What is the 'Made Whole' Doctrine?

California abides by the “Made Whole” doctrine when it comes to personal injury lawsuits – but, what is this doctrine, who does it affect, and how does it work?

The Made Whole Doctrine in California is the principle that an insured party injured in an accident must be “made whole” before their insurer can recover compensation. In other words: you must be fully compensated for your injuries before your insurance company can claim part of your settlement as reimbursement for coverage.

Here is an example to explain this: 

You are injured in a slip-and-fall accident and need emergency medical transportation. The bill for your ambulance ride is $5,000, and you file a claim with your insurance company to cover this expense. Later, you hire a personal injury lawyer and win a $50,000 lawsuit for all of your medical expenses. Because you were “made whole” for medical expenses, your insurance company bills you $5,000 in reimbursement for the ambulance ride.

The reimbursement insurance companies can claim is called subrogation, and it can only happen if you are “made whole” by a settlement. If you do receive enough compensation, your insurance company might reach out to you for payment or file a claim with the negligent party’s insurance provider to seek compensation.

Subrogation Laws

The made whole doctrine deals with the legal concept of subrogation, which for these purposes simply means:

• the right of an insurance company

• to recover money from the insured

• for money it paid out on a claim

You may be wondering, “Why is this doctrine important to my personal injury or property damage case?

When damages have occurred, whether through personal injury to a victim or property damage, the person injured can sue the responsible party or parties through a lawsuit. If the insurance company has paid out funds during this time (like for hospital bills), the insurance company will also wish to be compensated by the responsible party.

This means that both the victim and the insurer are going after the same pool of money from the person at fault. When the “pool” is not deep enough to fully compensate the victim that suffered the injury, this doctrine steps in to make sure that overeager insurance companies do not come in and take the money needed by the victim.

Can the doctrine be overruled by a contract with my insurance company?

Unless there is a contractual agreement that specifically says otherwise, the made whole doctrine will apply to your case. However, in many if not most insurance contracts, there is language that attempts to overrule this doctrine.

This typically occurs in a contract that states something to the effect of “the insurer is entitled to all rights of recovery that the insured person to whom payment was made has against another.” Translating that into plain English, it means:

• any amount of money the insurance company pays out on a claim

• can be recovered from

• any amount the injured person recovers

•  from the responsible party

In many states, including here in California, the right to contract around the “made whole” doctrine is well accepted and is usually contained in the very long form contract you sign when you first get insurance coverage. Despite the fact that you may have never known the provision existed, it can still be enforced against you in many cases.

Why do companies care about subrogation?

Insurance companies want to get paid back by the responsible party for any costs they have already paid, if possible. They also want to make sure:

• they do not pay out a large sum of money to the injured victim

• who is then compensated fully through a lawsuit

• but then keeps the money without paying back the insurance company.

This makes sense but must be carefully monitored to protect the rights of accident victims.

How an Attorney Can Help

Insurance companies can be relentless and may pursue subrogation even if it’s obvious that you were not made whole by a settlement or need to fight for enough compensation to be considered made whole. Contact one of our experienced workers’ compensation lawyers to discuss your case today.

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Cole, Fisher, Cole, O’Keefe + Mahoney is Central California’s leading workers’ compensation and social security disability law firm. With over 30 years of successful experience, we are committed to securing maximum benefits for our clients in the Fresno, California area. Schedule a free consultation today.