If you’ve been injured in an accident in British Columbia and received benefits through your long-term disability (LTD) policy or extended health coverage, you may be surprised to learn that your insurer could seek repayment for any amount paid out to you from your personal injury settlement. This legal process is known as subrogation.
What Is Subrogation?
Subrogation is a legal principle that allows an insurance company that has paid benefits to an insured person to recover the amount it paid from a third party who is responsible for the causing the loss.
In the personal injury context, this usually arises when a person is injured due to someone else’s negligence, for example in a slip-and-fall accident or from a dog attack, and that person receives benefits under an LTD policy, an extended health plan, or other group benefits. If the injured person later receives a settlement or judgment from the at-fault party, the insurer may be entitled to recover some or all of what it paid out.
Subrogation and LTD Benefits in BC
Most long-term disability policies in British Columbia include a subrogation clause or what is often called a “reimbursement clause” or “repayment provision”. These clauses typically require the insured person to repay the insurer from any settlement or judgment they receive for the same loss.
For example, suppose you suffer a traumatic injury in a car accident and are unable to work. You apply for and receive monthly LTD benefits from your group insurance plan. If you later receive a lump sum settlement from or the liable party, your LTD insurer may demand repayment of the benefits it paid you, to the extent the settlement overlaps with your loss of income.
Subrogation and Extended Health Benefits
Extended health plans, such as those offered through group benefits often obtained through employment, often cover medical expenses like physiotherapy, massage therapy, medications, and medical devices. When these costs result from a personal injury, the insurer may also assert a subrogated interest just as they would with LTD benefits.
However, extended health plans often have less aggressive subrogation practices compared to LTD insurers, and in some cases, the subrogation clauses are vague or unenforceable. Some group benefit plans may even choose not to pursue reimbursement at all, especially if the amount is relatively small.
Is Subrogation Always Enforceable in BC?
In British Columbia, courts will scrutinize subrogation clauses to determine if they are valid and enforceable. The key issues include:
- Clear language in the insurance policy giving the insurer the right of subrogation or reimbursement.
- Whether the insured has been fully indemnified (i.e., made whole) by the settlement or judgment.
- Whether the insurer actively participated in the litigation or settlement process.
- If there are any bases to exclude a claim of subrogation (i.e., legislative exclusions, etc.)
Depending on the facts of a case, if a personal injury settlement does not fully compensate the injured party, due to policy limits, liability disputes, or contributory negligence, the insurer may not be entitled to full repayment.
What Injured Claimants in BC Should Know
In many cases, LTD and health insurers will agree to reduce their claim by a portion of your legal fees. Some will go further and accept a compromise amount that reflects the realities of litigation risk and reduced settlement value. Working with an experienced personal injury lawyer ensures that these negotiations are handled effectively and that your rights are protected.
If you’ve received LTD or extended health benefits and are pursuing a personal injury claim, you should:
- Review your insurance policies to understand any repayment obligations.
- Inform your lawyer of all benefits you’ve received.
- Ensure any settlement reflects the insurer’s subrogated interest, especially if they assert a lien or demand repayment.
- Negotiate with the insurer for a fair reduction or waiver of their subrogation claim.
- Don’t assume you must repay everything, the amount may be negotiable depending on your case.
Experienced Negligence Lawyers
Subrogation is a complex area of law that intersects contract, tort, and insurance principles. In British Columbia, LTD and extended health insurers may have a right to reimbursement from your personal injury settlement, but that right is not absolute. Understanding your obligations, asserting your rights, and negotiating wisely can ensure you keep more of your settlement and avoid unpleasant surprises.
If you’ve been injured due to the negligence of another party and are receiving benefits, our personal injury and insurance lawyers can help you navigate subrogation issues and maximize your recovery. Contact us today for a free consultation.