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The Statute of Limitations on Insurance Subrogation

A statute of limitations is a law that specifies a time period for you to bring a lawsuit on a particular claim.

Also referred to as a "statute of repose," a statute of limitations cuts off your right to file a lawsuit on an affected claim after it expires. In insurance subrogation cases, the statute of limitations that applies to the underlying claim will govern the subrogation claim.

How Insurance Subrogation Works

Subrogation is the process by which an insurance company takes over your claims. For example, if you're a landlord and your tenant negligently burns down your rental property, the insurance company will pay for the damage under your policy and pursue a recovery from the tenant. These types of subrogations will be based upon your negligence claim and will, therefore, be governed by the statute of limitations applicable to personal injury or property damage cases in your state. You can generally find this in your state's legal code under a heading like "limitation of actions."

Medical Insurance Subrogation

Another form of subrogation occurs when Medicare, Medicaid or your medical insurance company asserts a claim on your recovery in a personal injury case.

While not every private company subrogates, Medicare and Medicaid have an automatic right of recovery against your settlement or verdict proceeds whenever you're injured through someone else's negligence and the program or plan pays a portion of your medical bills. Medicare's statute of limitations is six years and three months, which begins to run at the time Medicare becomes aware that you have received a settlement. Medicaid liens and private insurance company liens will be governed by individual state law.

When the Statute Begins to Run

With insurance subrogation cases based upon the negligence of another party, the statute of limitations to file a lawsuit against that defendant begins to run at the time of your injury or property damage. The fact that the insurance company didn't pay out on the claim until weeks after the event will not extend the statute.

When an insurance company is subrogating to your recovery in an accident or injury case, their claim is actually pointed at you, not the defendant that caused your injury. The claim is based upon the subrogating company's right to receive a portion of your recovery, and so the statute generally begins to run when you receive those proceeds or when the subrogating company is made aware that you have received them.

Factors that Extend the Statute

While the expiration of a statute of limitations creates an absolute bar to a lawsuit, several factors can pause its running. If the plaintiff is a minor or is mentally incompetent, the clock on the statute generally won't start ticking until the plaintiff reaches the age of majority or is restored to competency.

Some states also pause the statute when the defendant is deployed with the military, hiding from service of process or has fled the state. As with statutes of limitations themselves, you can find the factors that extend them in your state's laws on limitation of actions.