Case Title: Michael Ives v. Coopertools

Citation: 

Docket Number: 1995AP000932

State: wisconsin

Court: Wisconsin Supreme Court

Date: 1997-02-28T00:00:00Z

Document:
SUPREME COURT OF WISCONSIN 
 
                                                              
 
Case No.: 
 
95-0932 
                                                              
 
Complete Title 
of Case: 
 
 
Michael Ives and Tammy Ives,   
 
 
 
 
Plaintiffs-Respondents,  
 
 
 
Rhinelander Paper Company Group Health  
 
 
 
Plan for Hourly Employees Sponsored By  
 
 
 
Rhinelander Paper, Company, Inc.,   
 
 
 
 
Plaintiffs-Appellants-Petitioners,  
 
 
 
 
v. 
 
 
 
Coopertools, a Division of Cooper Industries,  
 
 
 
Inc., Alias Insurance Company No. 1, Cooper  
 
 
 
Industries, Inc., Alias Insurance Company No.  
 
 
 
2, Berns Enterprises, Inc., d/b/a Rhinelander  
 
 
 
Hardware, The Aetna Casualty & Surety  
 
 
 
Company, McGraw-Edison Company and  
 
 
 
Alias Insurance Company No. 4,   
 
 
 
 
Defendants.  
 
 
 
_________________________________________ 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
 
 
 
Reported at:  197 Wis. 2d 938, 541 N.W.2d 247 
 
 
 
 
 
 
(Ct. App. 1995) 
 
 
 
 
 
 
PUBLISHED 
  
                                                              
 
Opinion Filed:  
February 28, 1997 
Submitted on Briefs: 
 
Oral Argument:  
September 5, 1996 
 
                                                              
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Oneida 
 
JUDGE:  
Robert E. Kinney 
 
                                                              
 
JUSTICES: 
 
 
Concurred: 
STEINMETZ, J., concurs (opinion filed) 
 
 
 
WILCOX and CROOKS, JJ., join 
 
 
 
GESKE, J., concurs (opinion filed) 
 
 
 
ABRAHAMSON, C.J. and BABLITCH, J. join 
 
Dissented: 
 
 
Not Participating: 
BRADLEY, J., did not participate 
                                                              
 
ATTORNEYS:  
For the plaintiff-appellant-petitioner there were 
briefs by Matthew E. Yde and Ruder, Ware & Michler, S.C., Wausau 
and oral argument by Matthew E. Yde. 
 
 
 
For the plaintiffs-respondents there was a brief by D.J. Weis 
and Habush, Habush, Davis & Rottier, S.C., Rhinelander and oral 
argument by D.J. Weis. 
 
  
Amicus curiae brief was filed by Mark L. Thomsen and Cannon & 
Dunphy, S.C., Brookfield for the Wisconsin Academy of Trial 
Lawyers. 
 
 
Amicus curiae brief was filed by Terry J. Booth and Fellows, 
Piper & Schmidt, Milwaukee for the Wisconsin Health Insurers. 
 
NOTICE 
This opinion is subject to further editing 
and modification.  The final version will 
appear in the bound volume of the official 
reports. 
 
 
No. 95-0932 
 
STATE OF WISCONSIN               :        
        
 
 
 
 
IN SUPREME COURT 
 
 
MICHAEL IVES AND TAMMY IVES, 
 
  
PLAINTIFFS-RESPONDENTS, 
 
RHINELANDER PAPER COMPANY GROUP HEALTH 
PLAN FOR HOURLY EMPLOYEES SPONSORED BY 
RHINELANDER PAPER COMPANY, INC., 
 
 
PLAINTIFF-APPELLANT-PETITIONER, 
 
 
v. 
 
COOPERTOOLS, A DIVISION OF COOPER 
INDUSTRIES, INC.; ALIAS INSURANCE  COMPANY 
NO. 1; COOPER INDUSTRIES, INC.; ALIAS 
INSURANCE COMPANY NO. 2; BERNS 
ENTERPRISES, INC. d/b/a RHINELANDER 
HARDWARE; THE AETNA CASUALTY & SURETY 
COMPANY; McGRAW-EDISON COMPANY; and ALIAS 
INSURANCE COMPANY NO. 4, 
 
 
DEFENDANTS. 
 
