Thanks for pointing that out, Tony. Sorry I wasn't more precise. By "damages," I was speaking of a settlement in general and not referring to its specific components like medical expenses, loss of income, pain and suffering, etc.

I'm not an attorney, but I understand that the only way the insurance company can sue to recover payments made to you is through the subrogation clause. That allows them to sue on your behalf, and then they reimburse themselves from whatever settlement you might get. But they usually don't do that. They wait for you to sue, and then they collect 100% of their expenses out of whatever proceeds you wind up with. They do not participate in the investigative and legal expenses up front. Nor do they allow any percentage of the legal fees or other costs to be deducted from their expected reimbursement.

How do I know this? I was seriously injured in an accident resulting primarily from the negligence and/or malfeasance of the employees of a city-owned business. A preliminary private investigation showed that there had been similar prior incidents which were hushed up. However, there was a law that limited the city's legal liability so much that even if I had been awarded the maximum settlement allowed, it still would not have been enough to cover my investigative and legal fees, reimburse the medical insurance company for 100% of their costs, and have anything at all left over. Our medical insurance people specifically told me that they would not participate in any of the legal costs, whether I eventually won or not, and that they would have to be repaid dollar-for-dollar from any proceeds even if that left me with nothing. On top of that, I had to sign that subrogation agreement right then or they could refuse to cover my medical expenses in the meantime.

So I wound up using all my sick leave and vacation (about 5 months worth) to keep my head above water financially, and just let the health insurance cover my medical expenses like any other illness. Because of the city's maximum liability limit and the insurance company's strict subrogation clause, I didn't even bother pursuing a lawsuit. No point in it. There wouldn't have been enough left over to even replace my sick and vacation banks.

When I pointed out that in cases like mine they wouldn't get any of their costs back at all, they said they accepted that as a chance they were willing to take. I was told that accident lawsuits often result in big settlements and they could get 100% of their money back without any of the risks and expenses of filing a suit themselves. Since that got them more money overall, they couldn't make any exceptions and risk setting a precedent that might limit this policy in the future. They acknowledged and accepted the fact that in some cases they wouldn't get any reimbursement at all, but that was overshadowed by winning big in many others. Just a business decision. Can't let an individual's losses get in the way.