SB 487: A Major Shift in Subrogation Rights for Public Entities

California Senate Bill 487, signed into law in 2025, brings significant changes to the way employers and insurers can recover costs in workers’ compensation cases involving peace officers. The new law, heavily opposed by the employer community, places strict limits on subrogation recovery and eliminates a long-standing credit right that has been a cornerstone of cost control in public safety claims.

These changes will have a substantial impact on counties, cities, and other public entities that handle workers’ compensation claims for law enforcement officers.

Two Key Changes Under SB 487

1. Recovery Cap on Third-Party Claims
   In most serious injury cases, lien recovery will now be capped at one-third of the third-party’s insurance policy limit.
   
   For example: if a deputy is injured by a negligent driver with a $100,000 policy, the employer’s maximum recovery will be about $33,000, even if the employer or insurer has far exceeded that amount in paid benefits.
   
   
2. Elimination of Credit Rights Against Future Benefits
   Under current law, when an injured peace officer receives a large civil settlement, the employer can petition for a credit to offset future benefits, preventing double recovery.
   
   SB 487 eliminates that right entirely. Employers will now be required to continue paying all future benefits, medical, indemnity, and otherwise, regardless of how much the peace officer receives in settlement of a related civil action.

Why It Matters

For public employers, the financial implications are significant. The combination of capped recovery and the loss of credit rights means that many claims will remain open longer, reserves will rise, and total claim costs will increase. The traditional subrogation strategy used by counties and cities will need to be reevaluated.

Employers should act quickly to assess potential exposure:

• Review all open peace officer claims with a third-party component.
• Reevaluate recovery expectations and adjust reserves accordingly.
• Train claims staff as the old subrogation playbook will no longer apply.
• Reconsider your subrogation approach now that the cost-benefit equation has fundamentally changed.

How MS&A Can Help

MS&A’s Subrogation Team is closely monitoring the implementation of SB 487 and advising clients on how to prepare for these major changes before they take effect on January 1, 2026. Our team can assist with:

• Case reviews to identify claims affected by the new law
• Strategic planning for recovery and reserve management
• Training sessions for claims professionals on the new legal landscape

If you have questions about how SB 487 will impact your organization, or need guidance on subrogation strategy going forward, contact MS&A’s Subrogation Team today.

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