Made Whole Doctrine Subrogation Under Ohio Injury Law

If someone is injured in Ohio and the injury is not their fault, they will typically seek legal recourse to recover compensation for their damages caused by the responsible party. In some cases, however, the circumstances can result in injury victims having limited options to recover the full amount of their damages. There may be serious injuries, large medical bills, and significant lost wages or loss of earning capacity. On the other hand, the at-fault party may have not had insurance at all, not enough personal assets to cover the damages, or had an insurance policy limit that was far less than the amount of damages suffered by the injured victim. The worst part about these types of cases is the victim’s health insurance company may have paid a significant portion of the hospital bills and have a large subrogation interest. In Ohio, the made whole subrogation doctrine is a principle of law that uses equitable principles to balance out the recovery in these situations. Health insurance subrogation under this doctrine will not receive priority status until the victim is “made whole” for their injuries.

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Does The Language of the Insurance Policy Supercede R.C. 2323.44?

While historically, insurance companies could contract around this principle and include specific language in their policies giving them priority interests in this situation, a recent statute was passed in Ohio that prevented this loophole. Ohio Revised Code Section 2323.44 became effective Ohio law in March of 2016 and changed the rules completely with regard to disproportionate recovery. Under 2323.44(B)(1), Ohio law states that “if less than the full value of the tort action is recovered by reason of the collectability of the full value of the claim for injury, death, or loss to person resulting from limited liability insurance or any other cause, the subrogee’s or other person’s or entity’s claim shall be diminished in the same proportion as the injured party’s interest is diminished.” Furthermore, the statute makes it clear that this principle applies “​​notwithstanding any contract or statutory provision to the contrary.” Ultimately, the statute stands for the legal principle that a third party’s subrogation claim will be proportionally reduced if the full value of an injury claim is not able to be recovered.

What Subrogation Interest Does R.C. 2323.44 Apply To?

Ohio courts have been quite restrictive in who R.C. 2323.44 applies to. For example, the 2nd District Court of Appeals in Masters Ex Rel. FM v. Dept. of Medicaid, explained that subrogees under the law only include:

(a) An insurance company doing business in this state; 

(b) A self-funded plan providing health, sickness, or disability benefits; 

(c) A health care provider-sponsored organization; 

(d) Any person or entity that claims a right of subrogation by contract or common law.

The doctrine does not apply, however, to Medicaid. The court in Masters narrowed the application of the doctrine and held “the Department does not fit within the definition of a self-funded entity in R.C. 2323.44(A)(5)(b)” and a key reason why in the opinion is the intersection with the separate Ohio laws found in R.C. 5160.37. For those other subrogated interests in Ohio that meet the definitions, their recovery must be proportionally reduced if the full value of the injury claim cannot be recovered. The doctrine also only applies in cases where the evidence shows that insured was not able to make a full recovery. Some facts can serve as evidence of the opposite, such as settling for less than the policy limits as exemplified by Allen v. Binckett and Burris v. State Farm Fire & Cas. Co. These cases explain that where an insured signs a release and settles its case for less than policy limits, Ohio courts can view this as some evidence tending to prove the insured was fully compensated for its damages.

The History of Ohio’s Made Whole Doctrine

Prior to the legislative change in 2016, Ohio still recognized the “made whole” doctrine although it was able to be contracted around with contrary language within the insurance policy. Several cases such as Newcomb v. Cincinnati Ins. Co., Peterson v. Ohio Farmers Ins. Co., and Barnes v. Indep. Auto. Dealers Assn. of California Health & Welfare, recognized the so-called “general equitable principle of insurance law” that “absent an agreement to the contrary, an insurance company may not enforce a right to subrogation until the insured has been fully compensated for her injuries, that is, has been made whole.” While this remained an equitable principle, it used to be overridden by “a clear and unambiguous agreement between an insured and an insurer that the insurer shall have priority to any recovery from the tortfeasor” as outlined in the case of Ervin v. Garner and N. Buckeye Edn. Council Group Health Benefits Plan v. Lawson. This all changed when the Ohio legislature passed R.C. 2323.44 which specifically applies notwithstanding an insurance contract to the contrary.

About the Authors: Sawan & Sawan is a multi-generational, family owned law firm practicing law in the areas of car accidents, truck accidents, insurance claims, personal injury, and more. Our firm practices law in Ohio (Toledo, Columbus), Georgia, and Michigan.

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Dennis P. Sawan

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Christopher A. Sawan


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