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The "Make-Whole" Doctrine
Empowers Consumers

Every business day there are 10's of 1,000's of consumers being misinformed by insurance industry professionals. Consumers are being told they may not collect on vehicle damage claims from both their own policy’s Collision Coverage and the other (at-fault) party’s Liability Coverage. Consumers are being told they must pick one source of recovery but, they cannot collect from both . . . that is simply Not True !

the Truth is . . .

  • Consumers have the right to pursue Both sources of recovery as necessary to be made whole
  • The Consumer’s right to be Made Whole supercedes the insurer’s right of subrogation

Before you insurance professionals jump out of your chair, read-on. The logic and legality will be made clear. In fact, for those with the resource to do so, go to “Couch on Insurance” and review the Federal Common Law treatise entitled the “Make Whole” Doctrine (16 COI 2d . . . Section 61:64).

Couch on Insurance . . .
“Couch on Insurance” is universally regarded as the preeminent authority on insurance law.

As a supporter of iCan you have the right to know what “Couch on Insurance” has to say on the cite we’re quoting here. However, the direct quote is so convoluted in legalize as to lead the untrained reader to draw various conclusions. Therefor, we have chosen a paraphrased version of the “Make-Whole” Doctrine drawn as a direct quote from the United States Court of Appeals - Fourth Circuit, in the matter of “Paris v. Iron Workers Trust Fund” wherein the court stated . . . “In other words, the insured must be made whole before the insurer can exercise [its] right of subrogation.

Now then, with the “Make Whole” Doctrine clearly established as a policyholder’s legal right, let’s see how it would apply to a typical accident scenario.

Typical Accident Scenario . . .
Assume, for the sake of this discussion, you are operating your vehicle in a safe and lawful manner when your vehicle is damaged by another conducting themselves in an unsafe and negligent manner. You have just become what is known in insurance circles as a “Third Party Claimant” against the negligent party and can expect to be dealing with that party’s Liability insurance carrier.

Third Party Claimant Rights (Tort Law) . . .
In this scenario, the negligent party owes you for All Damages That Flow From Their Negligence (subject to mitigation). Among those damages include Full Actual Cost of Repair of your vehicle (assuming damage is reparable) + Loss-of-Use and/or Reimbursement of Costs incurred for Rental of Temporary Substitute Comparable Transportation + Post-Repair Residual Diminished Resale of your vehicle + Costs Incurred in Documenting the true extent of your damages + other elements of Collateral Damage such as Time away from work / family, Claim related Travel Expenses, Necessary Long Distance Calls, Postage, etc.

Again, the Negligent Party (either directly or through their liability insurer) Owes For All Damages That Flow From Their Negligence! In other words, you are entitled to be compensated for all damages that, but for the negligence of the other party, would not have existed.

Your Own Policy’s Collision Coverage . . .
Unlike your right of recovery against the negligent party, which is governed by Tort Law, your right of recovery under the Collision Coverage of your own policy is governed by the terms of your insurance contract (policy). Collision Coverage typically involves a Deductible to be paid by the insured • rarely covers Post-Repair Residual Diminished Value • may provide limited reimbursement for rental vehicle expense • but will virtually never provide reimbursement for any of the other Collateral Damages referenced herein.

Your own insurance policy covers a narrowly defined scope of damage . . . and limits how much you can collect for those “Covered” damages.

Academic vs Practical Considerations . . .
From a purely academic standpoint, one would be inclined to conclude the pursuit of reimbursement from the Negligent Party (through their liability insurer) would provide the best opportunity for Full Recovery of All Damages. This would be true but for the Liability Insurance Industry’s “We-Don’t-Pay-For-That” stance on various forms of legitimate damage. That attitude makes it virtually impossible to be made whole without initiating litigation and assuming the prohibitive costs thereof. If you were to accept the “Pick-One” attitude, practical considerations would usually point you to your own Collision coverage.

the “Pick-One” Attitude . . .
If you were to find yourself in the scenario described herein, you would most likely be confronted with either achieving Partial Recovery from the other party’s liability carrier as a result of their “We-Don’t-Pay-For-That” attitude [OR] achieving Partial Recovery from your own insurer based upon policy contractual limitations. Neither prospect offers the opportunity for Full Recovery of All Damages. You will probably be told by a representative from each insurer that you must “Pick-One” avenue of recovery, but . . . “You Can’t Collect From Both” . . . as stated earlier - That is Simply NOT TRUE !

