The Made-Whole Rule in Arizona: What Is Settled and What Is Not

By the FigureMyTax Editorial Team · How we calculate

We found no Arizona statute and no clear state Supreme Court holding that applies the made-whole rule to health insurers. Arizona law does limit medical payments liens by statute, and federal courts in the Ninth Circuit apply a made-whole default to ERISA plans.

What the doctrine says

Under the made-whole doctrine, an injured person must be fully compensated for all losses before an insurer that paid the medical bills can be repaid out of a settlement. States apply it differently, and Arizona is a state where summaries disagree, so we do not want to overstate it.

Summaries conflict

A national chart says Arizona law does not discuss the doctrine in the subrogation context. An insurance-adjusting site says it does not appear Arizona adheres to it. A subrogation chart calls Arizona an "anti-subrogation" state, while a law firm blog says Arizona follows the doctrine. When sources conflict, treat it as unsettled and read your policy.

What the Arizona statutes do say

The UM/UIM statute itself acknowledges that a common law prohibition against assignments of causes of action for personal injuries exists, and abrogates it only to the extent insurers may subrogate for UM payments (A.R.S. 20-259.01(I) and (K)). For auto medical payments coverage, an insurer may have a lien only on the amount it paid above $5,000 and must compromise it "in a fair and equitable manner" (subsection (J)). Hospital liens are separate and are covered in our hospital lien post.

Federal ERISA plans: a made-whole default

A self-funded employer health plan is governed by federal law. In Barnes v. Independent Automobile Dealers Association (9th Cir. 1995), the Ninth Circuit, which includes Arizona, adopted as federal common law the rule that, absent a clear contract provision to the contrary, an insured must be made whole before an insurer can enforce subrogation. A plan that clearly claims first-dollar reimbursement can override it.

What to do

Ask your health plan whether it is self-funded or insured, get the written plan terms, and have an attorney read the reimbursement clause before you agree to repay anything. Then model the outcome in the Arizona medical lien calculator, which lets you test the insurer's claim as repaid in full, reduced by its share of fees and costs, or waived.

Related claims

Medicare and AHCCCS follow their own rules; see the Medicare and AHCCCS post.

This is general information, not legal advice, and the state comparisons above are illustrative, not an exhaustive survey. Confirm how Arizona's rules apply to your specific case with a licensed Arizona attorney.