Subrogation is a common issue that arises in personal injury cases when insurance companies seek repayment for expenses related to an individual’s injuries that they have covered. This process allows insurers to recover costs from the responsible party after compensating the injured individual.
In Oklahoma, subrogation laws usually follow the “Make Whole Doctrine,” which allows the injured claimant to receive total compensation for losses before the insurer can collect funds through subrogation. The major exception to this often depends on the contract details between the insurer and their insured.
- What is Subrogation?
- Oklahoma’s Subrogation Laws
- Types of Subrogation Claims
- Auto Insurance Subrogation
- Case Example: Reeds v. Walker (Oklahoma Supreme Court, 2006)
- Case Example: Manokoune v. State Farm Mutual Automobile Insurance Co. (Oklahoma Supreme Court, 2006)
- Health Insurance Subrogation
- Equity Fire and Casualty Co. v. Youngblood case (Oklahoma Supreme Court, 1996)
- American Medical Security v. Josephson (Oklahoma Civil Court of Appeals, 2000)
- Tricare (Military Health Insurance) Subrogation
- Property Insurance Subrogation
- Subrogation Process and Timeline
What is Subrogation?
Subrogation gives insurers the right to legally pursue reimbursement from a third party that caused injury or damage for
which the insurer has already paid expenses under an existing policy. Some critical aspects of subrogation include:
- Stepping Into Shoes of Insured: The insurer essentially takes the place of the insured individual and assumes the legal rights to seek compensation from the responsible party.
- Prevents Double Recovery: Subrogation helps prevent an injured person from recovering costs twice for the same loss – from their insurer and the at-fault third party.
- Common in Auto Insurance: Vehicle collisions often trigger subrogation when insurers pay for repairs or medical bills and then pursue the at-fault driver for reimbursement.
- It applies to other insurance: Subrogation can involve health insurance, workers’ compensation, property damage policies, etc., whenever an insurer compensates and seeks repayment.
Oklahoma’s Subrogation Laws
Oklahoma has specific statutes and legal precedents that establish how subrogation works in various types of personal injury cases:
The state laws on subrogation in Oklahoma enable insurers to recover funds from liable third parties after having compensated the insured:
- 36 O.S. § 4803 allows insurance companies to require an assignment of the right of recovery against any party for loss to the extent payment is made by the insurance company.
- 74 O.S. § 1306.1 provides the Office of Management and Enterprise Services the right to recover payments made for injury to an employee caused by a third party through subrogation.
- 36 O.S. § 6092 prohibits subrogation rights under medical coverage in automobile policies for the named insured or relatives living in the same household.
- 21 O.S. § 142.12 provides for subrogation by the state for compensation awarded under the Oklahoma Crime Victims Compensation Act.
- 51 O.S. § 158 grants the state or political subdivision subrogation rights against applicable insurance policies for settlements or judgments under the Governmental Tort Claims Act.
- 63 O.S. § 1-1708.1D addresses the admissibility of evidence of subrogated medical payments in medical liability actions. In any medical liability action, upon application of a party, the court shall determine whether amounts claimed by a health care provider to be a payment of medical bills from a collateral source are subject to subrogation or other right of recovery. If the court decides that any such payment is subject to subrogation or other right of recovery, evidence of the payment from the collateral source and subject to subrogation or other right of recovery shall not be admitted.
Types of Subrogation Claims
While the underlying framework is similar for subrogation across different policy types, some distinct considerations apply depending on the specifics of each case:
Auto Insurance Subrogation
- Auto insurers frequently subrogate to recover collision repair costs, medical payments for injuries, and associated expenses from liable parties after accidents.
Case Example: Reeds v. Walker (Oklahoma Supreme Court, 2006)
This case involves National American Insurance Company (NAICO) seeking reimbursement from its insured, Phillip Reeds, for medical payments it made on Phillip’s behalf after he was injured in a car accident. The main issues are whether Oklahoma courts have jurisdiction despite this being an ERISA-regulated plan, and whether NAICO deserved summary judgment on its reimbursement claim.
