawsuit was titled aunt against nephew, but in reality, it was an insurance company vs. insurance company.
In most states, the subrogation clauses specifically state that the insurance company has the right to sue on your behalf using your name. In a few states, such as this State Farm case in Pennsylvania or in specific situations, the law allows or requires the insurance company to sue in their name.
Subrogation may sound like a bad clause because of the crazy lawsuits it can sometimes produce. In reality, it may keep your insurance premiums lower, if at the end of the year the total payouts by your insurance company are reduced by money the insurance company received in subrogation.
The other argument is the money is going from one insurance company pocket to another, and the only people benefiting are the attorneys suing to create or defend the transfer. Either way, it is a constant throughout our lives nowadays and is not going away.
When you look at the personal injury litigation going on in the U.S. — remember a large part of it in some estimates might be 40% subrogation claims — one insurance company is suing another using your name.