THE TRUTH . . . While you are Not entitled to collect twice for any One [1] element of your over-all damages - You Are entitled to be Made Whole regarding All Elements of your damage !

Multiple Source Recovery . . .
Having laid the above foundation, let us return to the hypothetical scenario we’ve described. There is No Logical Reason why you, as the victim of another’s negligence, should have to accept a recovery of any amount less than that which would make you whole.

As an adjunct to our hypothetical scenario, let us assume your vehicle had a pre-loss resale market value of approximately $20,000.00 and that the Vehicle Repair Damage alone (as defined by your chosen collision repair facility) came to approximately $ 5,000.00.

Here’s how Multiple Source Recovery can work . . .

    Step One . . . Submit your claim for damages to the Liability Carrier representing the negligent party that is responsible for your damages. Allow them to do their own “Estimate” (aka “Appraisal”) of your damages. Let us assume that insurer Estimated your Vehicle Repair Damage at $4,500.00. Accept the $4,500.00 payment they have defined. Deposit it. Do Not sign any form of “Release” document. If the payment document (check / draft) contains “Release” verbiage, line-out the “Release” verbiage, endorse and deposit it. When that payment has had time to “Clear” (do not allow them the opportunity to take an action that would jeopardize your right to be made whole), re-contact that liability carrier in an attempt to secure from them a written (operative word here - “Written”) confirmation of their intent to cover all forms of your Collateral Damages (as outlined herein). If the liability carrier is unwilling to provide such a written commitment, cease all further communications with that liability insurance company.

    Step Two . . . If the liability carrier is unwilling to commit (in writing) to cover all forms of your damages, including the collateral damages, submit your claim for damages to your own insurer under your Collision Coverage (and other coverages as may be available, such as rental reimbursement, etc.). Let us assume that your own insurance company “Estimates” your Vehicle Repair Damage at $4,500.00 and let’s further assume your Collision Coverage has a $500.00 Deductible. Your insurance company will probably issue a payment of $4,000.00 ($4,500.00 less $500.00 Deductible) payable to you and your chosen repair facility. Endorse those funds ($4,000.00) over to the repair facility that they may deposit it and proceed with repairs.

    Step Three . . . Use the $4,500.00 received from the other party’s insurance company to cover the collateral damages as they arise. Keep accurate records as to how those funds are used. Remember, you are simply holding those funds in trust to cover your legitimate damages not paid for by your own insurance company. Keep in mind that the insurance “Estimate” is just that, an “Estimate”. It would not be unusual for Additional Vehicle Repair Damage to be disclosed during the repair process. That is why 90% of insurance company “Estimates” result in “Supplements” (sometimes multiple “Supplements”) as the repair process unfolds. Let us assume that the final itemized repair costs come to $5,051.00. In effect, a “Supplement” of $551.00 is due to cover the True Cost of Vehicle Repair Damage (including your deductible). Pay $1,051.00 (including your deductible) to the repair facility out of the $4,500.00 you are holding in trust.

    Step Four . . . Compile your itemized accounting of how the $4,500.00 received from the Liability Insurer had been allocated. A “Sample” follows for your consideration . . .

~ Sample ~
Itemized Accounting of Collateral Damage Funds Allocation

Collision Deductible $ 500.00
Vehicle Repair Damage - Supplemental (invoice attached) $ 551.00
Comparable Temporary Substitute Vehicle (invoice attached) $ 455.50
Post-Repair Residual Diminished Value (appraisal attached) $ 2,700.00
Service Fee for Diminished Value Appraisal (invoice attached) $ 250.00
Time Away from Work / Family (2.2hrs @ $10.00) $ 22.00
 Long Distance Calls / Postage (see attached) $ 9.82
TOTAL UNCOMPENSATED / COLLATERAL DAMAGES $ 4,488.32
Funds Received From Liability Carrier - $ 4,500.00
EXCESS FUNDS COLLECTED (reimbursement enclosed) - $ 11.68


Step Five . . . Consistent with the “Sample” shown above, write a letter to Your Own insurance carrier providing them with your accounting of how the “Collateral Damage” funds, received from the other party’s insurer, had been utilized along with your check (payable to your insurance company) for the amount of excess funds. That letter should notify your insurance company that you have now been “Made Whole” and give permission to your insurance company to proceed with their “Subrogation” activity. Sentences you may wish to incorporate in that letter are provided for your consideration . .