The court ruled Oklahoma courts have jurisdiction because NAICO seeks money damages, which does not fall under ERISA’s exclusive federal jurisdiction. On summary judgment, the court reversed in favor of Phillip because the insurance contract did not unambiguously override Oklahoma’s “make-whole rule,” which states insurers cannot recover payments until insureds are fully compensated. Since there was a dispute over whether Phillip has been fully compensated, summary judgment was improper.
Case Example: Manokoune v. State Farm Mutual Automobile Insurance Co. (Oklahoma Supreme Court, 2006)
The mother of an injured minor passenger brought this lawsuit to enforce a settlement agreement reached with one insurance company, State Farm. Another insurance company, Equity, was asserting a right to subrogation to recover medical expenses it had paid.
The key issue is whether there are disputed material facts regarding the enforceability of Equity’s subrogation interest against the State Farm settlement.
The court concludes summary judgment was improper because:
- It is unclear if the plaintiff had actual or constructive notice of Equity’s subrogation right when accepting benefits. Notice is essential for a valid subrogation claim.
- It is disputed whether the settlement represented the minor’s full compensation, which is required under the “make whole” rule for subrogation rights to be enforceable.
- There are factual issues regarding whether State Farm had a duty to disclose the subrogation interest to the plaintiff during settlement negotiations and court approval. Its failure to do so could amount to constructive fraud.
Health Insurance Subrogation
- Health plans subrogate to claim repayment of medical expenses when injury treatment costs are triggered by a third party’s negligence or liability.
Equity Fire and Casualty Co. v. Youngblood case (Oklahoma Supreme Court, 1996)
This case involves a dispute over reimbursement between Employers Health Insurance (the manager of an ERISA-governed self-funded employee health benefit plan) and the Youngblood family. The Youngblood’s minor daughter Kim was injured in an auto accident and received $31,845 in medical expense payments from the benefit plan. Kim’s total damages exceeded $150,000. The liability insurers paid $40,000 to Kim/Yvonne Youngblood.
Based on its subrogation clause, the benefit plan sought full reimbursement of the $31,845. However, the clause did not specify priority of repayment or give the plan manager authority to interpret ambiguities. The court holds that in such cases, the “make whole” rule applies as federal common law due to the silence of ERISA on this issue. Under this rule, an insurer cannot enforce reimbursement unless the insured has been fully compensated. Since Kim was not fully compensated for her over $150k in damages, the plan cannot enforce reimbursement of the $40k she received from the liability insurers. The trial court judgment ordering payment of the $40k to the Youngbloods is affirmed.
American Medical Security v. Josephson (Oklahoma Civil Court of Appeals, 2000)
Josephson was injured on a flight and her health insurer, AMS, paid $18,517 in medical bills. Josephson sued the airline for negligence and settled for $125,000 before trial. AMS sought reimbursement under policy clauses.
The trial court granted AMS summary judgment on its reimbursement claim, but the appeals court reversed. Under Oklahoma’s “make whole” rule, an insurer cannot enforce reimbursement unless the insured has been fully compensated. Whether Josephson’s settlement fully compensated her is a disputed question of fact.
Tricare (Military Health Insurance) Subrogation
- The Federal Medical Care Recovery Act Allows the federal government to get money back when they have paid for medical care for people injured in certain situations.
- 38 U.S.C. § 1729 – If a veteran gets care at a Veterans Affairs (VA) facility for a medical issue unrelated to their military time, the VA may seek reimbursement.
Property Insurance Subrogation
The most common example is if you are in a car wreck caused by a negligent driver. The other driver’s insurance company takes forever to process your claim, so you have your car repaired under your policy. Your insurance company has a right to seek reimbursement from the negligent driver’s insurance company. You should make sure you get your deductible back whenever your insurance company pursues the claim.
Subrogation Process and Timeline
The best approach is to notify your insurance company (usually health insurance) as soon as possible. If you don’t, and the liability carrier is aware of a potential subrogation interest, any settlement checks will include that company on the payments. This can slow down getting the settlement checks disbursed.