Understanding the Make-Whole Doctrine: A Key Legal Principle
Definition & Meaning
The make-whole doctrine is a principle in insurance law that ensures an insured party is fully compensated for their losses before an insurer can claim any part of a settlement. In situations where an insured individual recovers damages from a third party, the insurer may attempt to reclaim funds through subrogation. However, this doctrine protects the insured by stipulating that the insurer can only recover amounts exceeding the total compensation for the loss suffered. This principle varies slightly across different states, but its core concept remains consistent.
Legal Use & context
The make-whole doctrine is primarily used in civil law, particularly in insurance claims and subrogation cases. It is relevant in situations where an insured person has received compensation from a third party and the insurer seeks reimbursement. Users can often manage these situations themselves with the appropriate legal forms, such as those available through US Legal Forms, which are drafted by qualified attorneys.
Real-world examples
Here are a couple of examples of abatement:
Example 1: If a person suffers damage to their property and receives $10,000 from a third party for repairs, but their insurance company has paid $12,000 for the same repairs, the insurer cannot claim any of the $10,000 until the insured has received full compensation for their loss.
(Hypothetical example) Example 2: A driver involved in an accident receives $5,000 from the at-fault driver's insurance. If their own insurance had already compensated them $7,000 for damages, the make-whole doctrine prevents the insurer from claiming any part of the $5,000 recovery.