Why the Majority Approach to Subrogation Between the Competing Interests of Insurers and Insureds in Settlements with Third-Party Tortfeasors is Unfair.

By: Dalton Battin, RBFL Student Editor

For years, a majority of courts have followed the “make-whole” subrogation approach between the competing interests of health insurers and insureds in settlements with third-party tortfeasors. However, this approach is not equitable and allows for inadequate policy limits on other forms of insurance. Now, you may be asking what this even means, so let me give an example. Let’s say, Sally is driving home from work late at night when her car is struck by Chad’s car. As a result, not only is Sally’s car totaled but she also suffered various severe injuries that required emergency surgery to save her life and will require various follow-up procedures.  Fortunately, Sally has medical insurance that coverages the cost of her emergency procedures, which happen to exceed $500,000. Because Chad was not only speeding but driving while intoxicated it is obviously that he is liable for any damages that Sally has suffered. Unfortunately, however, Chad is judgment proof, meaning that he does not have any means to compensate Sally for her damages, and his auto insurance has a policy limit of $300,000 per accident, the bare minimum that is required by the state Chad lives in. Although Sally damages easily and undisputedly exceed over $1,000,000, as a result of the circumstances, she decides to settle any civil claims for liability that she has against Chad for $300,000, his policy limit.

Now, in a perfect world, Sally would collect enough money from Chad and his insurers to make her whole again, or in other words, enough money to fully compensate her for all of her damages, including any medical expenses as well as pain and suffering that resulted from the accident. In Sally’s case, it would require well over $1,000,000 to make her whole again. Once Sally has collected for her damages against Chad, her health insurer would have a subrogation right to the money that it expended for her medical expenses as a result of Chad’s wrongdoing, in other words, Sally’s insurer would have the right to be paid back for any medical expenses that it covered which Chad was actually liable for.

However, when the settlement is inadequate to fully compensate victim for their injuries and pay their medical expenses, as in Sally’s case, the courts have differed as to who should be compensated from the settlement first. Should the victim, who has suffered a life altering experience and more likely than not needs the settlement proceeds in order to sustain an adequate standard of living after the accident, or the victim’s health insurer, who only covered the medical expenses for which the tortfeasor is really liable. Most courts have held that the victim must be made-whole before the insurer has any right to subrogation, which means that the insurer, in a case like Sally’s, would not be able to recover any of the medical expenses that it expended. While this made be the equitable result vis-à-vis the victim and her health insurer, it is not the equitable result vis-à-vis the victim’s health insurer and the tortfeasor’s auto insurance.

Essentially, the make-whole again approach allows tortfeasors’ auto insurers to subsidize their inadequate policy limits through the victims’ health insurance policies. Now, you may be asking, why should you care? You should care for two main reasons. For one, following this approach results in higher health insurance premiums, which are already relatively high and leaves many Americans uninsured, whose cost should be passed onto drivers and auto insurance policies, not hundreds of thousands of people who may not drive a day in their lives. Further, allowing for these inadequate policy limits in certain lines of insurance on the strength of health insurance subsidizing them puts uninsured victims in an extremely vulnerable position, as the settlements would be not able to cover the medical expenses that an insured would owe to a hospital in which case they would receive absolutely not compensate for their other damages. Therefore, the make-whole approach is unfair and should be abandoned because it raises health insurance premiums for every American and often leaves the uninsured tort victim in a precarious predicament.







  1. Kent Miller, Subrogation: Principles and Practice Pointers, Colo. Law. R., Jan. 1991, 11,11 ; § 222:5.Definition and Nature of Subrogation, 16 Couch on Ins. § 222:5.

Kenneth S. Abraham & Daniel Schwarcz, Insurance Law and Regulation, Cases and Materials (West Academic, 7th ed. 2020).

Andrea L. Parry, Subrogation in Pennsylvania-Competing Interests of Insurers and Insureds in Settlements with Third-Party Tortfeasors, 56 Temp. L.Q. 667, 669 (1983).

Todd L. Fulks, The “Made-Whole” Doctrine: Its Effect on Tennessee Tort Litigation and Insurance Subrogation Rights, 32 U. Mem. L. Rev. 87, 97 (2001).


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