holding that an insurer “is not entitled to subrogation unless the insured has been made whole for his [or her] loss”
How later courts described this case
- holding that an insurer “is not entitled to subrogation unless the insured has been made whole for his [or her] loss”
- "[T]he effect of 'conventional subrogation' was the same as 'legal subrogation,' which arises by application of the principles of equity, and that, accordingly, the contractual terms of subrogation agreements in an insurance policy were to be applied according to the rules of equity."
- the "make whole" doctrine provides that "[s]ubrogation is to be allowed only when the insured is compensated in full by recovery from the tortfeasor. The insured is to be made whole, but no more than whole."
- an insurance policy subrogation clause for reimbursement of medical expenses paid on behalf of an insured does not entitle the insurer to reimbursement when the insured’s settlement was for an amount less than the total damages sustained by the insured
Written by the judges who cited it.
Distinguished
Distinguished by Dennis D. Dufour v. Progressive Classic Ins. Co., 370 Wis. 2d 313 (2016)
In Mutual Service, we held that when an insurer maintains a separate subrogation claim against the tortfeasor, the made whole doctrine as articulated in Garrity and Rimes is inapplicable if the claim is "brought by a subrogated insurer against the tortfeasor or the tortfeasor's insurer where the subro-gated insurer's insured has previously settled with the tortfeasor.
Distinguished by Muller v. Society Insurance, 309 Wis. 2d 410 (2008)
See id. at 275-76. *430 ¶ 39. Rimes is distinguishable from the present case.
Distinguished by Oakley v. Fireman's Fund of Wisconsin, 162 Wis. 2d 821 (1991)
Moreover, since attorney's fees are not an element of damages, Garrity and Rimes are distinguishable from the case at bar.
The opinion
STEINMETZ, J.
(dissenting.) I disagree with the result and reasoning of the majority and therefore dissent.
The majority’s statement of issue is:
“The question presented is whether an automobile insurer, State Farm Mutual Automobile Insurance Company, which, under a subrogation agreement signed by its insured, Palmer H. Rimes, has made payment under the medical-pay provisions of its policy, has the right to recover those payments out of the monies received by its insured in a settlement with negligent third-party tort-feasors and their liability insurers, when, according to *285 the findings and judgment of the circuit court, the settlement figure was less than the total damages sustained by the insured as the result of an automobile accident.” Supra at 264.
That is an inappropriate statement of issue, since once the plaintiffs’ case was settled in full with the other tort-feasors, there were no longer any “findings and judgment” the court could render regarding the damages sustained by the plaintiff. All the court could do was render an advisory opinion which it did, and I find that inappropriate and beyond the trial court’s jurisdiction. The trial court did this to obtain a result of the value of plaintiffs’ claim in order to determine whether the plaintiffs were made whole when they settled with all tortfeasors in the case. There was no requirement that plaintiffs settle and, as it turns out, if one accepts the majority view, the plaintiffs should have gone to completion of the issues. Of course, there is no way of knowing what a jury verdict would have been with all interested and potentially liable parties participating in the trial. As events occurred here, the plaintiffs accepted in full and complete settlement $125,-000 from the potential tort-feasors, and the trial judge opined that the plaintiffs’ total case was worth $300,000 with no negligence by the plaintiff driver.
The majority uses two cases for precedential value. I do not believe either case is appropriate.
In Garrity v. Rural Mut. Ins. Co., 77 Wis. 2d 537 , 253 N.W.2d 512 (1977), the facts were that the parties stipulated that the Garritys had not been made whole for the loss they suffered. Garrity does not in any way lend support for a trial court conducting a mini-trial. The Garrity trial court ruled pursuant to the authority of sec. 269.01, Stats. (1973). 1
*286 In Garrity the court applied the reasoning in American Ins. Co. v. Milwaukee, 51 Wis. 2d 346, 351, 352-53 , 187 N.W.2d 142 (1971) :
“Subrogation is recognized or denied upon equitable principles, without differentiation between ‘legal subrogation,’ arising by application of equity, or ‘conventional subrogation,’ arising from contracts or acts of the parties.”
In Garrity, supra, at 546-47 , the court also stated:
“We hold that because the contract here contains no language to the contrary, the normal rule of subrogation applies and the subrogee has no right to share in the fund recovered from the tortfeasor until the subrogor is made whole.”
It would appear that due to the second holding of Garrity , the language of the contract could influence the equitable principles applied. However, the majority in the instant case makes short shrift of this possibility by stating:
“The subrogation agreement in the instant case between Rimes and State Farm is not significantly dissimilar and if literally interpreted would permit recovery by State Farm in the amount of medical payments made on behalf of Rimes.” Supra at 270.
This statement means that the subrogation agreement in Garrity and the present case are not different to any consequential degree. A comparison of the two *287 agreements, however, demonstrates they are totally different.
In Garrity, supra, at 540 , the subrogation clause read:
“ ‘Subrogation. This Company may require from the insured an assignment of all right of recovery against any party for loss to the extent that payment therefor is made by this Company.’ ” (Emphasis added.)
In the instant case the subrogation clause reads:
“Upon payment . . . the company shall be subrogated to the extent such payment to the proceeds of any settlement or judgment that may result from the exercise of any rights of recovery which the injured person . . . may have against any person . . . and such person shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Such person shall do nothing after loss to prejudice such rights.” (Emphasis added.)
