Montana Made Whole
by Ron E. Peck, Esq.
In the case of Ferguson v. Safeco Insurance Co. of America, 2008 WL 854841 (Mont.,2008), the Supreme Court of the State of Montana was asked to determine whether insureds could sue their insurance carrier in a class action suit, suing that insurance carrier for pursuing subrogation / reimbursement opportunities without first confirming that the insureds had been made whole. In Montana, policies regulated by state law may not subrogate or seek reimbursement for claims paid until the claimant is made whole by the tortfeasor or other liable third party first. Ordinarily, courts require the insured (and their attorney) to advise the insurance carrier that the insured has not been made whole, that the made whole doctrine applies, and provide evidence of the insured’s not being made whole. In the case at hand, however, the insured sued the insurance carrier not because it ignored her claim of not being made whole, but rather, failed to investigate on its own whether the insured had been made whole prior to pursuing reimbursement opportunities.
The insured, Ferguson, was involved in a motor vehicle accident. She was insured by Safeco. Safeco intervened in a lawsuit against the third party that caused the incident, and recovered some of the amounts it paid. Ferguson initiated action against Safeco claiming that she had not been made whole prior to Safeco obtaining funds, Safeco never provided her with notice of its intent to subrogate, and Safeco never investigated or made a determination as to whether Ferguson was made whole.
The Supreme Court, reviewing Ferguson’s case, states that the insurer has a duty to first determine whether the insured has been made whole before the insurer may collect subrogation monies.
In the words of Attorney Gary L. Wickert of Matthiesen, Wickert & Lehrer, S.C., “This is the sort of inimical judicial activism which will destroy us in the long run, if we don’t undertake an expansive and enduring public education campaign with regard to subrogation.”
Indeed, until the courts of Montana reconsider their interpretation of the Made Whole rule, it seems that to avoid negative repercussions, any insurance carrier that hopes to obtain reimbursement in the State of Montana will have to advise insureds of their intent to subrogate, and request that insureds advise them regarding their “made whole” status. Then again, prior to accepting reimbursement funds from a liable third party, insurers will want to discuss their recovery with the insured to avoid this kind of backlash.