If you are injured in an accident in Nevada, subrogation laws prevent you from getting a double financial recovery from 1) your insurance company and 2) the at-fault party. Therefore if your insurance company pays for all of your damages, you cannot then sue the negligent party that injured you for those same damages.
The advantage of Nevada subrogation laws is that your insurance company can pay you immediately after you get injured without you having to sue the at-fault party yourself. Then, once you are paid and moving on with your life, your insurance company can “step into your shoes” and seek reimbursement from the at-fault party without involving you.
Insurance companies commonly enforce their subrogation rights in the following situations:
- You carry Nevada collision insurance coverage and were hit by another driver;
- You carry Nevada uninsured motorist insurance coverage and were hit by a driver with no insurance; and
- You sustained an injury at work (“worker’s comp“)
However, Nevada law precludes the subrogation of Med-Pay coverage. Nevada law also prohibits insurance companies from subrogation if you have not been fully reimbursed for your damages.
In this article, our Nevada personal injury attorneys discuss:
- 1. Definition
- 2. Types
- 3. Applicability
- 4. Med-Pay?
- 5. Limitations
- 6. Health insurance
- 7. Statute of limitations
- Additional reading
1. Definition
Subrogation means the legal right of insurance companies to recover money they previously paid out for a loss by suing the third party responsible for that loss. In other words, subrogation is a way for an insurance company to try to get reimbursed by the outside people who caused the carrier to pay out in the first place.1
Example of subrogation: Jane gets into a car accident in Nevada with Marie, who was at fault. Jane’s insurance company pays Jane right away to repair the car. Since Marie was at fault, the insurance company then brings a legal action against Marie’s insurance company to get reimbursed for the cost of repairs.
Had Jane, in the above example, been uninsured, she would be allowed to seek damages from Marie’s insurance company. Since Jane is an insured party, subrogation gives her insurance company the right to “stand in the shoes” of Jane and seek the damages she is entitled to from the other party’s insurer.
Note that if Jane was at fault for the accident, then her insurance company would have no right to subrogation against Marie.
Also note that subrogation is not the same as “contributions” or “liens”: They are similar concepts that benefit insurance companies, but they do not permit the insurance company to “step into” your shoes and assume your rights.
The subrogation process allows insurance companies to be paid back by the person at fault.
2. Types
Subrogation allows insurance companies to “step into the shoes” of you as their policyholder and to assume your rights.
There are three types of subrogation:
- contractual
- statutory
- equitable
Contractual subrogation
Contractual subrogation arises from the written insurance contract between an insurance company and you as its policyholder. In these cases, you and the insurer spell out the unique terms of your subrogation agreement in the contract. Furthermore, the terms apply only to you and the named insurance company in the contract.
Common examples of contractual subrogation include collision insurance. Scroll down to section 3 for more information.
Statutory subrogation
Statutory subrogation arises out of current laws that grant subrogation rights to certain parties in specific situations. Therefore, it does not depend on the terms of a contract: It extends to all insurance companies and accident victims that fit the specifications in the statute.2
A common example of statutory subrogation is workers’ compensation. Scroll down to section 3 for more information.
Equitable subrogation
Equitable subrogation — also called judicial subrogation — arises from court cases where you and the insurer disagree on if and how subrogation is implemented. Here, the judge decides and looks to prior court precedents to determine how to resolve the case.3
In Nevada, equitable subrogation cases often involve mortgages.
3. Applicability
Subrogation frequently factors into the following insurance claims:
- collision coverage
- uninsured or underinsured motorist
- worker’s compensation
Automobile collision coverage
When you carry collision coverage, your insurance company will quickly pay to repair your vehicle’s property damage, no matter whose fault it is. However, if someone other than the policyholder is at fault, then the insurance company will seek reimbursement (“subrogate”) for the money it paid through the at-fault driver’s insurance company.
