Decision Deals Blow to "Make Whole" Doctrine

Last fall, the Ohio Supreme Court issued a decision upholding a clause in an agreement allowing an insurance company to be reimbursed for the medical expenses it paid on an insured’s behalf from the insured’s third party tort recovery, even though the insured had not yet been fully compensated. This decision will have a significant impact on the way insurance claims are litigated.

The decision issued in N. Buckeye Edn. Council Group Health Benefits Plan vs. Lawson essentially held that principles of contract law, and not equity, control the issue of subrogation. In the decision, Chief Justice Moyer specifically found that the “principles of equitable subrogation, including the make whole doctrine, do not override clear and unambiguous contractual provisions.” For many years, attorneys representing persons injured in personal injury accidents utilized the “make whole” doctrine to provide more net dollars to their injured clients. The “make whole” doctrine generally provides that absent an agreement to the contrary, an insurance company may not enforce a right of subrogation until the insured has been fully compensated for his or her injuries, that is, been made whole.

In the Lawson case, the Ohio Supreme Court found that the insurance provider, as a matter of law, was entitled to the monies it had expended towards the payment of the plaintiff’s medical bills out of any proceeds the plaintiff obtained in a settlement, even though the amount left over for the plaintiff was clearly insufficient to cover the plaintiff’s medical bills and pain and suffering.

This decision is very harmful to working people who feel that they have purchased insurance, paid for insurance, and then discover when there is an accident that the medical benefits providers will be entitled to receive their contributions from any settlements paid back first. The end result is that it allows insurance companies, by virtue of certain subrogation contract clauses, to abolish the “make whole” doctrine.

The decision, taken overall, is a blow to working people and is just another indication of why it is important that counsel is obtained in the negotiation and resolution of personal injury actions.

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