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COURT ERRED IN REFUSING TO APPLY THE “MADE WHOLE” RULE IN THIS SUBROGATION ACTION.

The Fourth Department determined Supreme Court erred when it refused to apply the “made whole” rule in this subrogation action. After settling for the full amount of the policy, respondent insurer sought the full amount paid to plaintiff by another insurer. The matter was sent back because it was unclear whether the settlement made plaintiff whole:

Plaintiff contends that, under the “made whole” rule, respondent has no right of subrogation because plaintiff’s damages exceed the amount of the settlement. By way of background, the “made whole” rule provides that, if “the sources of recovery ultimately available are inadequate to fully compensate the insured for its losses, then the insurer—who has been paid by the insured to assume the risk of loss—has no right to share in the proceeds of the insured’s recovery from the tortfeasor” … . “In other words, the insurer may seek subrogation against only those funds and assets that remain after the insured has been compensated. This designation of priority interests . . . assures that the injured party’s claim against the tortfeasor takes precedence over the subrogation rights of the insurer” … . Although we agree with plaintiff that the court erred in refusing to apply that rule, on this record, it is unclear whether the settlement made plaintiff whole. Grinage v Durawa, 2016 NY Slip Op 07429, 4th Dept 11-10-16

INSURANCE LAW (COURT ERRED IN REFUSING TO APPLY THE “MADE WHOLE” RULE IN THIS SUBROGATION ACTION)/MADE WHOLE RULE (INSURANCE LAW, COURT ERRED IN REFUSING TO APPLY THE “MADE WHOLE” RULE IN THIS SUBROGATION ACTION)/SUBROGATION (INSURANCE LAW, COURT ERRED IN REFUSING TO APPLY THE “MADE WHOLE” RULE IN THIS SUBROGATION ACTION)

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