Holes in the Whole: Considerations on the Made Whole Doctrine and Its Applicability to Environmental Claims

Nearly all states recognize the principle of the made whole rule which mandates that an insured be fully compensated for its loss before its insurer is reimbursed for its payouts. Some states apply the rule to an insured's overall loss, while others engage in an element-by-element examination of damages and allow an insurer to seek reimbursement once the insured has recovered its insured losses. States also take varying approaches on whether, and in what circumstances, insurers can expand their subrogation-like rights by contract. This article sets out a brief history of equitable and legal subrogation and the made whole rule; discusses various applications of the rule and related equitable issues, such as the allocation of attorneys fees for third-party recoveries that benefit both insured and insurer; and offers practice tips for insureds and counsel facing environmental claims.