Further Examination of the Made Whole Doctrine

What is the Made Whole Doctrine

The Made Whole Doctrine is a defense to subrogation and/or recovery rights, which require that before subrogation and/or recovery is permitted the insured must be made whole for all of their damages. Basically, the insured will not receive “priority status” until the victim is made whole of their damages, injuries, etc. 

Ohio courts have continually enforced the Made Whole Doctrine. Under the Made Whole Doctrine, a health benefit provider’s subrogation interest will not be given priority where doing so will result in less than a full recovery to the insured. Clermont County Transp. Improvement Dist. v. Tekulve, 2014-Ohio-1581, 2014 Ohio App. LEXIS 1530, 2014 WL 1486773 (Ohio Ct. App., Clermont County Apr. 14, 2014) (“[W]here an insured has not interfered with an insurer’s subrogation rights, the insurer may neither be reimbursed for payments made to the insured nor seek set off from the limits of its coverage until the insured has been fully compensated (i.e., “made whole”) for his injuries.”)

An insurance policy may avoid the application of the Made Whole Doctrine

An insurance policy may avoid the application of the Made Whole Doctrine only by including language that is clear in establishing both a priority to the funds recovered and a right to any full or partial recovery. N. Buckeye Educ. Council Group Health Benefits Plan v. Lawson, 103 Ohio St. 3d 188, 2004-Ohio-4886, 814 N.E.2d 1210, 2004 Ohio LEXIS 2158, 34 Employee Benefits Cas. (BNA) 2071 (Ohio 2004). According to the Ohio Supreme Court, a reimbursement agreement between an insured and a health-benefits provider clearly and unambiguously avoids the made-whole doctrine if the agreement establishes:

      1. That the insurer has a right to a full or partial recovery of amounts paid by it on the insured’s behalf; and
      2. That the insurer will be accorded priority over the insured as to any funds recovered. 

However, recent Ohio legislation, enacted at Revised Code Section 2323.44, has affected subrogation rights in Ohio. Under the new med pay subrogation law, which we’ve have previously discussed, a health insurer’s right of subrogation will be diminished in the same proportion that the insured’s claim is diminished if the insured is unable to collect full value resulting from limited liability insurance or any other cause. Revised Code 2323.44 does not bar a subrogated insurer from recovering only after the insured has been “made whole.”

The Made Whole Doctrine will impact health insurance carriers and insurers

In effect, this new law provides that if a claimant receives less than the full value of his or her claim, a subrogated entity’s interest will be reduced by the same proportional amount, irrespective of contractual language. The statute will impact both health insurance carriers and insurers offering medical payments coverage under automobile and/or homeowner’s policies. Contact one of our subrogation attorneys to discuss the Made Whole Doctrine in your state.