Subrogation in Brain Injury Claims NY
When you suffer a brain injury due to someone else’s negligence, recovering fair compensation becomes crucial for covering medical expenses, lost wages, and ongoing care. However, many injury victims discover that their settlement or verdict proceeds may be subject to subrogation claims from health insurance providers, Medicare, Medicaid, or ERISA plans. Understanding how subrogation works in New York can mean the difference between keeping your full settlement and losing a significant portion to lien holders.
New York has specific laws that limit subrogation rights in personal injury cases, but important exceptions exist. This page explains how subrogation affects brain injury claims, which types of liens you may face, and strategies for protecting your settlement proceeds.
Key Takeaways
- New York limits subrogation: NY General Obligations Law § 5-335 prohibits most private health insurers from pursuing subrogation claims against personal injury settlements.
- Major exceptions exist: Medicare, Medicaid, ERISA self-funded plans, and workers’ compensation retain full subrogation rights despite state law protections.
- Made whole doctrine applies: New York requires injured parties to be fully compensated before insurers can pursue subrogation recovery.
- Liens can be negotiated: Experienced attorneys can often reduce subrogation claims significantly through negotiation and legal challenges.
- Brain injury settlements are substantial: With average settlements ranging from $540,000 to over $1 million, subrogation claims can represent hundreds of thousands of dollars at stake.
What Is Subrogation in Brain Injury Claims?
Subrogation is a legal doctrine that allows an insurance company or health plan to recover money it paid for your medical treatment when a third party caused your injuries. According to Rosenbaum Taylor, subrogation allows an insurance company to recover funds paid for a claim by pursuing the party that caused the loss.
The insurer “stands in your shoes” and assumes your legal rights to seek compensation from the responsible party. When your brain injury case settles or results in a verdict, the insurer demands reimbursement from your recovery for the medical expenses it paid on your behalf.
In brain injury cases, subrogation can be particularly significant because treatment costs are often substantial. Emergency care, hospitalization, surgeries, rehabilitation, and ongoing therapy can easily exceed hundreds of thousands of dollars. When an insurance company pays these bills initially, it typically reserves the right to be reimbursed if you later recover compensation from the at-fault party.
The Standing in the Shoes Doctrine
The legal principle underlying subrogation is known as the “standing in the shoes” doctrine. The insurer obtains the same rights and remedies as the insured when seeking compensation for the loss. However, this right is limited—the insured must have a right to recover from the third party from which the insurer wants to recover. Without this foundational right, subrogation cannot proceed.
How Does Subrogation Work in New York?
In New York, the subrogation process typically unfolds as follows:
Initial Treatment: Your health insurance pays for medical treatment related to your brain injury. These payments may include emergency care, hospital stays, surgical procedures, rehabilitation services, and ongoing therapy.
Notification: Your insurance company receives notice that you’re pursuing a personal injury claim against a third party. Most insurance policies require you to notify the insurer of potential third-party recoveries.
Lien Notice: The insurer sends formal notice asserting its subrogation rights and the amount it claims you owe. This notice may come to you directly or to your attorney.
Settlement or Verdict: Your brain injury case resolves through settlement or trial verdict. The recovery includes compensation for medical expenses, among other damages.
Reimbursement Demand: The insurer demands reimbursement from your settlement proceeds before you receive your portion.
According to established New York law, most subrogation claims are subject to a three-year statute of limitations, beginning with the date of loss. This means insurers must assert their subrogation rights within three years of paying the medical expenses.
New York General Obligations Law § 5-335: Protection for Injury Victims
New York enacted General Obligations Law § 5-335 to protect personal injury victims from aggressive subrogation claims. According to the statute, no person entering into a settlement shall be subject to a subrogation claim or claim for reimbursement by an insurer, and an insurer shall have no lien or right of subrogation or reimbursement against any such settling person.
This law represents a significant protection for brain injury victims in New York. It prevents private health insurance companies from reducing your settlement proceeds through subrogation claims.