FILED 
 
FEB 28, 1997 
 
Marilyn L. Graves 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
REVIEW of a decision of the Court of Appeals.   Reversed and 
order of the circuit court affirmed. 
¶1 
PER CURIAM.  This is a review of a published decision 
of the court of appeals1, vacating the order of the Circuit Court 
for Oneida County, Robert E. Kinney, Judge.  The question in 
this case is whether a subrogated insurer is entitled to 
reimbursement on its lien when the injured plaintiffs settle 
with the alleged tortfeasors before trial for an amount less 
than their total damages.  We unanimously conclude that the 
                     
1  Ives v. Coopertools, 197 Wis. 2d 937, 541 N.W.2d 247 (Ct. 
App. 1995). 
 
 
No. 95-0932 
 
2
court of appeals erred in its holding that there must be a 
determination of Michael Ives' contributory negligence, if any, 
before the question of reimbursement to Rhinelander can be 
considered.  However, we are evenly divided on the reasons for 
this conclusion. 
¶2 
The published opinion of the court of appeals here 
should not stand when we unanimously agree that it does not 
state the law in Wisconsin.  The court in State v. Gustafson, 
121 Wis. 2d 459, 462, 359 N.W.2d 920, cert. denied, 471 U.S. 
1056 (1985), affirmed a conviction where a majority of the court 
concluded there was prejudicial error, but no majority agreed on 
a particular error.  There, a reversal would have sent the 
matter back for a new trial, but without providing adequate 
guidance to the circuit court.  Id. at 462, citing Will of 
McNaughton, 138 Wis. 179, 118 N.W. 997, 120 N.W. 288 (1909).   
Here, however, we are in agreement as to the proper resolution 
of the contributory negligence question.  Thus, despite our even 
division on the rationale for our decision, we affirm the order 
of the circuit court. 
¶3 
The situation at hand is unlike the case of a tie vote 
on a certification or bypass.  In such instance, if we allow the 
circuit court's decision to stand the parties have in effect 
been denied a full appellate review and opinion.  State v. 
Richard Knutson, Inc., 191 Wis. 2d 395, 396, 528 N.W.2d 430 
(1995).  Here, the parties have had the opportunity of full 
review by both this court and the court of appeals.  Our 
division on reasoning simply means that the analyses of the two 
concurrences have no precedential value.  State ex rel. Thompson 
v. Jackson, 199 Wis. 2d 714, 719, 546 N.W.2d 140 (1996)(citing 
 
 
No. 95-0932 
 
3
State v. Elam, 195 Wis. 2d 683, 685, 538 N.W.2d 249 (1995)(a 
majority of justices must have agreed on a particular point for 
it to be considered the opinion of the court).     
¶4 
Chief Justice Shirley S. Abrahamson, Justice William 
A. Bablitch and Justice Janine P. Geske would vote to reaffirm 
the made whole rule enunciated in Garrity v. Rural Mutual Ins. 
Co., 77 Wis. 2d 537, 253 N.W.2d 512 (1977) and Rimes v. State 
Farm Mut. Auto. Ins. Co., 106 Wis. 2d 263, 316 N.W.2d 348 
(1982), but would overrule Sorge v. National Car Rental System, 
Inc., 182 Wis. 2d 52, 57, 512 N.W.2d 505 (1994).  This rule 
focuses on what an injured plaintiff has lost, and not on what 
an injured plaintiff can legally receive.2  Justices Donald W. 
Steinmetz, Jon P. Wilcox and N. Patrick Crooks would conclude 
that, in the case of a settlement before trial, the circuit 
court should assess the subrogated insurer's rights of recovery 
at a rate equal to the percentage of the plaintiff's recovery in 
relation to his or her gross damages.  Attorney's fees and costs 
may be handled on a pro rata basis as well, if the insurer is 
not represented by counsel.3  Justice Ann Walsh Bradley did not 
participate. 
¶5 
 
By the Court.—For the reasons set forth, the 
decision of the court of appeals is reversed, and the order of 
                     
2  See attached concurrence written by Justice Geske.  This 
concurrence also sets out the facts of this case. 
3  See attached concurrence written by Justice Steinmetz. 
 
 
No. 95-0932 
 
4
the circuit court denying Rhinelander's claim for reimbursement 
is affirmed. 
 
