Q:       What is subrogation, exactly?

A:        Subrogation is an old legal doctrine that has to do with substituting one person (or entity) for another in the settling of a debt or claim. The purpose of subrogation is to make sure that a debt is paid by the person (or entity) who should ultimately be responsible for it. Subrogation also gives certain rights to the substituted person (or entity) who takes responsibility for the debt or claim.

Q:       I’ve seen the term “subrogation” in my insurance policy. How does subrogation apply to an insurance claim?

A:        Subrogation frequently arises in the context of insurance claims. When you buy auto insurance, the insurance company gives you a policy that says what will be covered in case you are involved in an accident that causes personal injury or property damage.  Let’s say, however, that you are involved in an accident that was not in any way your fault and was not caused by your negligence. Instead, the damage was caused entirely by the other driver. In such a case, your insurance carrier can collect full reimbursement from the insurance carrier of the driver who was at fault. In this way, subrogation has to do with equity, and in this instance, it allows your insurance carrier to “step into your shoes” and, on your behalf, collect reimbursement against the other driver, who was the actual negligent party.

Q:       What if there is more than one person who caused the damage?

A:        In a civil “tort” lawsuit, a “plaintiff” brings legal action “for damages” against one or more persons (or entities) whose action has caused suffering or harm. Subrogation regularly arises in tort lawsuits involving multiple defendants stemming from a single incident or transaction. Torts involve any civil wrong against a person or property. They can range from automobile accidents, product liability claims and medical malpractice situations to claims of defamation, nuisance or even emotional distress. 

            Frequently, a plaintiff may be able to collect an entire judgment against only one defendant under the rules of “joint and several liability.” This means that, even if several people shared responsibility for the harm, any one of them can be held liable for the entire amount of the damages. Subrogation may allow a single defendant who got stuck paying the whole amount of the damages to seek reimbursement from the other defendants.

Q:       If I am injured in an accident that was someone else’s fault, can my doctor collect from that person to cover my medical bills?

A:        Yes. It’s possible for medical providers and insurers who have given you medical care and treatment or paid your medical bills to pursue their subrogation rights so that the person who caused your accident will be held responsible for those bills.

Q:       How does subrogation work in business situations?

A:        Business contracts, including construction contracts, often contain subrogation clauses and provisions. It is common for project owners to place subrogation clauses in agreements for work involving contractors, subcontractors, architects, builders or other professionals. In such a situation, the subrogation clause can shift risk and potentially place reimbursement burdens on your shoulders, which you would not otherwise expect. For this reason, you should always review and analyze such clauses carefully and consider consulting with a qualified attorney before signing.

            Contracts may also include “waiver of subrogation clauses.” If your contract includes a waiver clause and you waive your subrogation rights in a contract, you won’t be able to seek reimbursement from the other party to the contract, even if that party is at fault.

Q:       How can I protect my subrogation rights?

A:        The doctrine of subrogation is widely considered to be a highly technical area of law, and often is applied to very complex situations. Do not miss an opportunity to obtain reimbursement through subrogation, and always read the terms of a subrogation clause carefully. When in doubt, contact an attorney with knowledge in this convoluted area of the law so you can protect and defend your rights.

This “Law You Can Use” consumer information column was provided by the Ohio State Bar Association. It was prepared by Andrew L. Smith, a senior associate attorney in the Cincinnati office of Smith, Rolfes & Skavdahl Company, LPA. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       I am overwhelmed by credit card and medical debt. Will my wages be garnished unless I file for bankruptcy?

A:        Wage garnishment is a possibility. If you are employed and earn more than minimum wage, a creditor who has obtained a judgment against you can file a wage garnishment. This will take up to 25 percent of your take-home pay, which will be paid to your creditor rather than to you until the judgment is satisfied. It may be possible, however, to avoid both garnishment and bankruptcy.

Q:       How can I avoid a wage garnishment?

A:        There are two options that may give you some breathing room in your budget while avoiding wage garnishment.

            The first option is to enter into trusteeship in the municipal court where the creditor has obtained the judgment against you. The trusteeship requires you to pay to the court the amount that would have been taken by a wage garnishment. This sum would be divided among all of your listed creditors (not including your mortgage and/or car payment), rather than being paid to only the one creditor threatening garnishment.