Legislative Purpose
New York lawmakers recognized that allowing insurers to claim large portions of personal injury settlements could leave victims without adequate compensation for their injuries. GOL § 5-335 ensures that settlement funds go to compensating the injured party rather than reimbursing insurance companies that were already paid premiums for coverage.
Important Exceptions to GOL § 5-335
While GOL § 5-335 provides broad protection, it contains three critical exceptions where subrogation rights remain enforceable:
| Exception Type | Legal Authority | Subrogation Rights |
|---|---|---|
| Additional First-Party Benefits (APIP) | Article 51 of NY Insurance Law | Full subrogation rights preserved |
| Medicare and Medicaid | Federal and state law | Full recovery rights; liens must be satisfied |
| Workers’ Compensation | NY Workers’ Compensation Law | Full subrogation rights for benefits paid |
| Self-Funded ERISA Plans | Federal ERISA law (preempts state law) | Full reimbursement rights per plan terms |
Types of Liens in Brain Injury Cases
Brain injury victims may encounter several types of liens or subrogation claims depending on which entities paid for their medical care. Understanding each type helps you plan for how settlement proceeds will be distributed.
Private Health Insurance
Protection Level: High (GOL § 5-335 applies)
Traditional private health insurance policies issued to individuals or through employers are generally prohibited from asserting subrogation claims against personal injury settlements in New York. If your insurer attempts to claim reimbursement, your attorney can cite GOL § 5-335 as a defense.
Exception: The policy terms matter. According to NY Department of Financial Services, HMO recoupment rights depend on contract terms for group health plans, with different standards applied to individual versus group coverage.
Self-Funded ERISA Plans
Protection Level: None (Federal law preempts state law)
Self-funded employer health plans governed by the Employee Retirement Income Security Act (ERISA) are exempt from New York’s anti-subrogation law. According to ERISA lien specialists, an ERISA plan must be self-funded to claim reimbursement from a settlement or award, and such plans preempt state law protections.
Legal Basis: The U.S. Supreme Court ruled in FMC v. Holliday, 498 U.S. 52 (1990), that self-funded plans are not subject to anti-subrogation laws and can enforce the plan’s right to be reimbursed out of third party action proceeds.
Medicare
Protection Level: None (Federal law mandates repayment)
Medicare has a statutory right to recover payments made for injury-related care when you receive a settlement or verdict. According to personal injury attorneys handling Medicare liens, a Medicare lien will attach to judgment or settlement proceeds awarded as compensation for the accident, and you must pay back Medicare before other distributions.
Important: Medicare has sophisticated systems for tracking personal injury settlements and enforcing its recovery rights. Failing to address a Medicare lien can result in significant penalties.
Medicaid
Protection Level: None (State law mandates recovery)
According to New York personal injury law firms, New York State law authorizes Medicaid agencies’ use of all reasonable measures to recover benefits paid from third parties determined to be liable for the injury victim’s medical expenses. Medicaid agencies can file a lien against personal injury recovery, restricting access to settlement proceeds until the lien is satisfied or resolved.
Good News: Both Medicaid and Medicare liens can be substantially reduced through negotiation. Depending on case specifics, Medicaid liens can sometimes be reduced or even eliminated.
Medicare and Medicaid Subrogation Rights
Medicare and Medicaid represent the most common types of liens in brain injury cases, particularly for elderly victims (Medicare) and lower-income individuals (Medicaid). Both programs have strong legal rights to recovery that supersede New York’s state law protections.
Medicare Secondary Payer Act
Federal law designates Medicare as a “secondary payer” when another entity is responsible for injury-related medical expenses. According to the Centers for Medicare & Medicaid Services, Section 1862(b) of the Social Security Act gives Medicare the right to recover payments it has made on behalf of private insurers that are the primary payers for Medicare beneficiaries.
Medicare’s recovery rights extend to all injury-related medical expenses paid before settlement. Under federal law, CMS may recover from a primary plan or any entity, including a beneficiary, provider, supplier, physician, attorney, state agency or private insurer that has received a primary payment. Your attorney must report your settlement to Medicare and work with the Medicare Secondary Payer Recovery Contractor (MSPRC) to resolve the lien.
