City of Asbury Park v. Star Insurance Company (083371) (Statewide), 233 A.3d 400

City of Asbury Park had a workers’ compensation policy (Feb 2010–Feb 2011) with a $400,000 per-occurrence self-insured retention (SIR); Star Insurance covered amounts above the SIR.
In 2011 firefighter John Fazio was injured; the City paid $400,000 (SIR) and Star paid $2,607,227.50; statutory lien created for $3,007,227.50.
Fazio later settled a third-party claim for $2,700,000; the parties agreed $935,968.25 of the proceeds be held in escrow for reimbursement of City and Star liens.
Star demanded the entire escrowed amount, asserting contractual subrogation rights and priority; the City invoked the made-whole doctrine, claiming it must be reimbursed for its $400,000 SIR before Star recovers.
The district court ruled for Star; the Third Circuit certified the question to the New Jersey Supreme Court.
The New Jersey Supreme Court held that under New Jersey equitable principles the made-whole doctrine does not apply to first-dollar risk allocated to an insured (deductible/SIR); contract terms govern priority.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the made-whole doctrine applies to first-dollar risk (deductible/SIR)	City: insured must be made whole (recover SIR) before insurer may subrogate; Hogges supports this priority	Star: applying made-whole to SIR would unjustly enrich the insured and rewrite the parties’ bargain	No — made-whole does not apply to first-dollar risk; reimbursing SIR first would convert the policy into one without SIR and give insured an unwarranted windfall
Whether a policy’s subrogation clause can alter made-whole priority	City: subrogation clause is a general clause and does not expressly override made-whole	Star: subrogation clause gives insurer all recovery rights when insurer pays; contract should control	Contract matters — courts must read subrogation and SIR/deductible provisions together; an unambiguous grant of the insured’s recovery rights to the insurer prevents made-whole from overriding the agreement

Culver v. Insurance Co. of North America, 115 N.J. 451 (1989) (made-whole is an equitable principle but courts must also enforce specific subrogation agreements)
Providence Washington Ins. Co. v. Hogges, 67 N.J. Super. 475 (App. Div. 1961) (discusses insured-first/made-whole principle absent express contractual contrary terms)
Fireman’s Fund Ins. Co. v. TD Banknorth Ins. Agency, Inc., 72 A.3d 36 (Conn. 2013) (held made-whole does not apply to deductibles; reimbursement would create an unpaid-for windfall)
Jones v. Nationwide Prop. & Cas. Ins. Co., 32 A.3d 1261 (Pa. 2011) (concluded made-whole should not apply to collision-policy deductibles; would force insurer to cover risk insured did not pay to insure)
Daniels v. State Farm Mut. Auto. Ins. Co., 444 P.3d 582 (Wash. 2019) (reached the opposite result; held insurer must reimburse deductibles before recovering in subrogation under made-whole)