Subrogation refers to giving someone a legal right to collect a debt owed to you. In the context of insurance, this means granting your insurance provider the legal right to sue or collect damages from someone whose actions have caused you injury or harm. In this article, we will get to learn about subrogation and critical illness insurance policy.
The critical illness insurance context
What does subrogation mean in a critical illness insurance policy? It means that the insured must permit the insurers to perform any act to enforce or secure criminal rights or remedies against a third party that caused the insured loss or injury.
The insurer may do this before or after it has paid the insured’s claim. By doing so, the insurance provider can recover the loss incurred in paying out the insured’s claim. The insurance company has the right to be indemnified for the bills they have paid or will pay to the insured.
In subrogation, the insurer steps into the shoes of the insured to search for the negligent party. The insured cannot prejudice the subrogation rights of the insurer in any manner. It becomes vital that the insured person at their own expense provide the insurers with the required assistance and co-operation to enforce these rights.
The rights of the insured
Whether or not a third party is responsible for the illness or injury, the insurer has to pay the insured’s medical bills as per the policy. It cannot delay the process or refuse coverage even if someone else is responsible for the injury the insured suffers.
Any recovery made from the third party first goes towards the amount the insurer has paid or will have to pay to the insured under their critical illness policy. Then, the cost and expenses the insurer incurs for the recovery process are accounted for. The insurer pays any remaining amount recovered to the insured.
Case study: Suing a firm for injury to the insured employee
LJ Engineering had always emphasized a safe working atmosphere. However, last year, electrical engineer Rajkamal Sharma sustained burns from the heat of the company’s milling machine. He was immediately rushed to a hospital where doctors treated him for his injuries. However, he had suffered third-degree burns over 60% of his body.
Since Rajkamal had a critical illness insurance policy, his wife approached the insurer to settle the claim. The insurer agreed to cover it under the critical illness insurance policy. Upon receiving the intimation and reviewing all the supported claim documents, the insurer paid a fixed amount to Rajkamal. It was sufficient to deal with the medical expenses. Additionally, since the accident resulted in disability, the insurance money acted as a shield for loss of income.
The insurance company then asked Rajkamal about the reason for the burn. When he reported that it was due to a fault in the machinery, the insurance company initiated an investigation. It verified Rajkamal’s assertion. Thus, the insurer filed a case against LJ Engineering to recover the amount paid to Rajkamal.
Rajkamal submitted all the necessary documents to prove the fault of the employer. He also gave a written statement to say he had followed all the safety regulations at the time of the accident. He extended his help whenever the insurer asked for it so that the insurer could recover the claim amount from LJ Engineering.