Medicaid Estate Recovery Program
New York Medicaid has statutory authority under New York Social Services Law § 104-b to recover payments from personal injury settlements. According to the New York State Department of Health, federal law requires Medicaid recipients to cooperate in identifying any third party who may be liable to pay for care and services, and specific procedures exist for pursuing third party payments from personal injury lawsuits by means of SSL Section 104-b liens.
Medicaid is always the payor of last resort, meaning third-party health insurance is the primary payor when a Medicaid recipient has other coverage. However, Medicaid liens in New York can often be negotiated. Attorneys experienced in lien negotiation can frequently reduce Medicaid’s claim based on factors such as comparative negligence, attorney’s fees, and procurement costs.
Federal Programs Take Priority
Even though New York law protects you from private insurance subrogation, federal law requires repayment to Medicare and Medicaid. Attempting to avoid these liens or failing to notify these programs of your settlement can result in penalties, loss of benefits, or even criminal charges in extreme cases. Always work with an attorney experienced in handling government liens.
ERISA Self-Funded Health Plans: The Major Exception
Self-funded ERISA health plans represent the most significant exception to New York’s anti-subrogation protections. These employer-sponsored plans can assert full reimbursement rights against your brain injury settlement, often demanding 100% repayment of medical expenses paid.
Understanding ERISA Preemption
The Employee Retirement Income Security Act (ERISA) is a federal law that governs most employer-sponsored benefit plans. When an employer “self-funds” its health plan—meaning the employer pays claims directly rather than purchasing insurance from an insurance company—the plan is governed exclusively by federal ERISA law.
According to the U.S. Department of Labor, Section 514(a) of ERISA provides that provisions of ERISA shall supersede any and all State laws insofar as they “relate to” any employee benefit plan. The U.S. Supreme Court has said that a state law has a prohibited relation to an ERISA plan if it makes reference to, or has a connection with, employee benefit plans. This means that even though NY GOL § 5-335 protects you from other health insurers, it provides no protection against ERISA plan reimbursement claims.
How to Identify an ERISA Self-Funded Plan
Review your Summary Plan Description (SPD) or contact your employer’s benefits administrator. Key indicators include:
- Plan documents state the employer “self-funds” or “self-insures” the plan
- Claims are paid by your employer or a third-party administrator (TPA) rather than an insurance company
- Your insurance card may show a TPA’s name but no insurance company name
- The plan includes specific subrogation and reimbursement language
Negotiating ERISA Liens
While ERISA plans have strong legal rights, they can often be negotiated. Strategies include:
Attorney’s Fees and Costs: Many courts recognize that the plan should share in the attorney’s fees and costs required to obtain the recovery. If your attorney spent 33% of the recovery in fees and incurred significant litigation costs, the ERISA plan’s recovery may be reduced proportionally.
Made Whole Argument: Even under ERISA, some courts apply equitable principles requiring that you be “made whole” before the plan recovers. If your settlement doesn’t fully compensate you for all damages, the plan’s recovery may be limited.
Plan Language Review: The specific language in your plan documents matters enormously. An experienced attorney will carefully review whether the plan’s subrogation clause was properly drafted and whether it permits the recovery the plan claims.
The Made Whole Doctrine in New York
New York follows the “made whole” doctrine, which provides important protection for injury victims facing subrogation claims. According to subrogation law experts, the Made Whole Doctrine provides that an insurer has no right of subrogation against its insured when the insured’s actual loss exceeds the amount it has recovered from both the insurer and the wrongdoer.
How the Made Whole Doctrine Protects You
The doctrine recognizes that personal injury settlements rarely provide full compensation for all damages suffered. Brain injury victims face medical expenses, lost wages, pain and suffering, loss of enjoyment of life, and future care needs. Settlement amounts are often compromised due to liability disputes, insurance policy limits, and defendant’s ability to pay.
Under the made whole doctrine, you must be fully compensated for your total losses before an insurer can claim subrogation rights. If your actual damages exceed your recovery, the insurer’s claim may be reduced or eliminated.