            The second option is to enter into a debt scheduling agreement with a nonprofit consumer credit counseling agency. In Ohio, Apprisen (www.apprisen.com) is one such nonprofit organization with a number of offices across the state. If you choose this option, a credit counselor would contact your creditors to arrange monthly payments and may be able to convince your creditors to keep interest from accumulating. Creditors are not required to participate in this program, but many of the larger creditors such as banks, hospitals and utilities do participate. Nonprofit credit counseling services provide free initial comprehensive and confidential financial counseling sessions and charge modest fees if a consumer enters into a debt repayment program.

Q:       I am retired and my only income comes from Social Security and PERS from my years as a public employee. If I do not pay my creditors, will I be forced to file a bankruptcy?
A:        No. Your creditors cannot take these funds because they are considered exempt from attachment. (An “attachment” is a court order instructing your bank to pay money from your account to the court.) If your only sources of income are Social Security and PERS (or SERS), you may be considered “uncollectible” or “judgment proof.” If an attachment of your bank account is filed, however, you must request a hearing to show the court the source of your income and that it is exempt from attachment. If you fail to do this, the creditor may be able to keep the money that is attached.

Q:       How can I decide whether I need to file a bankruptcy?
A:        Consult with a bankruptcy attorney or nonprofit consumer credit counseling agency. An attorney or credit counselor will review your specific situation and help you decide the best course of action.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Akron attorney Terry D. Zimmerman of Kaffen & Zimmerman Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       What is a judgment debtor exam?

A:        A judgment debtor exam is a court-ordered meeting between you and a creditor held after that creditor already has a judgment against you. At this post-trial meeting, the creditor can ask you a wide variety of questions about your assets (i.e., cars, homes, job, bank accounts, etc.) and you must take an oath and give truthful answers. If the case against you is not over and there is no judgment, the creditor is not entitled to a judgment debtor exam, but be aware that the creditor may have other ways of getting relevant information.

Q:       Do I have to attend the judgment debtor exam?

A:        Yes! Although it may seem pointless, especially if you know you have no assets or ability to pay the judgment, you must attend the judgment debtor exam. Because it is a court-ordered proceeding, it is wise to show up, even if you don’t have much to tell the creditor. If you cannot make the scheduled exam, try to contact the creditor’s lawyer to reschedule. If that doesn’t work, contact the court and ask for a continuance.

Q:       What happens if I don’t attend the exam?

A:        If you fail to show up, you may be summoned to appear before the judge and explain your reason for missing the scheduled exam. Even worse, the judge might issue a “capias” letter (similar to a warrant) for your arrest. This means that if you are stopped by the police for any reason in the future, the warrant will show up in the police department’s system and you could be arrested and detained until the exam is completed. You could also be fined and held in contempt of court for failing to appear.

Q:       What happens at the exam?

A:        Usually, you will arrive at the courthouse at the scheduled time and meet briefly with the creditor’s attorney. After this introduction, you will take an oath. In most instances, you will then go to a private conference room where the examination will be conducted. At this private meeting, the creditor’s attorney can ask you about anything related to your ability to pay the judgment. This includes questions about your bank accounts, job, house, cars, jewelry, tools, insurance policies, retirement savings and any other personal property. Keep in mind, if the judgment against you is solely for a personal debt, the creditor usually cannot ask you about business assets.

Q:       Do I have to answer every question?

A:        Yes, and you must abide by your oath to tell the truth during the exam. Just as you wouldn’t lie on the witness stand, you shouldn’t lie at the debtor exam. If you are caught lying, you could be charged with criminal perjury. If you refuse to answer a question, you could be held in contempt. If you think that a question is improper, you can ask the magistrate to rule on the appropriateness of the question before you answer. Keep in mind, however, that the magistrate cannot give you legal advice.

Q:       I am worried about my privacy. Will other people hear my answers?

A:        No. Generally only you, the creditor/creditor’s attorney, and possibly a magistrate or judge will hear your answers. Also, your answers will not be part of the public record and the creditor is still subject to privacy laws regarding how your information may be used. Because this is a private meeting where your answers will not be shared with the public, don’t be afraid to give account information.

Q:       Is there anything else I need to know?

A:        As long as you are truthful with the creditor’s attorney, it should be a fairly harmless process. You may even wish to use the judgment debtor exam meeting time to work out a payment plan with the creditor so you don’t have to worry about an untimely or unexpected wage or bank garnishment. Most creditors are willing to work out a payment plan, and the worst they can do is say no.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Columbus attorney Mark A. Glumac of Wiles, Boyle, Burkholder, & Bringardner Co., L.P.A. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.