 
No. 95-0932.jpg 
 
1
¶6 
JANINE P. GESKE, J. (concurring).  In our opinion, 
Rhinelander is not entitled to reimbursement of its lien because 
the circuit court determined that the Iveses were not made whole 
by their settlement with the alleged tortfeasors.4  We start with 
a recitation of the facts as presented to us.   
Facts and Procedural History 
¶7 
In November 1989, 
Michael 
Ives sustained 
severe 
injuries when he fell out of a tree after his homemade deer 
stand collapsed.  Rhinelander Paper Company Group Health Plan 
for Hourly Employees Sponsored by Rhinelander Paper Company, 
Inc. ("Rhinelander"), paid $132,292 in medical expenses Michael 
incurred because of the accident.5  Michael and Tammy Ives sued 
the manufacturer and seller of a double-end snap cap Michael 
used to hold his deer stand in place, and also named the 
insurers 
of 
the 
manufacturer 
and 
seller 
(hereinafter, 
collectively, "the defendants").  The Iveses alleged that the 
double-end snap cap failed, causing the deer stand to collapse. 
  Rhinelander employed counsel to participate in the Iveses' 
                     
4  Chief Justice Shirley S. Abrahamson and Justice William 
A. Bablitch join in this concurrence. 
5  The parties make no claim that the insurance coverage 
provided by Rhinelander was part of a self-funded ERISA plan.  
Subrogation provisions of a self-funded ERISA plan trump state 
subrogation rules.  FMC Corp. v. Holliday, 498 U.S. 52, 58-65 
(1990).  According to the pleadings, the original subrogated 
plaintiff, Employers Insurance Company, sold health insurance 
policies for a premium, and had issued a policy to Michael and 
Tammy Ives, pursuant to which it may have made payment of 
medical bills relating to the accident.   
 
 
No. 95-0932.jpg 
 
2
suit and to prosecute its subrogation claim for payment of 
Michael's medical expenses.6 
¶8 
Approximately one 
week before 
trial, 
the 
Iveses 
entered into a settlement with the defendants.  The defendants 
paid $261,250 to fully settle the $1.5 million claim that 
included 
the 
past 
medical 
expenses 
previously 
paid 
by 
Rhinelander.  This settlement extinguished Rhinelander's claim 
against the defendants.  Schulte v. Frazin, 176 Wis. 2d 622, 
634-35, 500 N.W.2d 305 (1993).  The Iveses then requested a 
post-settlement subrogation hearing7 to determine their potential 
liability, if any, to Rhinelander out of the settlement 
proceeds.  For purposes of the post-settlement subrogation 
hearing, the Iveses and Rhinelander stipulated to the following 
facts: 
 
1. 
Plaintiffs' total damages as a result of injuries 
to Plaintiff MICHAEL IVES following his fall from a 
deer stand on or about November 10, 1989, are 1.5 
million dollars. 
 
2. 
That the defendants' payment of $261,250.00 in 
full settlement of all personal injury and property 
damage claims arising out of Plaintiff MICHAEL IVES' 
fall from a deer stand on or about November 10, 1989, 
is full-value for the Plaintiffs' claims based on the 
following factors: 
 
 
a. 
Liability difficulties; and  
                     
6  In this case, counsel agreed at oral argument that this 
is a claim for contractual subrogation.  The insurance policy 
under which Rhinelander makes its claim, however, is not part of 
the record before this court. 
7  Following the decision in Rimes v. State Farm Mut. Auto. 
Ins. Co., 106 Wis. 2d 263, 316 N.W.2d 348 (1982), this type of 
post-settlement subrogation hearing came to be known as a "Rimes 
hearing." 
 
 
No. 95-0932.jpg 
 
3
b. 
Uncertainty of successor corporate liability on 
the Coopertools defendants. 
 
3. 
That 
due 
to 
liability 
problems 
and 
the 
uncertainty of successor corporate liability, the 
Plaintiffs accepted 17.42 percent of their total 
damages 
arising 
out 
of 
the 
November 
10, 
1989, 
accident. 
 
4. 
That Plaintiffs' decision to accept 17.42 percent 
of their total damages was not based on insufficient 
insurance coverage or the unavailability of funds on 
the part of the defendants to satisfy a 1.5 million 
dollar judgment. 
 
