The Tennessee Court of Appeals Finds That Courts Must Engage in an Analysis of the Dollar Amounts of an Insured’s Recovery and Losses in Order to Determine if an Insured has Been “Made Whole.”

Julie Y. McLaughlin¹

Health Cost Controls, Inc. v. Ronald Gifford, No. W2005-01381-COA-R3-CV (Tenn. Ct. App. Mar. 20, 2006).

In this case, Ronald Gifford was injured in a car accident. At the time of the accident, Gifford was insured through Prudential Insurance Company, who paid medical expenses on his behalf in the amount of $37,795.08. After learning that the accident was the result of a third-party and that Gifford had received a settlement of $100,000.00 from the third-party, Health Cost Controls (HCC), as assignee of Prudential’s reimbursement interest, sought reimbursement of the $37,795.08. When Gifford refused to reimburse HCC, it instituted an action for reimbursement. After the case had been in litigation for several years, the Tennessee Supreme Court decided that HCC could not be reimbursed unless a factual determination was made as to whether Gifford had been “made whole."²

The chancery court found that Gifford had not been made whole, solely on the basis of the severity of his physical and emotional injuries and the medical bills that he had incurred. The court noted:
[i]n light of the severity of the physical and emotional injuries, and the medical bills incurred, the Court finds Gifford has not been made whole by the settlement proceeds in this case, and therefore, HCC is not entitled to reimbursement of the $37,795.08 it paid in medical bills on behalf of Gifford.

The Tennessee Court of Appeals reversed, finding that Gifford had been made whole and must reimburse HCC. The Court noted that the chancery court found that Gifford only incurred monetary damages in excess of $45,000.00, which consisted of the amount of his medical expenses. The Court further noted that Gifford had not presented any evidence regarding the monetary value of his injuries. In determining an insured’s total recovery, the Court found that you must add the amount of the insured’s settlement amount to all medical expenses that were paid on behalf of the insured. Gifford recovered $100,000.00 for his injuries from the settlement agreement, $37,795.08 from Prudential, and $7,358.95 from another insurer; thus, his total recovery was $145,154.03. Since Gifford’s total recovery was in excess of the amount of damages proved at trial, the Court found that he had been “made whole” and that HCC was entitled to reimbursement.

Lessons to be Learned:
An insured cannot claim that they have not been “made whole” when they fail to provide monetary evidence that their injuries do not exceed their total recovery.

[1] Julie McLaughlin is an associate in the Memphis, Tennessee law firm of Lawrence & Russell, LLP, where she is devoted to litigating employment disputes and ERISA matters on behalf of employers and self-funded employee welfare benefit plans. She can be reached at juliem@lawrencerussell.com.

²In York v. Sevier County Ambulance Auth., 8 S.W. 3d 616 (Tenn. 1999), the Tennessee Supreme Court held that an insured must be made whole before an insurer is entitled to reimbursement, regardless of policy language.