Calculating Whether You’ve Been Made Whole
| Damage Category | Example Amount |
|---|---|
| Past Medical Expenses | $350,000 |
| Future Medical Expenses | $500,000 |
| Lost Wages (Past) | $120,000 |
| Lost Earning Capacity (Future) | $400,000 |
| Pain and Suffering | $300,000 |
| Total Damages | $1,670,000 |
| Settlement Received | $800,000 |
| Shortfall (Not Made Whole) | $870,000 |
In this example, the victim received only $800,000 for damages totaling $1,670,000. Under the made whole doctrine, the victim has not been fully compensated and may have grounds to resist or reduce subrogation claims.
Made Whole Doctrine Limitations
The made whole rule does not apply in every instance. According to New York subrogation law, it does not apply to salvage recoveries for property damage. The doctrine is applicable only to situations in which the insured makes a recovery and the subrogated insurer is seeking reimbursement from the insured and out of that recovery.
How Subrogation Affects Your Brain Injury Settlement
Subrogation claims can significantly reduce the net amount you receive from your brain injury settlement. Understanding the financial impact helps you make informed decisions about settlement negotiations.
Brain Injury Settlement Values in New York
According to 2025 legal data, traumatic brain injury settlements typically range from $50,000 to over $10 million, with amounts heavily dependent on injury severity and individual circumstances. The overall average settlement is $540,000 based on September 2025 data, while another analysis reports the average is $700,000 to $1.2 million.
Settlement ranges by severity include:
- Mild TBI: $5,000 to $150,000
- Moderate TBI: $85,000 to $500,000
- Severe TBI: $240,000 to over $1 million
In New York-specific cases, severe traumatic brain injury cases in the Bronx can result in multi-million dollar settlements, while moderate TBI cases typically settle in the mid-to-high six figures depending on the severity and impact on the victim’s life.
Sample Settlement Distribution with Subrogation
Consider a moderate brain injury case settling for $400,000:
- Gross Settlement: $400,000
- Medicare Lien: -$85,000 (leaves $315,000)
- Attorney’s Fees (33%): -$132,000 (leaves $183,000)
- Case Costs: -$8,000 (leaves $175,000)
- Net to Client: $175,000
In this scenario, the Medicare lien reduced the client’s net recovery by $85,000. However, with skilled negotiation, that Medicare lien might be reduced to $55,000, increasing the client’s net recovery to $205,000.
Negotiating and Reducing Subrogation Claims
Experienced personal injury attorneys employ multiple strategies to reduce subrogation claims and maximize client recoveries. According to Rosenbaum Personal Injury Lawyers, a skilled New York City accident lawyer negotiates with health insurance providers to lower the payoff of subrogation claims, though insurers are not required to accept reduced amounts.
Attorney’s Fees Reduction
Argue that the lien holder should bear a proportionate share of attorney’s fees and costs incurred to obtain the recovery. This “common fund” doctrine recognizes that the lien holder benefits from the attorney’s work and should contribute to the expenses.
Example: On a $300,000 settlement with $100,000 in liens, attorney’s fees of 33% ($99,000) might be deducted before calculating the lien, reducing it to $67,000.
Made Whole Defense
Demonstrate that the settlement does not fully compensate the victim for all damages. Prepare a detailed damages analysis showing total losses exceed the recovery, supporting a reduction or elimination of the subrogation claim.
Example: Document $800,000 in total damages against a $400,000 settlement, arguing the client received only 50% compensation and should not pay the full lien.
Procurement Cost Reduction
Assert that the lien holder should share in the costs of procuring the recovery, including litigation expenses, expert witness fees, filing costs, and deposition expenses.
Example: With $25,000 in litigation costs, argue the lien should be reduced by a proportionate amount, recognizing that without these expenses, no recovery would exist.
Disputed Liability Reduction
When liability is contested or comparative negligence applies, argue that the lien should be reduced proportionally. If the victim was found 30% at fault, the lien might be reduced by 30%.
Example: In a case with comparative negligence of 25%, a $80,000 lien might be negotiated down to $60,000.
Injury-Related Treatment Challenge
Review the lien for medical expenses unrelated to the injury. Insurers sometimes include treatment for pre-existing conditions or unrelated health issues. Challenge any expenses that were not caused by the incident.