5. 
That 
Rhinelander 
has 
paid 
medical 
expenses 
($128,487.40) 
and 
accident 
and 
sickness 
benefits 
($3,804.60) relating to this accident in the amount of 
$132,292.00. 
 
¶9 
Relying upon this court's decision in Rimes, 106 Wis. 
2d 263, the circuit court held that the Iveses were not made 
whole.  The court considered the stipulated facts, and found 
that the settlement did not compensate the Iveses for their 
entire actual loss.  Further, the circuit court concluded that 
the equities of the case favored the Iveses.  Thus, Rhinelander 
was not entitled to reimbursement of its subrogated lien.  
¶10 The court of appeals vacated the order of the circuit 
court. Relying upon Sorge v. National Car Rental System, Inc., 
182 Wis. 2d 52, 512 N.W.2d 505 (1994), the court of appeals 
remanded for a determination of Michael Ives' percentage of 
contributory negligence.  Because the Iveses stipulated that 
they received 17.42 percent of their damages in the settlement, 
the appellate court calculated that the settlement would make 
the Iveses whole only if Michael was 82.58 percent or greater 
contributorily 
negligent. 
 
The 
court 
of 
appeals 
further 
concluded that Rhinelander had a right of priority in any money 
 
 
No. 95-0932.jpg 
 
4
collected over the amount of the Iveses' total damages, 
discounted 
for 
the 
percentage 
of 
Michael's 
contributory 
negligence, up to the amount of benefits paid.  The court held 
that a settlement discounted for factors other than the 
plaintiff's contributory negligence does not make the insured 
whole.  Finally, the court of appeals held that the Wis. Stat. § 
895.045 (1989-90) bar to recovery in negligence actions has no 
application to the equitable resolution of a subrogation 
dispute.8 
Standard of Review 
¶11 In this case we are asked to determine the rights of 
the insured and the subrogated insurer when the insured has 
settled with the defendants without involving the subrogated 
insurer.  This case presents a question of law that we decide 
without deference to the lower courts.  Schulte v. Frazin, 176 
Wis. 2d 622, 628, 500 N.W.2d 305 (1993).  In doing so, we apply 
principles of equity to the facts before us.  Beacon Bowl, Inc. 
v. Wisconsin Electric Power Co., 176 Wis. 2d 740, 776, 501 
N.W.2d 788 (1993). 
                     
8  Wis. Stat. § 895.045 (1989-90) provides: 
Contributory negligence.  Contributory negligence 
shall not bar recovery in an action by any person or 
his 
legal 
representative 
to 
recover damages for 
negligence resulting in death or in injury to person 
or property, if such negligence was not greater than 
the negligence of the person against whom recovery is 
sought, but any damages allowed shall be diminished in 
the 
proportion 
to 
the 
amount 
of 
negligence 
attributable to the person recovering. 
All further references are to the 1989-90 statutes unless 
otherwise noted. 
 
 
No. 95-0932.jpg 
 
5
Arguments of the Parties 
¶12 Rhinelander asserts that the Iveses have been made 
more than whole by their settlement with the tortfeasors.  The 
Iveses settled for an amount equaling 17.42 percent of their 
stipulated total damages of $1.5 million.  According to their 
stipulation, the settlement of $261,250.00 was full-value9 and 
compensated the Iveses for their personal injury and property 
damage claims arising out of Michael Ives' fall.  In light of 
that, Rhinelander proposes a formula whereby it would receive in 
reimbursement 17.42 percent of its lien.  Such a formula 
incorporates the percentage of the stipulated total damages that 
the Iveses received.  Under Rhinelander's theory this formula 
would prevent a double recovery of that percentage by the 
Iveses.  Rhinelander alternatively argues for a full-blown 
evidentiary determination of contributory negligence. 
¶13 Rhinelander asserts that the Iveses have been more 
than made whole, in fact, that their recovery has greatly 
exceeded the amount of damages they were legally entitled to 
recover.  Rhinelander's assertion is premised on the assumption 
that, had there been an actual trial,  Michael Ives would have 
been found at least 50% negligent.  This is only an assumption, 
however, because at the Rimes hearing in this case the circuit 
                     
9  This court is not called upon by the parties to interpret 
the meaning of "full-value" as used in their stipulation. The 
circuit court also refused to interpret that term. For purposes 
of this concurrence, we read the terms of the entire stipulation 
to recognize that the plaintiffs and alleged tortfeasors decided 
to settle all of the plaintiffs' claims for damages arising from 
this accident, rather than assume the risks facing each of them 
at a trial. 
 
