Law Blog

The “Made Whole Doctrine” and Settling for Less Than 3rd Party Limits

The Washington Supreme Court recently decided Group Health Cooperative v. Coon, a highly contested case regarding the applicability of the Made Whole Doctrine.

First, a brief overview of the facts. Mr. Coon developed a serious fungal infection after surgery. While it was unclear what the exact cause of the infection was, the hospital where the surgery was performed settled with Mr. Coon. Importantly, the settlement was for an amount of money that was less than the hospital’s policy limits – that is, the settlement was less than the maximum amount the hospital’s insurance would have to pay under their policy. Group Health, Mr. Coon’s insurer, argued that it was entitled to subrogation from the settlement. Specifically, Group Health argued that Mr. Coon had been made whole, while he argued that he had not. The trial court granted summary judgment in favor of Group Health, and appeals were taken.

Under the Made Whole Doctrine, an insurer is entitled to subrogation only when the insured is “more than fully compensated” for their injuries and has “actually received excess compensation” for their injuries (see Daniels v. State Farm). According to Sherry v. Financial Indemnity Co., being made whole is not limited to coverage available under insurance policies. So if your injuries are so substantial that all insurance coverage available isn’t enough to cover all of your damages, then the insurance company isn’t entitled to subrogation.

In this case, Mr. Coon’s injury had resulted in amputation of his leg. He settled his case against the hospital for a little over 2 million dollars, less than the hospital’s policy limits. Group Health argued that settlement for less than the hospital’s policy limits created a presumption that Mr. Coon had been “made whole.” In reversing the trial court’s summary judgment decision, the Supreme Court stated “[s]ettlement for less than the tortfeasor’s policy limits does not create a presumption of full compensation. Instead, acceptance of a settlement is simply some evidence that the inured has been fully compensated.” It is important to note that the court did not reach a determination as to whether or not Mr. Coon had been made whole. Rather, it said that a court could not say that he had been made whole as a matter of law just because he settled for less than the hospital’s limits. The case will go back to the trial court to determine if he has, in fact, been made whole under the circumstances.

This case is important because it adds to a long list of cases and law that protect people who have been hurt in Washington. People settle for all sorts of reasons – litigation is stressful, expensive, and uncertain. Oftentimes people want to focus on getting better and not on their legal case. This decision will help injury victims make a decision that is right for them. Your health, not your insurance company, should be your first priority.