Example: Identify and exclude $15,000 in diabetes treatment costs from a brain injury lien.
Administrative Appeals
Medicare and Medicaid liens can be challenged through formal administrative appeals if they include incorrect amounts or unrelated treatment. This process requires detailed documentation and adherence to strict deadlines.
Example: Successfully challenge $20,000 in Medicaid charges for treatment that occurred before the injury date.
Attorney’s Role in Protecting Your Settlement
An experienced brain injury attorney plays a crucial role in identifying, managing, and negotiating subrogation claims. These claims require specialized knowledge of federal and state law, insurance regulations, and negotiation strategies.
Early Lien Identification
Your attorney should identify all potential liens early in your case. This includes:
- Requesting copies of all health insurance policies and plan documents
- Determining whether health coverage is fully insured or self-funded (ERISA)
- Notifying Medicare and Medicaid of the pending claim
- Requesting itemized statements of all medical expenses paid
- Identifying all healthcare providers who may assert treatment liens
Lien Resolution Before Settlement
Competent attorneys resolve lien issues before finalizing settlement agreements. This prevents situations where you agree to a settlement amount only to discover that liens consume most of your recovery. Your attorney should obtain written lien reduction agreements before you sign a release.
Protection from Double Recovery
Your attorney ensures you don’t pay liens twice. Sometimes insurance companies demand reimbursement for medical expenses that were separately compensated in the settlement. Careful allocation of settlement proceeds protects you from this double recovery.
Common Mistakes to Avoid
Brain injury victims often make costly errors when dealing with subrogation claims. Avoiding these mistakes can save tens of thousands of dollars or more.
Failing to Notify Your Health Insurer: Most health insurance policies require you to notify the insurer when you suffer an injury caused by a third party. Failing to provide notice can result in claim denials, coverage termination, or demands for immediate repayment of all medical expenses.
Spending Settlement Proceeds Before Resolving Liens: Some victims receive settlement checks and immediately spend the funds without resolving outstanding liens. This leaves them unable to pay valid subrogation claims, potentially resulting in lawsuits, wage garnishment, or damaged credit.
Ignoring Medicare or Medicaid Notices: Federal programs take their recovery rights seriously. Ignoring notices from Medicare or Medicaid can result in withheld future benefits, penalties, and even federal charges in extreme cases. Always respond to government lien notices promptly.
Accepting ERISA Plan’s First Demand: ERISA self-funded plans often demand 100% reimbursement of medical expenses paid. Many injury victims assume they must pay the full amount. However, ERISA liens can frequently be negotiated based on attorney’s fees, costs, and the made whole doctrine.
Not Using an Attorney for Lien Negotiation: Attempting to negotiate subrogation claims without legal representation typically results in paying more than necessary. Attorneys experienced in lien negotiation understand the legal arguments, leverage points, and negotiation strategies that can reduce claims significantly.
Providing Incomplete Information to Your Attorney: Your attorney needs complete information about all health coverage, medical providers, and treatment received. Failing to disclose a health plan or provider can result in unexpected lien claims surfacing after settlement.
When to Consult an Attorney
Consult an experienced brain injury attorney as soon as possible after your injury. Early involvement allows your attorney to:
- Identify all potential subrogation claims before they become problematic
- Preserve your rights under New York law
- Begin negotiating liens early in the case
- Structure your case strategy to minimize subrogation impact
- Ensure proper documentation of all damages to support made whole arguments
- Coordinate with healthcare providers to manage treatment liens
Waiting until settlement negotiations are underway to address subrogation issues limits your attorney’s options and may result in accepting a lower net recovery than necessary.
Never Settle Without Addressing Liens
Settling your brain injury case without resolving outstanding liens can be financially devastating. You may find yourself legally obligated to pay liens from your portion of the settlement, drastically reducing your net recovery. Always ensure your attorney has addressed all liens before you accept any settlement offer.
Frequently Asked Questions About Subrogation in Brain Injury Claims
Can my private health insurance company take money from my brain injury settlement in New York?