 
No. 95-0932.jpg 
 
6
court did not make a specific finding as to liability.  Without 
hearing any evidence, Judge Kinney merely remarked that the most 
likely result would be a jury finding that the incident here was 
a "pure accident."  Judge Kinney also acknowledged that this 
remark was speculation on his part. 
¶14 The Iveses contend that the pre-trial release they 
executed does not make them whole because it does not compensate 
them for all of the elements of their damages under Rimes.  They 
seek to distinguish the settlement agreement and stipulation 
they entered into here from the agreement and stipulation in an 
earlier subrogation case, Sorge, 182 Wis. 2d 52.  There the 
plaintiff acknowledged that the settlement amount, which took 
into account a deduction for her contributory negligence, was 
all that she was legally entitled to receive.  The Iveses agree, 
based on Sorge, that when a settling plaintiff receives all that 
he or she is legally entitled to receive, the plaintiff meets 
the made whole test of Rimes. 
¶15 Finally, the Iveses ask this court to conclude that 
the circuit court here did all that it needed to decide the made 
whole question.  The court relied on the stipulation between the 
parties and "on its knowledge of the evidentiary facts derived 
from having done extensive work on the file prior to the Rimes 
hearing," weighed the equities, and then held that the Iveses 
had not been made whole.  Respondents' brief at 5. 
Purpose and History of Subrogation 
¶16 Our analysis leads us to believe that the made whole 
doctrine should be reaffirmed.  As part of our analysis we 
 
 
No. 95-0932.jpg 
 
7
review the development of the subrogation doctrine.  Subrogation 
has its genesis in the principle of indemnity.  Although an 
insured is entitled to indemnity from its insurer pursuant to 
coverage provided under a policy of insurance, the insured is 
entitled 
only 
to 
be 
made 
whole, 
not 
more 
than 
whole.  
Subrogation prevents an insured from obtaining one recovery from 
the insurer under its contractual obligations and a second 
recovery from the tortfeasor under general tort principles.  The 
subrogation doctrine also advances an important policy rationale 
underlying the tort system.  It forces a wrongdoer who has 
caused a loss to bear the burden of reimbursing the insurer for 
indemnity payments made to its insured as a result of the 
wrongdoer's acts and omissions.  See Elaine M. Rinaldi, 
Apportionment of Recovery Between Insured and Insurer in a 
Subrogation Case, 29 Tort. & Ins. L.J. 803 (1994). 
¶17 Another author traces the development of subrogation 
from cases involving the liability of a surety.  Harriette R. 
Flinn, Subrogation - Insured Must Be Paid In Full For Loss 
Before Insurer Is Entitled To Subrogation Against Tortfeasor, 10 
Mem. St. U. L. Rev. 161, 162-63 (1979).  Where an insurer pays 
its full obligation under the policy, but that amount is less 
than the insured's entire loss, the insurer's liability is 
nonetheless limited by the policy amount.  Id.  The question 
then arose whether the common law which developed to protect 
creditors in a surety situation should apply to the situation 
where the insurer has already paid in full compliance with his 
policy but the insured's loss exceeds the insurance payment.  In 
 
 
No. 95-0932.jpg 
 
8
the absence of an express agreement to the contrary, the 
traditional rule has been that the common law rule prevails and 
the insurer has no subrogation rights until the insured is made 
whole, that is, until the insured has been compensated for the 
entire loss sustained.  Author Flinn also noted, however, that 
it has become standard practice for indemnity contracts to 
contain express provisions subrogating the insurer who has paid 
a claim to all of the rights of the insured against a wrongdoer. 
 Id.   
¶18 In 1977, this court held that a subrogation clause in 
an indemnity insurance contract did not change the common law 
rule that a subrogated insurer has no right to share in the 
funds recovered from the tortfeasor until the insured is made 
whole.  Garrity v. Rural Mutual Ins. Co., 77 Wis. 2d 537, 546-
47. The insureds suffered a fire loss to their dairy barn and 
other property, for which they were paid the limits under their 
Rural Mutual fire insurance policy.  Id. at 539.  The parties 
stipulated that the insureds' total loss exceeded the fire 
policy limits.  Id.  In other words, the Garritys were not made 
whole.  Id. at 543.  The Garritys then sued the owners of a feed 
mill, alleging that negligent operation of a feed truck caused 
the fire.  Id. at 539.  The alleged tortfeasors were also 
insured by Rural Mutual for liability coverage limits of 
$25,000.  Id.  
¶19 The Garritys executed a subrogation receipt under 
their fire policy granting to Rural Mutual a right of recovery 
against any party found liable for their loss.  Because Rural 
 
