Asbury Park v. Star Ins. Co.

A firefighter was justly compensated for his work-related injuries, but the workers comp payout caused a fight between Asbury Park and its insurance carrier. In this certified question the from the 3rd Circuit, the Supreme Court held that the contract between the insured city and the insurer controlled the allocation of funds recovered from a third-party tortfeasor, thereby negating the Made Whole Doctrine. 

A firefighter was injured on the job and the city paid out $400,000 in workers compensation benefits under the self-insurance retention clause of its contract with the defendant insurer. The insurer paid out $2.6 million to the firefighter. In a subrogation action, the insurer recovered some — but not all — of the funds paid out the the firefighter. Asbury Park claimed the Made Whole Doctrine required that the city gets the first dollars of the recovery, but the insurer claimed it went the other way pursuant to a clause in their contract. The Supreme Court agreed with the insurance company, holding that the city agreed to cover the first $400,000 of any loss, thus upon a subrogation recovery, the city must still suffer the first $400,000 loss.