The Texas Made-Whole Rule, adopted in Ortiz v. Great Southern Fire & Casualty Insurance Co., no longer applies to cases where the Plan disclaims the rule and requires full reimbursement in the plan document. 597 S.W.2d 342, (Tex. 1980). In the Ortiz case the insurance carrier relied upon arguments made in equity. The court held that health plans do not have an equitable right to recovery until the plan beneficiary is fully compensated. Id.

In Fortis Benefits v. Venessa Cantu and Ford Motor Company, 50 Tex. Sup. J. 965, (June 29, 2007), the Supreme Court of Texas determined that the “made whole” doctrine must yield to contractual subrogation rights within the plain terms of the policy, because “contractual subrogation clauses express the parties’ intent that reimbursement should be controlled by agreed contract terms rather than external rules imposed by the courts,” and, “a contractual subrogation provision, whether in an ERISA plan or in a private insurance policy, must be enforced as written.” Id.

While this is great news relating to the Made Whole Rule, we believe that the Court’s reasoning can and should be applied to other equitable doctrines as well. For instance, by relying on contractual provisions, we will put forth the argument that plan document terms denying reductions for attorneys’ fees will defeat the common fund doctrine.

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This entry was posted by Adam V. Russo on Tuesday, November 13th, 2007 at 4:03 pm and is filed under Attorneys' Fees, ERISA, Made Whole Rule, Plan Language, Provider Reimbursement, Summary Plan Description, Texas. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.