What is subrogation?
Subrogation literally refers to the act of one person or party standing in the place of another person or party. Subrogation in the insurance sector occurs when the insurance carrier takes on the financial burden of the insured as the result of an injury or accident (motor vehicle accident or slip and fall) payment and seeks repayment from the at-fault party. In this case, please have your lawyer contact our Manager, Communication and Administration, R. Eva Cole.
Our objective is to recover the LTD benefits paid to you from the income loss recovered by you from the third party. Also to minimize our liability to pay LTD benefits to you in the future through an offset of the future income loss recovered by you from the third party. Subrogation gives us certain rights to the conduct and proceeds of your claim against the third party, which rights are explained below.
The "subrogation provision" states:
12.(1)Where a long-term disability benefit is payable for an injury or illness for which any third party is, or may be, legally liable, the Trustees will be subrogated to all rights and remedies of the employee against the third party, to recover damages in respect of the injury or death, and may maintain an action in the name of such employee against any person against whom such action lies, and any amount recovered by the Trustees shall be applied to
a) payment of the costs actually incurred in respect of the action, and reimbursement to the Trustees of any disability benefits paid, and the balance, if any shall be paid to the employee whose rights were subrogated.
b) any settlement or release does not bar the rights of the Trustees under subsection (1) unless the Trustees have concurred therein.
c) an employee will fully cooperate with the Trustees in order to allow the Trustees to do what is reasonably necessary to assert the Trustees' rights to subrogation.
- We are entitled to control your action against the third party, including hiring our own lawyer to conduct the claim ? see Conduct of Your Claim Section below.
- You are required to cooperate with our office in the conduct of the claim against the third party.
- Our consent is required in order for a settlement of the claim to be binding.
- When your claim is settled, or a verdict on your claim is obtained from the court, and proceeds are paid to you pursuant to that settlement or court verdict, we are entitled to be reimbursed from the income loss portion of those proceeds, the LTD benefits paid to you to that time, plus interest at the rate paid in the settlement or court verdict, net of the recovery (i.e. legal) costs.
- We are entitled to reduce any LTD payable to you in the future to the extent of the lost future income or loss of earnings capacity recovered by you in the settlement (or court verdict) of the claim, net of recovery costs.
The Conduct of Your Claim
Traditionally, rather than conduct your accident claim yourself, we suggest engaging your own lawyer to conduct the third party accident claim. Your lawyer would report to us on the progress of the claim from time to time, and reimbursing our office from the settlement proceeds. However, this permission for you to conduct the claim comes with three express conditions:
1. That our prior consent will be obtained to any proposed settlement;
2. That before any settlement funds are paid to you, including funds pursuant to a court order, an agreement is reached between you and our office as to the portion of the money that is to be reimbursed to us. Or, if such agreement cannot be reached, that sufficient funds are set aside to deal with our reimbursement claim, with the remaining funds going to you;
3. That the third party and its insurer are advised, and acknowledge, that our consent to any settlement of your claim is required in order for the settlement to be binding, and that any payment of the claim, whether by settlement or by order of the court, is to be made jointly to you and our office, or to your lawyer in trust for you and our office.
The Settlement Process
As indicated, one of the conditions of you conducting the accident claim is that our consent is to be obtained for any proposed settlement. Here is the process usually followed:
- When it is time to settle, your lawyer will contact us or our legal counsel, to advise of the proposed settlement, usually by providing a copy of the proposed settlement demand.
- We will review the settlement proposal, focusing primarily on the income loss portion of the proposed settlement. In cases where less than 100% of the income loss is being claimed, requests may be made for further information to explain why.
We will advise you of the reimbursement amount due before you settle your claim. If you do not agree with this amount, a settlement may still proceed. However, in this circumstance, we require that the amount in dispute be held in trust until the issue is resolved. Any additional settlement amount can be paid to you without delay.
- Once consent to a proposed settlement is given, or a consent to a range of proposed settlements is given, you are then free to negotiate the settlement with the third party within the authority provided by the consent. When the claim is settled, your lawyer will repay us from the settlement proceeds (or keep that amount in trust if the amount of the reimbursement is in dispute), and pay the rest to you, after deducting their legal fees, which are your responsiblity. Confirmation of consent will be given to the third party, on request.
Please see Subrogation FAQ's, or should you have additional questions, please contact our Manager, Communication and Administration, R. Eva Cole.