Appellate: Civil; Health Care; Insurance; Personal Injury

Fortis Benefits v. Cantu

05-0791 - 6/29/2007

Justice Willett

Subrogation. "Made Whole" Doctrine Yields to Contractual Subrogation Clause.

This is a personal injury-auto accident case. After respondent, Cantu, sued multiple parties for severe injuries she sustained in an auto accident, her medial insurer, petitioner Fortis Benefits, intervened, claiming a subrogation right under the policy. The various defendants settled with Cantu, and Fortis looked only to Cantu for its recovery. The court of appeals upheld a trial court finding that because Cantu's medical expenses exceeded the settlement amount plus the benefits Fortis had paid, Fortis's subrogation claim was barred by the equitable "made whole" doctrine. 170 S.W.3d 755. Held: The equitable "made whole" doctrine-the rule that an insurer is not entitled to subrogation of medical benefits, unless the insured has been "made whole"- does not trump an insurer's contract-based subrogation right. Rather, the "made whole" doctrine must yield to Fortis's right to contractual subrogation under the plain terms of the insurance policy. Parties are thus free to negate the "made whole" doctrine contractually, and to do so before an event occurs that triggers medical benefits under the policy. Ortiz v. Great Southern Fire & Casualy Insurance Co, 597 SW.2d 342 (Tex. 1980) (holding that "An Insurer is not entitled to subrogation if the insured's loss is in excess of the amounts recovered from the insurer and the thried party causing the loss") would govern if Fortis were merely asserting a claim for equitable subrogation. but Fortis is not citing principles of equity to recover its money; its policy with Cantu conferred on Fortis two separate contractual rights of recovery, one styled "subrogation" and one styled "reimbursement."

Equity Yields to Contracts. Subrogation.

The three varieties of subrogation-equitable, contractual, and statutory- represent three separate and distinct rights that, while related, are independent of each other. Independent, however, does not mean co-equal. Generally equity follows the law, which requires equitable doctrines that conform to contractual and statutory mandates, not the other way around. Where a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy.

State Bar of Texas Civil Digest

July 25, 2007