## Facts

- Welch Foods, Inc. sold industrial property in Washington County, Arkansas to the Colemans and the Paschals.
- The buyers obtained an owner’s title insurance policy from Chicago Title Insurance Company that contained an express subrogation clause allowing Chicago Title, after paying a loss, to pursue the insureds’ rights against third parties.
- The buyers later learned a twenty-foot strip along the property’s edge belonged to Southwestern Electric Power Company, impairing access and diminishing value.
- The Colemans conveyed their interest to the Paschals, who submitted a claim under the title policy.
- Chicago Title paid the claim and then sued Welch, as subrogee, for breach of the deed’s warranty of title.
- The circuit court granted summary judgment to Chicago Title; Welch appealed.

## Issues

1. Whether Chicago Title’s subrogation claim was governed by conventional (contractual) subrogation or by legal/equitable subrogation.
2. Whether a non-insured third party sued under an express subrogation clause may defeat the insurer’s claim with equitable defenses, including the “made whole” doctrine.
3. Whether summary judgment for Chicago Title was proper on the undisputed facts.

## Decision

- The Arkansas Supreme Court affirmed summary judgment for Chicago Title.
- The court held Chicago Title’s rights arose from conventional subrogation because the policy contained an express subrogation clause.
- The court held equitable defenses were not available to Welch because Chicago Title asserted express contractual subrogation rights against a non-insured third party to whom Chicago Title owed no legal duty and who showed no reliance on Chicago Title.
- With the material facts undisputed and the remaining questions purely legal, Chicago Title was entitled to judgment as a matter of law.

## Legal Principles

- Subrogation may be conventional (based on agreement) or legal/equitable (arising by operation of law based on the parties’ equities).
- Even though subrogation has equitable origins, courts may enforce an express contractual subrogation right according to its terms in appropriate circumstances.
- When an insurer exercises an express contractual right of subrogation against someone other than its insured—particularly a party to whom the insurer owed no legal duty and who did not rely on the insurer—equitable defenses (including “made whole”) do not bar the insurer’s claim.
- Summary judgment is appropriate when the movant establishes entitlement to judgment as a matter of law and the nonmovant fails to show a genuine dispute of material fact.

## Conclusion

The court enforced Chicago Title’s express policy-based subrogation right to pursue the grantor for breach of warranty of title and held that a non-insured third party could not invoke equitable defenses to defeat that contractual subrogation claim, making summary judgment appropriate on undisputed facts.


Welch Foods, Inc. v. Chi. Title Ins. Co., 341 Ark. 515, 17 S.W.3d 467 (Ark. 2000)