Made Whole Doctrine
Definition
Legal principle requiring the insured to be fully compensated before the insurer can pursue subrogation. The insured must be 'made whole' (fully indemnified) before the insurer can recover from third parties.
Example
An insured suffers $100,000 in damages but the policy only covers $80,000. The insurer pays the $80,000 policy limit. Under the made whole doctrine, the insurer cannot subrogate until the insured recovers the remaining $20,000 from the at-fault party, ensuring the insured is fully compensated first.
In Practice
The made whole doctrine varies by state and applies primarily to property and health insurance. Some states have statutory exceptions. Policy language may attempt to contract around the doctrine, but courts often favor the insured. The doctrine protects policyholders from insurers recovering subrogation funds before the insured's full loss is covered.