Subrogation
Settlements-Health

“Made whole” Doctrine does not bar insurer’s contractual subrogation claim.
Fortis benefits v. Cantu, No. 05-0791 (Tex. June 29, 2007) unpublished

The Texas Supreme Court ruled an insurer is entitled to contractual subrogation following the insured’s settlement of tort claims, despite the “made-whole” doctrine. That doctrine had to yield to the insurer’s right to contractual subrogation under the plain terms of the insurance policy.

Vanessa Cantu sued several parties for injuries she sustained in a car wreck. Fortis benefits, Cantu’s health insurer, intervened and asserted contractual subrogation and reimbursement rights to recoup from Cantu’s tort recovery the amount of medical benefits it had paid under the policy.

Cantu settled her claims with the defendants for $1.445 million. Cantu and Fortis disputed what portion of the settlement proceeds, if any, should go to Fortis, and Cantu moved for summary judgment, arguing she had not been “made whole” by the settlement and that the equitable made-whole doctrine barred Fortis’ contractual claims of subrogation and reimbursement.

Under the made-whole doctrine, an insurer is not entitled to subrogation if the insured’s loss is in excess of the amounts recovered from the insurer and the third party causing the loss. Fortis argued the policy’s provisions for subrogation and reimbursement were not displaced by the doctrine. The trial court disagreed, however, and granted summary judgment in favor of Cantu. The appeals court affirmed, and Fortis appealed.

The Supreme Court reversed the appeals court’s judgment and remanded the case. The Supreme Court found the equitable made whole doctrine is inapplicable when the parties’ agreed contract provides a clear and specific right of subrogation.

Texas Insurance Law & Litigation Alert
August 31, 2007