 
No. 95-0932.jpg 
 
9
Mutual also insured the alleged tortfeasors, it sought a 
declaration of its rights of subrogation against itself.  Id. at 
539-40. 
¶20 The circuit court entered an interlocutory judgment 
granting Rural Mutual the right of priority in any recovery of 
money from defendants or their insurer, up to the amount paid 
under the fire policy.  Id. at 540.  Under that ruling, Rural 
Mutual would not have had to pay any more money to plaintiffs 
even if its insured tortfeasors were found negligent.  Id. 
¶21 This court disagreed with the circuit court ruling 
which incorrectly gave the contractual language primacy over the 
common law rule that an insured must be made whole before the 
insurer may recover from the tortfeasor.  Id. at 541.  The court 
focused on the distinction between the right of recovery 
provided in the subrogation clause and the common law rule 
dictating priority of payment to an insured who has not been 
made whole.  Id. at 544-46.  In Garrity, the court relied upon 
the following rationale for the made whole rule: "[t]he owner of 
the policy should be first to make good his own loss; where 
either the insurer or the insured must to some extent go unpaid, 
the loss should be borne by the insurer for that is a risk the 
 
 
No. 95-0932.jpg 
 
10
insured has paid it to assume.”  Id. at 542.10  In other words, 
the insurer has no right of reimbursement against the insured 
where the total compensation received by the insured is less 
than his loss.  Id. at 543.  Garrity involved only a claim for 
property damage. 
¶22 As the Garrity decision demonstrates, subrogation 
rights are common under policies of property or casualty 
insurance, wherein the insured sustains a fixed financial loss 
and the purpose is to place that loss ultimately upon the 
wrongdoer.  3 Appleman, Insurance Law and Practice s 1675, at 
495 (1967).  The more recent disputes concerning the propriety 
of subrogation reimbursement have occurred in cases of personal 
injury.  In Rimes, this court reviewed a procedure applying the 
                     
10  Although Justice Steinmetz' concurrence criticizes an 
alleged reliance on Essock v. Mawhinney, 3 Wis. 2d 258, 88 
N.W.2d 659 (1958) for the made whole theory in Garrity v. Rural 
Mut. Ins. Co., 77 Wis. 2d 537, 253 N.W.2d 512 (1977), neither 
Garrity nor Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 
263, 316 N.W.2d 348 (1982) even cite to Essock.  Essock stands 
for the proposition that mere uncertainty as to the amount of 
damages does not preclude a right of recovery.  See, e.g., Hein 
v. Torgerson, 58 Wis. 2d 9, 18-19, 205 N.W.2d 408 (1973); Hope 
Acres, Inc. v. Harris, 27 Wis. 2d 285, 298, 134 N.W.2d 462 
(1965). 
Justice Steinmetz' concurrence is also critical of the 
Garrity court's failure to rely on Wisconsin precedent in 
adopting the made whole theory.  The issue in Garrity was one of 
first impression in Wisconsin.  Any time there is a case of 
first impression, we look to other state jurisdictions and 
treatises for guidance.  At the time the Garrity decision was 
published it was consistent with the rule in several other 
states and with the interpretations of commentators such as 4 
Williston on Contracts, sec. 1269 (Third ed. 1967) and Couch on 
Insurance, sec. 61.61 (2d ed. 1968).  For the past twenty years, 
Garrity has been precedent in this state.  Many cases, including 
the decision in Sorge v. National Car Rental System, Inc., 182 
Wis. 2d 52, 62, 512 N.W.2d 505 (1994), have cited to or relied 
upon Garrity.   
 