Generally, no. New York General Obligations Law § 5-335 prohibits most private health insurers from pursuing subrogation claims against personal injury settlements. However, self-funded ERISA plans are exempt from this protection due to federal law preemption. Check with an attorney to determine whether your specific health plan is protected by GOL § 5-335 or qualifies as an ERISA self-funded plan.
Do I have to pay back Medicare if I get a brain injury settlement?
Yes. Medicare has federal statutory rights to recover payments made for injury-related medical treatment when you receive a settlement or verdict. The Medicare Secondary Payer Act requires that Medicare be reimbursed from your settlement. However, Medicare liens can often be negotiated and reduced, particularly when attorney’s fees and costs are factored in. Always work with an attorney experienced in Medicare lien resolution.
What is the made whole doctrine and how does it protect me?
The made whole doctrine requires that you be fully compensated for all your damages before an insurer can pursue subrogation. If your total losses exceed your settlement amount, you have not been “made whole” and may be able to reduce or eliminate subrogation claims. This doctrine recognizes that settlements rarely provide complete compensation for serious injuries like brain trauma.
Can I negotiate to reduce a Medicaid lien on my settlement?
Yes. New York Medicaid liens can often be negotiated and reduced. According to legal experts, both Medicaid and Medicare liens can be substantially reduced depending on the specifics of the case. Factors that support reduction include attorney’s fees, procurement costs, comparative negligence, and whether you were made whole. An experienced attorney can negotiate with the Medicaid program to reduce the lien amount.
How do I know if I have an ERISA self-funded health plan?
Review your Summary Plan Description (SPD) or contact your employer’s benefits administrator. Key indicators include plan documents stating the employer “self-funds” or “self-insures” the plan, claims paid by your employer or a third-party administrator rather than an insurance company, and specific subrogation language in the plan documents. If you’re unsure, an attorney can review your plan documents to determine whether ERISA preemption applies.
What happens if I ignore a subrogation claim?
Ignoring valid subrogation claims can have serious consequences. For private insurers with enforceable rights (like ERISA plans), you may face lawsuits, judgment liens, wage garnishment, or damaged credit. For Medicare or Medicaid, consequences can include withheld future benefits, penalties, and in extreme cases, federal charges. Always address subrogation claims promptly with assistance from an attorney.
Can my attorney’s fees be deducted before calculating the subrogation amount?
This depends on the type of lien and applicable law. Many courts recognize the “common fund” doctrine, which holds that lien holders should share proportionally in the attorney’s fees and costs required to obtain the recovery. Your attorney can argue for reducing the lien based on these principles. The success of this argument varies depending on whether the lien is from Medicare, Medicaid, an ERISA plan, or another source.
How long does an insurance company have to assert a subrogation claim in New York?
According to New York law, most subrogation claims are subject to a three-year statute of limitations, beginning with the date of loss. This means insurers must assert their subrogation rights within three years of paying the medical expenses. However, different statutes of limitations may apply to Medicare, Medicaid, and ERISA plans. Consult with an attorney to understand the specific deadlines applicable to your case.
Protect Your Brain Injury Settlement from Subrogation Claims
Subrogation claims can significantly reduce your brain injury settlement proceeds if not properly managed. New York law provides important protections against private health insurance subrogation, but critical exceptions exist for Medicare, Medicaid, and ERISA self-funded plans.
Understanding your rights under NY General Obligations Law § 5-335, the made whole doctrine, and federal healthcare programs ensures you receive maximum compensation for your injuries. Experienced attorneys can negotiate substantial reductions in subrogation claims through strategic arguments about attorney’s fees, procurement costs, and whether you’ve been fully compensated.
Given the complexity of subrogation law and the substantial amounts at stake in brain injury cases, working with an attorney knowledgeable about New York subrogation law is essential for protecting your financial recovery.
Get Help Protecting Your Brain Injury Settlement
Don’t let subrogation claims reduce your brain injury settlement more than necessary. Our experienced New York brain injury attorneys understand how to identify, challenge, and negotiate subrogation liens to maximize your net recovery.
