Oklahoma Make Whole Rule

Question: Does Oklahoma’s “make whole” rule apply to a large subrogation demand from client’s Oklahoma insurer on an individually purchased health insurance plan?

Answer: I think the direct answer is that the make whole rule will be applied except to the extent that the insurance plan has language negating the applicability of the make whole rule.

Equity Fire and Cas. Co. v. Youngblood, 1996 OK 123, 927 P.2d 572 adopts the make whole rule in the context of an ERISA case, although subsequent federal ERISA cases have said that ERISA pre-empts the Oklahoma law in this regard, with regard to an ERISA case.

The open question is whether the rule in Oklahoma is that the policy or health plan may do away with the make whole rule in a case in which state law applies. Manokoune v. State Farm Auto Ins. Co., 2006 OK 74, 145 P.3rd 1081 (a case not involving ERISA) says that it does but I argue that the statement in Manokoune is dictum, since the issue was not involved in the case and was not briefed. What the Supreme Court says in Manokoune is “19 . . . . Generally speaking, if the compensation a beneficiary has received from a third party represents less than full compensation and the contract giving rise to a subrogation interest does not stipulate that it has priority over any other funds the beneficiary might receive, the subrogation contract is not enforceable. Youngblood, 1996 OK 123, 15, 927 P.2d at 576-77. “[An] insurance contract stands subject to the make-whole rule unless it contains an unequivocal, express statement that the insured does not have to be made whole before the insurer is entitled to recoup its payments.” Reeds, 2006 OK 43, 31, ___ P.3d at ___.” (The P.3d cite for Reeds is 157 P.3d 100.)

As a very practical matter, I think the odds of getting the insurer to agree or a trial court to adopt my view that that statement in Manokoune is dictum is not very good. This leads me to believe you are going to be stuck with the de facto rule that the insurer can negate the make whole rule with an appropriate policy provision.

 For an example of language which may be held to negate the make whole