What About Contractual Subrogation In Texas?

What if a resident of Grand Prairie, Weatherford, Dallas, Arlington, Fort Worth, or some other Texas city, suffers a loss because of some other persons negligence. Their own insurance company pays for the loss. Then the other persons insurance company pays for the same loss. What happens next?
This is where “contractual subrogation” rears its head. Contractual subrogation arises by virtue of an agreement between the parties and is awarded under that agreement, usually but not always, subject to the dictates of equity.
The Texas Supreme Court case dealing with this is, Fortis Benefits v. Cantu. This was a case decided in 2007. Here the Texas Supreme Court held that an insurance company, here Fortis Benefits, could recover benefits from the insured’s (Cantu) settlement even if the insured is not made whole. In this case, Cantu was severly injured in an automobile accident, and later sued several defendants. The health insurer, Fortis, intervened in the case, asserting a right of subrogation on its prior payments to Cantu. Cantu settled with the various defendants, and Fortis sought to recover solely from Cantu. Cantu, who had not recovered enough from the settlement and from Fortis to cover her actual damages, argued the “made whole” doctrine. In other words, she argued that she should not have to repay Fortis until all her damages had been paid and she was “made whole.” The court disagreed with Cantu, saying the “made whole” doctrine did not apply because in the Fortis insurance contract there was language saying that Fortis was entitled to recover for all the benefits it had paid if and when the insured made a recovery against a third party.
In this Fortis case, the Texas Supreme Court found that equitable principles do not govern in contractual subrogation cases. The court reasoned as follows:
We do not disagree that equitable and contractual subrogation rest upon common principles, but contract rights generally arise from contract language; they do not derive their validity from principles of equity but directly from the parties agreement. The policy declares the parties’ rights and obligations, which are not generally supplanted by court fashioned equitable rules that might apply, as a default gap-filler, in the absence of a valid contract. If subrogation arises independent of any contract, then an express subrogation agreement would be superfluous and serve only to acknowledge this preexisting right, a position we reject. Contractual subrogation clauses express the parties’ intent that reimbursement should be controlled by agreed contract terms rather than external rules imposed by the courts.
Furthermore, the court noted that “where a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy.”
This case further illustrates the absolute must that a person seek the help of an experienced Insurance Law Attorney when they find themselves in these types of situations.
The court noted that, if the insurer in Fortis Benefits had claimed an equitable right of subrogation, then the “made whole” doctrine would have applied, per Ortiz v. Great Southern Fire & Casualty Ins. Co.