Opinion ID: 198862
Heading Depth: 3
Heading Rank: 1

Heading: The Make Whole Doctrine

Text: 21 The Harrises further contend that the district court erred in declining to adopt the so-called make whole doctrine as federal common law under ERISA. Under the make whole doctrine, an insurer-subrogee may receive reimbursement for benefits previously paid to the insured only if the insured has obtained a settlement or judgment that fully compensates for the total losses sustained by the insured; otherwise, the insured would not owe the insurer any reimbursement, or at most would owe a pro rata share of its partial tort recovery. See Cagle v. Bruner, 112 F.3d 1510, 1520 (11th Cir. 1997) (citing 16 Couch on Insurance § 61:64 (2d ed. 1983)). The Harrises argue that since the tort settlement compensated them for only two-thirds of their actual losses in the motorcycle accident, they either owe HPHC nothing or at most $68,582.86. 22 Their contention presents yet another issue of first impression in this circuit. Some courts of appeals have held that an ERISA plan, which affords the plan administrator an unqualified right to reimbursement for all ERISA benefits paid to a plan participant, unambiguously precludes importation of the common-law make whole doctrine. See Waller, 120 F.3d at 140 (ERISA plan need not provide for first priority reimbursement); Sunbeam-Oster Co. v. Whitehurst, 102 F.3d 1368, 1374-76 (5th Cir. 1996) (unconditional plan provision implies reimbursement to the full extent of benefits previously paid, regardless of [the] source); cf. Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1299 (7th Cir. 1993) (finding no abuse of discretion in plan administrator's interpretation of plan provision as precluding make whole doctrine). Other courts of appeals take the opposite position. See Cagle, 112 F.3d at 1521-22 (requiring that plan provide for first reimbursement to preclude make whole doctrine); Barnes v. Independent Auto. Dealers Ass'n of Cal. Health & Welfare Benefit Plan, 64 F.3d 1389, 1395 (9th Cir. 1995) (same). 23 Although the make whole doctrine could be imported as federal common law under ERISA, see Pilot Life, 481 U.S. at 56, in our view it should be done only as necessary to effectuate legitimate ERISA policy objectives, see United McGill, 154 F.3d at 171. Thus, we decline to adopt the make whole doctrine as federal common law in the present circumstances, for the following reasons. 24 First, as with the attorney-fee question, see supra Section II.A, generally speaking ERISA does not superimpose substantive provisions on covered plans. Where an ERISA plan requires -- without qualification -- that plan participants reimburse the plan for benefits paid, the plan should not be construed to depend upon an implied contingency such as the make whole doctrine, particularly since ERISA specifically envisions that covered plans be written in straightforward language comprehensible by the average plan participant. See Sunbeam-Oster, 102 F.3d at 1374-75. In such circumstances, the absence of more particularized and technical legal language addressing the partial recovery situation cannot be grounds for supplanting the Plan Priority rule. Id. at 1376. Similarly, the instant ERISA plan explicitly entitled [HPHC] to recover from a Member the value of services provided, arranged, or paid for, when the Member was reimbursed for the cost of care by another party. 25 Moreover, there are cogent arguments for the view that ERISA objectives could be disserved if the make whole doctrine were to be adopted as the ERISA default rule. Although plan members like the Harrises would benefit financially, ultimately the costs would be borne by all other plan members in the form of higher premiums for coverage. See id. at 1376 n.23. 26 The make whole doctrine entails other undue burdens as well. For example, though the Harrises settled their tort claims in order to eliminate the risks and burdens of litigation, the make whole doctrine would necessitate that their claims nonetheless be litigated in the district court -- including the contentious contributory negligence claim -- in order to determine whether the Harrises were fully or only partially compensated by the $737,500 tort settlement. 27 For the foregoing reasons, we hold that where the terms of an ERISA plan confer upon it an unqualified entitlement to reimbursement for the value of the services provided to a member, the ERISA plan administrator need not demonstrate that the settlement fund, from which reimbursement is sought, fully compensated the plan member.