Group Health Insurance

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Subrogation and group health insurance

Does your employer offer corporate health insurance? Has the term ‘subrogation’ come up in the context of this employee insurance scheme? If you would like to understand what it means and how it affects you, this post is for you.

What is subrogation?

Have you ever been accidentally injured, visited the emergency room for treatment, and submitted your medical bills to your group health insurance provider? Usually, the insurer will pay for your medical expenses depending on the terms of the policy. Thereafter, however, the insurer may contact you to discuss the injuries or how they occurred. They do this to determine if someone else can be held accountable, fully or partially, for the injuries. They will then try to recover their costs from this person/s. Simply put, this is the concept of subrogation.

With subrogation, the insurance company is stating that they want to be reimbursed for medical expenditure that arises due to the fault of a third-party. The insurer can take over the legal rights of the policyholder against the third-party to recover money it paid while settling a claim. The insurer can directly proceed against the third-party and recover expenses.

The rights of the insured

Once an insurance company pays a claim, the policyholder waives off their rights to sue the third party for the recovery of losses or damages. However, the insurance company can sue the third party.

Subrogation and group health insurance

Under the Act of Subrogation, insurers can benefit only to the extent of the payment made. This means that if the insurers recover more money than they paid, they can only retain what they paid and have to refund the rest to the policyholder. However, if the recovery amount is less than claim they paid, the insurer cannot realise the remaining from the insured. So, the insured has nothing to lose or gain, unless the third-party pays damages exceeding the claim amount.

Case study: Insurer sues for damages

W M Realty Co. was building independent villas near Sohna Road, Gurgaon. They hired Silicon Engineering Co., which sent one of its civil engineers, Rakesh Shah, to the construction site. While Rakesh was walking at the site, a gust of wind lifted the chain-link construction fence off the ground and dropped it on him. People on the site rushed him to a nearby hospital where the doctors performed an emergency operation.

Luckily, Silicon Engineering Co., had group health insurance. Rakesh approached the insurer to settle the medical expenses, which were around Rs 1.5 lakh. Although the insurer settled the claim, it found out that W M Realty had failed to provide a safe working environment for its contractual employees. For instance, the firm had not placed sufficient sandbags at the foot of the fence. W M Realty refused to compensate Rakesh. However, his insurer filed a case against W M Realty to recover the claim amount it had paid Rakesh. The insurer was able to file a case because it had the right of subrogation in the insurance.

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