First-Dollar Risk Allocated to the Insured Is Not Subject to the Made Whole Doctrine

August 24, 2020
William L. Doerler - The Subrogation Strategist

Pursuant to the equitable made whole doctrine, where there are limited funds available, an insurer cannot pursue subrogation until the insured has been made whole – i.e., fully compensated – for its injuries. In City of Asbury Park v. Star Ins. Co., No. A-20, 083371, 2020 N.J. LEXIS 746, the Supreme Court of New Jersey (Supreme Court) addressed the question of whether the equitable made whole doctrine applies to first-dollar risk an insured takes on, such as a deductible or self-insured retention (SIR). More specifically, the Supreme Court considered whether the insured, here the City of Asbury Park, was entitled to recover all its $400,000 SIR before the insurer, Star Insurance Company (Insurer) could assert its subrogation rights. The court held that the made whole doctrine does not apply to first-dollar risk allocated to the insured.

Mr. Doerler may be contacted at doerlerw@whiteandwilliams.com



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