 
No. 95-0932.jpg 
 
11
made whole inquiry to a personal injury case.  106 Wis. 2d 263. 
 There the majority reluctantly approved the circuit court's use 
of a post-settlement evidentiary "mini-trial" to determine the 
plaintiffs' total amount of damages and apportionment of 
negligence between plaintiff and tortfeasors.  Id. at 276-79.  
¶23 In Rimes, the plaintiff was injured in an automobile 
accident involving three other vehicles.  Id. at 265.  The 
plaintiff ultimately dismissed one of the defendants with 
prejudice, and on the second day of trial accepted settlement 
from the insurers of the remaining vehicle owners.  Id. at 266-
67.  The settlement included the $50,000 policy limits of one 
policy, and $75,000 out of a total $300,000 limit from the other 
policy.  Id. at 267.  
¶24 The plaintiffs and their subrogated insurer then 
agreed to seek a "trial" concerning the insurer's claim to 
reimbursement for medical payments previously made on behalf of 
the injured plaintiff.  Id. at 267.  The circuit court held a 
two-day hearing, found no contributory negligence and found 
total damages of over $300,000.  Id. at 268-69.  The circuit 
court held that only the amount of total damages would make the 
plaintiffs whole.  Because the settlement amount fell far short, 
the subrogated insurer was not entitled to reimbursement.  Id. 
at 269. 
¶25 On appeal, the insurer asserted that the plaintiffs' 
voluntary settlement and release in Rimes was the legal 
equivalent of being made whole.  This court disagreed for 
several reasons.  Id. at 273.  There was no evidence of an 
 
 
No. 95-0932.jpg 
 
12
acknowledgment by the plaintiffs that the settlement during 
trial had made them whole.  Id. at 267-68, 273.  No recital in 
the plaintiffs' stipulation evidenced an acknowledgment of 
wholeness.  Id. at 273.  The court particularly noted that the 
plaintiffs, in their general release, set aside an escrow fund 
in the amount of the insurer's subrogated claim.  That escrow 
fund indicated to us that the plaintiffs did not consider 
themselves whole.  Id.  The court therefore refused to assume 
that the grantor of a release acknowledged full reimbursement 
for the wrong done.  Id.  By their settlement with the 
tortfeasors, the Rimes plaintiffs gave up their right of action 
against the defendants for consideration that may or may not 
have made them whole.  Id. 
¶26 Only where an injured party has received an award by 
judgment or otherwise that pays for all of his or her elements 
of damages, including those for which the insured has already 
been indemnified by an insurer, is there a right to subrogation 
reimbursement.  Id. at 275.11  In light of the facts in Rimes, 
and in accordance with the general principles of subrogation 
stated in Garrity, this court concluded that the settlement in 
Rimes did not make the plaintiffs whole.  Id. at 276.  
                     
11  The made whole rule of Rimes v. State Farm Mut. Auto. 
Ins. Co., 106 Wis. 2d 263, 316 N.W.2d 348 (1982) has become the 
default federal common law rule in the Seventh Circuit where an 
employee benefit plan fails to designate priority rules or 
provide its fiduciaries the discretion necessary to construe the 
plan accordingly.  Schultz v. Nepco Employees Mut. Benefit, 190 
Wis. 2d 742, 751-52, nn.9-10, 528 N.W.2d 441 (Ct. App. 1994), 
citing Sanders v. Scheideler, 816 F. Supp. 1338 (W.D. Wis. 
1993), aff'd by unpublished order, 25 F.3d 1053 (7th Cir. 1994).  
 
 
No. 95-0932.jpg 
 
13
¶27 Four years later, this court cautioned that the made 
whole principle of Rimes and Garrity was not absolute. Vogt v. 
Schroeder, 129 Wis. 2d 3, 16-17, 383 N.W.2d 876 (1986).  There 
we were asked, prior to a trial, to balance the equities between 
an underinsurer who had paid benefits and an underinsured 
tortfeasor who had not paid for the damages he caused.  Id. at 
17.  In doing so, the court recognized the equitable principle 
derived from Garrity that "the wrongdoer should be responsible 
for his conduct and not be allowed to go scot-free by failing to 
respond in damages while another, an indemnitor for the injured 
party, is required to do so."  Id. at 13.  The court concluded 
that once the injured plaintiff's underinsurance carrier paid at 
least the maximum amount obtainable from the underinsured 
motorist's carrier, the underinsurer could assert a subrogation 
reimbursement claim against the tortfeasor's insurer.  The 
outcome in Vogt was based on this court's policy of promoting 
prompt settlement, and served to put the burden of final payment 
on the tortfeasor for the amount in excess of his coverage.  Id. 
at 19.  Under Vogt, a plaintiff can take advantage of the 
defendant's settlement offer and an underinsurer can protect its 
right to subrogation reimbursement.  Id. at 23. 
¶28 In 1993 the court considered a claim for subrogation 
where the insurer sought subrogation recovery against the 
tortfeasor regardless of the answer to the made whole inquiry.  
Schulte v. Frazin, 176 Wis. 2d 622, 628.  In Schulte, the 
injured plaintiffs and defendants entered into a $2,460,000 
settlement of a medical malpractice claim. Id. at 626.  The 
 