Even though your insurance company will never seek subrogation from you if you are at fault for the collision, they may increase your insurance premiums. As long as you are not at fault for the collision, the insurance company should not use the collision as an excuse to raise premiums.4
Uninsured or underinsured motorist cases
Uninsured motorist (UM) or underinsured motorist (UIM) coverage allows you to recover money from your insurance company in the event that an uninsured or underinsured driver involves you in a car crash. Then the right of subrogation gives your insurance company the ability to “step into your shoes” and sue the uninsured or underinsured at-fault motorist to reimburse it.5
Example: Kerry carries no car insurance. One night she loses control of her vehicle and crashes into Jeff. Since Jeff carries IM insurance, Jeff’s insurance company pays all his medical bills and car repair bills. Then the insurance company sues Kerry for all the money it paid to Jeff.
Note that it makes no difference to Jeff in the above example if her insurance company is unsuccessful in getting Kerry to pay. Jeff gets to keep all the money he received through his UM claim, irrespective of whether the insurance company ever gets reimbursed.
Workers’ compensation cases
All employers are required to carry worker’s compensation insurance to pay you in the event you get injured on the job. If someone other than you caused the accident, subrogation rights permit the insurance carrier to sue the at-fault person to reimburse it.
Note that you are permitted to sue the at-fault party in a civil lawsuit in addition to filing a workers comp claim. However, if you then win money in the civil lawsuit, the workers’ comp carrier may have reimbursement rights to recover a portion of those winnings:6
Example: Paul delivers pizza for a living. One evening Jackie crashes into him, and Paul sustains a broken leg. Paul files a workers’ comp claim, and he receives $10,000 to pay his medical bills. Paul also brings an injury claim against Jackie, who pays him a $20,000 settlement, part of which is meant to go towards his medical bills. Since accident victims are not allowed to receive “double recovery” for the same expenses, the employer’s workers’ comp carrier can try to get its $10,000 back from Paul.
Note that there are various ways that a workers’ comp carrier can go about recovering money, including joining the lawsuit or filing a lien. You are advised to retain an attorney to protect your interests and ensure that workers’ comp carriers are not taking back any more money than they are legally entitled to.
4. Med-Pay
Nevada prohibits subrogation of Med-Pay coverage.
Some auto insurance policies provide Med-Pay coverage (short for Medical Pay), which pays your medical bills following an accident. Nevada is one of the few states that prohibits subrogation of Med-Pay coverage:
The Nevada Supreme Court reasoned that it violates public policy to let a car insurance company collect Med-Pay premiums and then deny the benefit to you whenever you receive money for your injuries from other sources, such as a health insurance policy. The Court acknowledged that in many cases, your medical bills far exceed whatever money you may receive from Med-Pay and other sources.7
5. Limitations
The risk of subrogation is that the insurance company recoups too much money, leaving you with less than you are legally entitled to. The “Made Whole” doctrine and “Common Fund” doctrine help to offset these risks.
Made Whole Doctrine
The Made Whole doctrine prohibits insurance companies from subrogation until you have been fully reimbursed — “made whole” — for its losses.
Example: Helen’s car sustains $30,000 in damage after Jack crashes into her car. Helen’s car insurance carrier pays her $10,000 to repair the damage. Helen also receives $5,000 from Jack. Since Helen is still short of the money required to repair her car, her car insurance company cannot try to recover the money that Jack paid her.
Note that parties to a contract in Nevada can include a subrogation clause that excludes the Made Whole doctrine as a possible defense against subrogation. If Helen’s insurance company in the above example had such a clause, then it may be able to recover some money from Helen.8
Common Fund Doctrine
The Common Fund doctrine kicks in when you recover money from a personal injury lawsuit: The doctrine requires your insurance company to pay a portion of the monies it recovers through subrogation to your personal injury attorney.
The reasoning behind the Common Fund doctrine is that your insurance company should help pay for your policyholder’s personal injury attorney since the attorney did all the work in prosecuting the lawsuit and recovering damages.9
Subrogation bars double recoveries.
6. Health insurance
When your healthcare insurance carrier pays you money, it may have a “reimbursement” provision in its policy that allows it to get that money back. This policy kicks in if you receive money from the at-fault party meant to pay for your medical bills.10
Example: Norman is walking down the street when Ashley crashes into him, breaking his arm. Norman’s health insurance company pays $10,000 to cover all his medical bills. Ashley has bodily injury liability coverage, so her car insurance company pays Norman $10,000 in compensatory damages to cover all his medical bills. If Norman’s health insurance policy contained a reimbursement agreement, his health insurance company may recover its $10,000.
