924 F.3d 483
8th Cir.2019Background
- Milton and Norma Blakely’s home in Crossett, Arkansas suffered a fire in Oct. 2014; Entergy provided electricity to the property. A second, unrelated fire in Aug. 2015 destroyed the home while it lacked electric service.
- EMC Insurance paid $203,247.49 to the Blakelys for property damage and sued Entergy in diversity court claiming Entergy caused the 2014 fire and asserting subrogation for amounts exceeding EMC’s payments.
- At the close of EMC’s case, Entergy moved for judgment as a matter of law arguing EMC lacked standing because EMC had not shown the Blakelys had been "made whole" before filing suit; the district court granted the motion.
- The made whole doctrine (equitable subrogation) in Arkansas requires an insured be made whole before an insurer’s subrogation right accrues; Riley v. State Farm held that, absent agreement, an insurer’s subrogation right does not accrue until a court determines the insured has been made whole.
- EMC argued on appeal that the made whole doctrine does not apply to property-damage subrogation and that Entergy was estopped from raising it; the Eighth Circuit concluded the doctrine does apply but found EMC had failed to preserve or prove the made-whole issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Arkansas’s made whole doctrine applies to property-damage subrogation | Made whole doctrine inapplicable to property loss subrogation | Made whole doctrine applies to subrogation generally, including property loss | Court: Doctrine applies to property-damage subrogation |
| Whether insurer must obtain insured’s agreement or a judicial made-whole determination before suing the tortfeasor (standing) | EMC: insurer may sue without prior made-whole determination | Entergy: insurer lacks standing absent insured agreement or prior judicial determination | Court: Insurer can commence suit; it need not obtain prior determination, but must prove made-whole before recovery; Ark-Homa allows insurer to be plaintiff if real party in interest |
| Whether EMC proved or preserved that the insureds were made whole during the suit | EMC: did not assert made-whole but argued other defenses; contends issues not waived on appeal | Entergy: EMC failed to present or preserve made-whole evidence; burden on insurer | Court: EMC failed to preserve or present evidence that insureds were made whole; judgment affirmed on that ground |
| Estoppel/inconsistent positions defense to raising made-whole at trial | EMC: Entergy estopped from raising made-whole because Entergy urged limiting damages to insureds’ out-of-pocket $36,000 | Entergy: no estoppel; alternative damages contentions are permissible | Court: Estoppel argument frivolous; no unfair inconsistency in Entergy’s positions |
Key Cases Cited
- Riley v. State Farm Mut. Auto. Ins. Co., 381 S.W.3d 840 (Ark. 2011) (insurer’s subrogation right does not accrue until insured is made whole absent agreement)
- Franklin v. Healthsource of Ark., 942 S.W.2d 837 (Ark. 1997) (articulating Arkansas made-whole equitable principle)
- S. Farm Bureau Cas. Ins. Co. v. Tallant, 207 S.W.3d 468 (Ark. 2005) (equitable subrogation prevents double recovery)
- Ark-Homa Foods, Inc. v. Ward, 473 S.W.2d 910 (Ark. 1971) (insurer is proper plaintiff where insurer has paid full loss even if made-whole determination occurs after suit begins)
- McGeorge Contracting Co. v. Mizell, 226 S.W.2d 566 (Ark. 1950) (insurer must sue in its own name when insured has been paid in full)
- Lopez v. United Auto Ins. Co., 427 S.W.3d 154 (Ark. App. 2013) (insurer bears burden to prove insured was made whole)