Personal Injury Damages; Collateral Benefits
Often times, injured parties are compensated by third parties, or collateral sources, including, but not limited to their personal insurer, disability payments, and workers compensation. These payments are received before the injured party recovers from the defendant in a lawsuit. In some jurisdictions, plaintiffs are allowed double recovery. In other jurisdictions, statutory law requires the court to deduct collateral benefits from jury awarded damages.
Generally, plaintiffs are allowed to effectively “double recover.”
However, many insurance policies include some sort of subrogation clause, which can be either passive or active. Subrogation clauses are an exception to statutory requirements denying “double recovery,” since the insurer basically advanced the awarded damages from the defendant to the injured party.
A passive subrogation clause, entitles insurers to whatever a jury awards the plaintiff up to the amount paid to the insured. For example, a plaintiff is hit by a car severely injured. The insurance company pays $100,000 in medical expenses. A jury awards the plaintiff $200,000 in total damages. Thus, the insurance company is entitled to the first $100,000 of the jury award. Insurers entitlement to jury awarded damages only if the injured party initiates a lawsuit on their own.
With an active subrogation clause, the insurer has the right to initiate a lawsuit on behalf of the plaintiff. This allows the insurer to recover from the defendant even if the plaintiff does not choose to. Active subrogation exists as some plaintiffs will not bring suit because they have already been satisfactorily paid out by the insurer.
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