** Consistent with my priority right to be “Made Whole”, as explained in the treatise
“Couch on Insurance” (16 COI 2d - Section 61:64), I hereby confirm I have been
“Made Whole” and your right of subrogation is now in effect.

I affirm I have provided no release nor taken any action that would dilute or
otherwise compromise your right of subrogation. **

NOTE . . . IF it should happen the funds received from the liability (other party’s) insurer are not sufficient to cover your Collateral Damages (a remaining balance still owed to you), you should still write a letter to Your Own insurance company providing them with your itemized accounting of how the Collateral Damage funds were utilized with the “Excess Funds Collected” line changed to read “Uncollected Collateral Damage (balance due policyholder)” and the appropriate amount shown. Sentences you may wish to incorporate in that letter are provided for your consideration . .

** Consistent with my priority right to be “Made Whole”, as explained in the treatise
“Couch on Insurance” (16 COI 2d - Section 61:64), I hereby notify you that I have
not yet been “Made Whole”. As demonstrated in my “Itemized Accounting of
Collateral Damage Funds Allocation” I am still $XXX.xx short of being Made Whole.

I am willing that you proceed with subrogation activity with the understanding that
I will receive the First Fruits of any subrogation recovery to the extent of $XXX.xx.

I affirm I have provided no release nor taken any action that would dilute or
otherwise compromise your right of subrogation.

Please notify me, in writing, whether you choose to pursue or
waive your right of subrogation. **

The Net Effect of Multiple Source Recovery . . .
For consumers who have found themselves in situations similar to the “Scenario” we’ve depicted here, you’ve probably experienced the insurance industry’s insensitivity towards your rights in the past. Sad to say, that attitude is pervasive throughout the insurance industry. Insurance companies have long known they can get away with paying you less than what you are owed if they simply make it frustrating for you to pursue your rights. Insurer’s have never told you of your right to collect from both sides of the insurance equation in third party / first party situations. In fact, they’ve gone out of their way to convince you of just the opposite.

Now, with a clearer understanding of your rights and Multiple Source Recovery, consumers do not have to deal with insurers saying “We-Don’t-Pay-For-That” or having them pull your “Direct-Bill Rental” vehicle in an effort to “Squeeze” you into accepting a less-than-fair settlement. With Multiple Source Recovery you are in control. You get to define what your “Damages” are and determine what, if any, refund is appropriate.

Keep in mind, you do have a duty, under the law, to “Mitigate” your damages. Loosely translated, “Mitigate” means “Reasonable Effort to Minimize.” As an example, if your damaged car is a Pontiac GrandAm, you can not expect to be reimbursed for renting a Cadillac Escalade as a temporary substitute vehicle. You are entitled to a “Comparable” vehicle. Let this example serve as a guideline for how you will be accounting for your allocation of Collateral Damage Funds.

“Make-Whole” Doctrine . . . Diminished Value Implications . . .
While Diminished Value is universally acknowledged as a recoverable damage in Third Party (liability) circumstances, very few states require insurers to pay Diminished Value to their own policyholders. However, once you have fully read this section, you’ll begin to understand how your right to be Made Whole could require your own insurer to compensate you for your Diminished Value out of the First Fruits of any subrogation recovery they may collect.

NOTE: If the other party’s liability insurer has only minimum policy limits, which are not sufficient to cover your insurance company’s subrogation interests and pay All your Collateral Damages - Including your Diminished Value Damage - you are still the “First Hog at the Trough” with Priority Rights to recover 100% of All your damages. If, after you have been made whole, the other insurance company has any policy limit funds remaining, then your insurance company is entitled to collect those remaining funds.

For those iCan members that have arrived at this “Multiple Source Recovery” page through a Diminished Value thread, please go back to the top and read this section in its entirety.



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