Case ID: wis-2d_132/html/0062-01.html
Source: Caselaw Access Project
Author: {"author": "NETTESHEIM, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN, Plaintiff-Appellant, v. FIREMAN'S FUND INSURANCE COMPANY OF WISCONSIN and Stanley E. Altenbern, Defendants-Respondents.
    
    Court of Appeals
    
      No. 84-1853.
    
    
      Submitted on briefs December 4, 1985.
    
      Decided May 14, 1986.
    
    (Also reported in 390 N.W.2d 79.)
    
      For the plaintiff-appellant, the cause was submitted on the briefs of Donald H. Piper and Terry J. Bath of Fellows, Piper & Schmidt of Milwaukee.
    For the defendants-respondents, the cause was submitted on the briefs of Paul R. Hoefle, Frisch, Dudek and Slattery, Ltd. of Milwaukee.
    Before Scott, C.J., Brown, P.J., and Nettesheim, J.
    
      
       Petition to review granted.
    
   NETTESHEIM, J.

Blue Cross & Blue Shield United of Wisconsin (Blue Cross) appeals a circuit court judgment dismissing its subrogation complaint against Fireman's Fund Insurance Company of Wisconsin (Fireman's) and its insured, Stanley E. Alten-bern.

The circuit court held that Blue Cross's complaint failed to state a claim for relief because it did not allege that Blue Cross's insured had been made whole by virtue of a settlement with Fireman's pursuant to Garrity v. Rural Mutual Insurance Co., 77 Wis. 2d 537, 253 N.W.2d 512 (1977) and Rimes v. State Farm Mutual Automobile Insurance Co., 106 Wis. 2d 263, 316 N.W.2d 348 (1982). We conclude that equitable principles do not require that Blue Cross's insured be made whole by virtue of the settlement with Fireman's. Thus, an allegation to such effect is not essential to Blue Cross's subrogation cause of action. Therefore, we reverse and remand for further proceedings upon the complaint.

Kyle Adams was injured while a passenger in a vehicle driven by Altenbern, owned by Wisconsin Coach-lines, Inc., and insured by Fireman's. Kyle was insured, as a dependent of his father's, by Blue Cross, which paid $10,202.50 for hospital services, medical care and treatment rendered to Kyle as a result of the accident. After this payment, Blue Cross sent Fireman's notification of Blue Cross's subrogation rights.

Subsequently, the Adamses executed a release with Altenbern, Wisconsin Coachlines and Fireman's. For consideration of $60,000, the Adamses agreed to release the parties from "any and all claims, demands, actions and rights of action" arising out of the injuries, damages and losses sustained as a result of the accident. Fireman's policy limits were $100,000. In the release, the Adamses expressly acknowledged that they were not made whole for their damages by virtue of the settlement. Furthermore, the release indicated that because the Adamses were not made whole, the subrogation interest of Blue Cross was extinguished under Rimes.

Blue Cross commenced this subrogation action against Fireman's to recover the $10,202.50 paid on Kyle's behalf. Fireman's moved to dismiss the complaint, claiming that a failure to allege that the Ad-amses had been made whole rendered the complaint defective. The trial court agreed, concluding that such an allegation was essential under Rimes and Garrity.

The issue is whether the complaint states a claim for which relief can be granted. Such an issue presents a question of law. Cf. Morgan v. Pennsylvania General Insurance Co., 87 Wis. 2d 723, 731, 275 N.W.2d 660, 664 (1979); Evans v. Cameron, 121 Wis. 2d 421, 426, 360 N.W.2d 25, 28 (1985). An appellate court is not bound by a trial court's determination of a question of law but decides the matter de novo. First National Leasing Corp. v. City of Madison, 81 Wis. 2d 205, 208, 260 N.W.2d 251, 253 (1977).

We certified the issue in this case to the Wisconsin Supreme Court. In our certification, we inquired whether the holdings in Rimes and Garrity were intended to apply in a fact situation such as here. Our certification was tendered without the benefit of the recent Wisconsin Supreme Court decision in Vogt v. Schroeder, 129 Wis. 2d 3, 383 N.W.2d 876 (1986). In Vogt, the supreme court noted that "[b]oth Garrity and Rimes rest upon the application of equitable principles to a particular set of circumstances." Id. at 13, 383 N.W.2d at 880. The court also noted that both cases presented the "inequitable prospect of insurance companies attempting to take the funds that should have gone to the insured." Id. at 14, 383 N.W.2d at 880. As such, the issue in Rimes and Garrity was one of priority between an insured and an insurer. Vogt concludes that "[t]he teaching of Garrj,ty and Rimes is not the simplistic rule that is urged by Progressive to be of universal application in all subrogation cases. Rather, it is that subrogation depends upon the application of equitable principles to the facts of the case." Id. at 15, 383 N.W.2d at 881.

Vogt presented a case in which an automobile insurer asserted a subrogation claim against an underin-sured tort-feasor and his insurance company premised upon underinsurance motorist coverage payments made to its insured. The supreme court concluded that the underinsurer had a right of subrogation against the tort-feasor and his insurer to the extent of benefits paid to its own insured. Id. at 17, 383 N.W.2d at 882. The supreme court noted that recognition of the subro-gation right comported with the policy provisions and also with generally accepted equitable subrogation principles. See id. at 19, 383 N.W.2d at 882.

The compelling equitable factor which defeated the subrogation right asserted in Rimes/Garrity was the prospect of an insurer seeking funds from its own insured who had not been made whole. Such a factor was not present in Vogt; nor does it present itself in this case. Blue Cross does not assert any claim against the Adamses. Thus, we are not faced with the prospect of a subrogee claiming funds from a tort-feasor that would, in the absence of subrogation, have been applied toward the satisfaction of the insured's damages.

With the reach of Rimes/Garrity having been defined and limited by our supreme court in Vogt, we conclude that equitable principles do not defeat Blue Cross's subrogation right in this case. Therefore, an allegation that the insured was made whole is not essential to Blue Cross's statement of its cause of action. Blue Cross's subrogation rights as provided in the policy can therefore be enforced pursuant to Associated Hospital Service, Inc. v. Milwaukee Automobile Mutual Insurance Co., 33 Wis. 2d 170, 147 N.W.2d 225 (1967), wherein the validity of a subrogation clause such as that involved here was upheld.

By the Court. — Judgment reversed and cause remanded. 
      
       Pertinent portions of the insurance contract were incorporated into the complaint.
     
      
       The supreme court rejected our certification by order dated April 8, 1986 — six days after the release of the Vogt decision.
     
      
       We are aware that the settlement agreement requires the Ad-amses to indemnify the releasees "from any claim that may be made against them in connection with this accident by Blue Cross — Blue Shield United of Wisconsin . . . ." To this end, the amount of Blue Cross's subrogated claim ($10,126.50) has been es-crowed with Fireman's attorneys. While enforcement of this agreement would "divert" the amount of the subrogated claim from the Adamses (the insured) to Blue Cross (the insurer), the Adamses are not parties to this action and the question of any available remedies to them is not before us in this case.