Q. Usually after an automobile accident the medical bills are initially paid by the victim's health insurance. A letter then comes from the health insurance company stating that there are subrogation rights under the policy. Clients often ask whether they have to repay the health insurance company out of the settlement they receive from the negligent person's insurance company.

 A. Most health insurance policies have provisions which require repayment of any medical benefits paid as the result of an accident if there is a recovery from a negligent party or that party's insurance company. Without this provision the health insurance carrier has no right to be repaid out of the proceeds of any recovery from a negligent party.

            Where there is a health insurance provision allowing reimbursement, full repayment is rarely allowed under the law. This is true irrespective of what the policy says. The reason for this lies in fairness principles which have been made law in Iowa.

            For example, if the injured victim does not make full recovery of their damages due to a reduction for comparative fault or if there is inadequate insurance to cover the full damages, then the recovery by the health insurance company should be reduced. Additionally, costs incurred in making the recovery in the form of attorney fees and case preparation costs can also reduce the recovery by the health insurance carrier.

            The rationale for allowing reimbursement to the health insurance carrier, if there is a policy provision requiring this, is to avoid a double recovery on the part of the injured victim. Since, in most cases, part of the recovery by the victim will be for medical bills incurred, that portion of the recovery should be repaid to the entity that originally paid those bills.

            There are numerous factors which determine the amount that the health insurance carrier should be reimbursed out of any settlement, the amount is usually negotiated between your attorney and the health insurance carrier. If they cannot agree then the court will determine the amount.