Had Ashley’s car insurance company paid Norman less than $10,000, then Norman’s health insurance company would only be able to recover the difference of $10,000 minus the amount Ashley paid.
Note that a right of reimbursement differs slightly from a right of subrogation because reimbursement does not permit your insurance company to “step into your shoes” and exercise your rights.
7. Statute of limitations
Insurance companies generally have two (2) years from the date of your injury to seek subrogation.11
Additional reading
For more in-depth information, refer to these scholarly articles:
- The Role of Subrogation by Operation of Law and Related Problems in the Insurance Field – Louisiana Law Review.
- Subrogation on Medical Expense Claims: The Double Recovery Myth and the Feasibility of Anti-Subrogation Laws – Dickinson Law Review.
- Profits in Subrogation: An Insurer’s Claim to Be More Than Indemnified – BYU Law Review.
- Insurance and Subrogation: When the Pie Isn’t Big Enough, Who Eats Last? – University of Chicago Law Review.
- Subrogation, Restitution, and Indemnity – Texas Law Review.
Legal References:
- NRS 17.275. Subrogation of insurer. A liability insurer, who by payment has discharged in full or in part the liability of a tortfeasor and has thereby discharged in full its obligation as insurer, is subrogated to the tortfeasor’s right of contribution to the extent of the amount it has paid in excess of the tortfeasor’s equitable share of the common liability. This provision does not limit or impair any right of subrogation arising from any other relationship. Re. automobile policies, see also NAC 686A.680 (“An insurer shall, upon claimant’s request, include first-party claimant’s deductible, if any, in subrogation demands. A subrogation recovery must be shared on proportionate basis with first-party claimant, unless deductible amount has been otherwise recovered. No deduction for expenses may be made from deductible recovery unless an outside attorney is retained to collect recovery. The deduction may then be for no more than pro-rata share of allocated loss adjustment expense.”). Smith v. Hutchins, (1977) 566 P.2d 1136 (“The plaintiff had no control over his insurance carrier’s exercise of subrogation rights under the policy. The plaintiff did not split his cause of action. If splitting occurred, it was the result of the unilateral action of his insurance company. In these circumstances, to rule that the plaintiff lost his right to proceed with his district court action to recover damages for personal injuries, is, in our view, plainly wrong.”). See also Safeco Ins. Co. v. Capri, (1985) 705 P.2d 659 (re. landlord/tenant subrogation). See also NRS 116B.570 (re. condo waiver of subrogation). See also Harvey’s Wagon Wheel, Inc. v. MacSween, (1980) 606 P.2d 1095 (re. anti-subrogation rule). See also Lumbermen’s Underwriting All. v. RCR Plumbing, Inc., (1998) 969 P.2d 301.
- See NRS 687B.145.
- See Wilmington Trust FSB v. A1 Concrete Cutting & Demolition, LLC (In re Fontainebleau Las Vegas Holdings, LLC), (2012) 128 Nev. 556, 289 P.3d 1199.
- See “What is Subrogation and why is it important?“, AMIS Insurance.
- See St. Paul Fire & Marine Ins. Co. v. Emplrs Ins. Co., (2006) 122 Nev. 991, 146 P.3d 258; NRS 687B.145.
- See Breen v. Caesars Palace, (1986) 102 Nev. 79, 715 P.2d 1070; Poremba v. Southern Nevada Paving, (2017) 388 P.3d 232; NRS 616C.215.
- Maxwell v. Allstate Ins. Co., (1986) 728 P.2d 812.
- Canfora v. Coast Hotels & Casino, Inc., (2005) 121 Nev. 771, 121 P.3d 599 (“Unless it is explicitly excluded, the make-whole doctrine operates as a default rule that is read into insurance contracts.”). See also Trustee of Hosp. Employees & Restaurant Employees Int’l Union Welfare Fund v. Kirby, (D. Nev. 1995) 890 F. Supp. 939.
- State Dep’t of Hum. Resources v. Elcano, (1990) 106 Nev. 449, 794 P.2d 725.
- Canfora v. Coast Hotels & Casino, supra.
- State Farm v. Wharton, (1972) 88 Nev. 183, 495 P.2d 359.