There is a distinction in the two clauses; in Garrity the right of recovery of the insured governs, and in the present case the proceeds of any settlement are pledged for payment. The plaintiffs are presumed to know the language of their contract and should be bound by it, and, at least equitable determinations should not ignore the language of the contract.
The subrogation receipts in the two cases are also substantially different. In Garrity, supra, at 544-45 , the receipt stated:
“ ‘ “In consideration of and to the extent of said payment, the undersigned hereby subrogates said insurance company to all the rights, claims and interest which the undersigned may have against any person or corporation liable for the loss mentioned above, and authorizes the said insurance company to sue, compromise or settle, in the insured’s name or otherwise, all such claims, and to execute and sign releases and acquittances and endorse checks or drafts given in settlement of such claims in the name of the undersigned with the same force and effect as if the undersigned executed or endorsed them.” ’ ”
*288 There the insured gave up all rights, claims and interest in the loss covered against any person and authorized the insurance company to settle.
The subrogation receipt in the instant case differs and reads:
“It is further -warranted that no settlement has been made by the undersigned with any person or corporation against whom a claim may lie, and no release has been given to any one responsible for the loss, and that no such settlement will be made nor release given by the undersigned without the written consent of the said insurer, and the undersigned covenants and agrees to cooperate fully with said insurer, in the prosecution of such claims and to procure and furnish all papers and documents necessary in such proceedings and to attend court and testify if the insurer deems such to be necessary.” (Emphasis added.)
In this case, the receipt clearly made the interest of the company paramount in any money paid, pursuant to the coverage, to the insured.
However, all these distinctions in the contracts are ignored when applying equitable principles in the present case.
The stipulation between the parties at settlement released all claims and tort-feasors and resolved all issues except the subrogation issue between the Rimes and their insurance company regarding the subrogated interest in the settlement. There were no real parties in interest left after the settlement except State Farm and the Rimes regarding their agreement. The judge went beyond this and tried the issue of plaintiffs’ sustained damages which had already been settled, as well as the apportionment of negligence. The plaintiffs’ settlement was based on possible recovery considering contributory negligence and damages when they accepted the $125,-000. The need for the extra hearing after settlement was only to determine the amount State Farm was en *289 titled to, recognizing it stood in their insured drivers’ shoes as to negligence.
The only adversaries left after the settlement were the insureds and their insurance company on whether a settlement made one whole under all the circumstances or whether a new technique had to be developed to determine wholeness. In accepting the latter course, this court puts its imprimatur on the mini-trial (two days) to the court. There is no reason why State Farm and a company in a similar situation could not demand more than a mini-trial but rather a complete jury trial, since its recovery is affected by not only its insureds’ negligence but damages as finally determined by a trier of fact. Therefore, I do not believe the result of this case to be an assistance in moving cases through the courts. The majority’s criticism of the insurance company’s failure to give up its claimed rights at settlement is neither valid nor appropriate.
The other case the majority relies on is Lewandowski v. Continental Casualty Co., 88 Wis. 2d 271 , 276 N.W.2d 284 (1979). I find that relying on that case as authority for the mini-trial in this case is not correct. In Lewandowshi, the court held the very issue that had to be determined in a legal malpractice case was what loss was caused by the attorney’s failure. The court held the issue to be tried was the value and merit of the original claim and stated: “[T]he ultimate goal should be to determine what the outcome should have been if the issue had been properly presented in the first instance.” Lewandowski, supra, at 281 .
In Lewandowski the primary action for an automobile case had been barred by the attorney’s causal negligence and the only way to discover the loss to the client therefore was to try the value of the original action. That is not by any stretch of the imagination a mini or extra proceeding. It is the heart of the matter, the whole is *290 sue. Since a loss was claimed as a result of the attorney’s admitted negligence and causation was found as a matter of law, the only issue between the parties was the loss which consisted of the liability and damages of the client in the automobile accident case. I, therefore, see no precedential value in the Lewandowski case to the mini-trial of this case where the value of the plaintiffs’ claim to them was the settlement.
A specter arises from the court’s ruling that the insured must be made whole before a subrogor has any right of recovery. The issue becomes when is the insured made whole? Is it when the jury makes an award? I would assume so. The majority implies that never in a settlement is a person made whole since it is recognized purely as a compromise and is not the equivalent of being made whole. Therefore, all settlements in the future must determine within them an admission of wholeness or be subject to additional mini-trials.
I dissent and hold under the circumstances of this case that the settlement made the plaintiffs whole and the mini-trial was an advisory opinion which determined facts without the full participation of all parties.
Sec. 269.01, Stats. 1973, provided:
“269.01 Agreed case; affidavit; judgment. Parties to a controversy which might be the subject of a civil action, may agree *286 upon a verified case containing the facts upon which the controversy depends and submit the same to any court which would have jurisdiction if an action were brought. The court shall, thereupon, render judgment as in an action. Judgment shall be entered and docketed as other judgments and with like effect, but without costs for any proceeding prior to the trial.”
This section was subsequently repealed effective January 1, 1976. Supreme Court order, 67 Wis. 2d at 769.