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What is Subrogation?

Posted by: euser
January 11, 2007
Topic: Minnesota No-Fault Law

Generally, the term "subrogation" denotes a principle where an insurer that has paid benefits under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy. Under the No-Fault Act, the right of subrogation is typically not allowed to the insurance company. However, Minn. Stat. § 65B.53, Subd. 2 and 3 allows subrogation when:

(1) the accident and injuries occurred in another state,

(2) where the claim is based on an intentional tort,

(3) where the claim is based on strict or statutory liability, and

(4) where the claim is based on negligence other than negligence arising out of the maintenance, use, or operation of a motor vehicle.

The main purpose behind the subrogation statutes is to prevent double recoveries. The statutes provide that the right of subrogation "exists only to the extent that basic economic loss benefits are paid or payable and only to the extent that recovery on the claim absent subrogation would produce a duplication of benefits or reimbursement of the same loss." This means that the insurance company would be reimbursed for economic loss benefits paid to the insured if the insured also obtains an award from a third-party defendant in a tort action.

Subrogation issues also arise between insurance companies regarding priority of payment. Minn. Stat. § 65B.47, Subd. 6 states that "where a reparation obligor pays basic economic loss benefits which another reparation obligor is obligated to pay under the priority provided in this section, the reparation obligor that pays is subrogated to all rights of the person to whom benefits are paid."