 
No. 95-0932.jpg 
 
14
settlement agreement did not provide for any payment to the 
subrogated carrier.  Id.  The settlement agreement did provide 
that the plaintiffs would indemnify the defendants for any 
liability arising out of the incident.  Id. at 626-27.  
Application of the subrogation principle depended upon the 
equities, and thus upon the facts at hand.  Id. at 631.  This 
court also recognized that any determination of rights to 
subrogation 
reimbursement 
must 
consider 
the 
realistic 
competition between an insured and the subrogated insurer for 
limited settlement funds.  Id. at 633. 
¶29 The ultimate holding in Schulte reiterated the Rimes 
rule and affirmed the need for a made whole inquiry.  However, 
we also concluded in Schulte that where the plaintiffs settled 
with defendants, indemnified the tortfeasors and moved for a 
subrogation hearing, the plaintiffs not only extinguished their 
claim 
against 
the 
tortfeasors 
but 
also 
extinguished 
the 
subrogated insurer's claim against the tortfeasors.  176 Wis. 2d 
at 634-35. 
¶30 Not long after Schulte this court confronted the 
effect of contributory negligence on the made whole inquiry.  
Sorge, 182 Wis. 2d 52.  There, the parties asked us to determine 
whether an insurer had a right to subrogation reimbursement when 
the plaintiff settled before trial.  Unlike the plaintiff in 
Rimes, however, the Sorge 
plaintiff 
admitted 
contributory 
negligence.  Id. at 55.  She settled for what she later 
stipulated would have been her recovery following a jury trial. 
 Id. at 55-56. 
 
 
No. 95-0932.jpg 
 
15
¶31 It is clear that the Sorge case was brought to this 
court based on stipulated facts, and not following a trial or 
the traditional Rimes hearing.  In our view, it is unfortunate 
that the Sorge stipulation did not provide us with the usual 
facts necessary for a made whole determination.  The stipulation 
did not identify the amount of the plaintiff's total damages, 
that is, the amount that would have made her whole under Rimes 
and Garrity.  Alternatively, the stipulation did not identify 
the particular percentage of plaintiff Sorge's negligence.  
Sorge's attorney represented that the stipulation did, however, 
provide that "Ms. Sorge settled the case for an amount less than 
the total damages that she had, minus the total amount of the 
subrogated – the subrogated carrier's liens, but in an amount 
which would have been equal to what she would have received from 
a jury after a reasonable deduction for - for her contributory 
negligence."  Brief for Petitioner at App. F-4, Sorge, 182 Wis. 
2d 52.12  
                     
12  There appears to be confusion in the Sorge record as to 
what damages the settlement amount included.  The attorney for 
the subrogated insurer claimed at the same hearing at which the 
plaintiff's attorney recited 
the 
stipulation, 
that 
"[t]he 
medical expenses were paid on her behalf by the medical 
providers, and then she received a settlement which included in 
it the medical expenses again.  She's paid twice.  Rimes wants 
to avoid that."  Brief for Petitioner at App. F-9.  Attorney 
Stingl later argued, "Judge, I don't think the reduction – I 
don't think there's any stipulation anyplace that said the 
reduction is because of the medical expenses. . . . What was 
said was the reduction was for her own negligence."  Brief for 
Petitioner at App. F-12, Sorge v. National Car Rental System, 
Inc., 182 Wis. 2d 52, 512 N.W.2d 505 (1994).  It does not appear 
from the Sorge record that this dispute was ever resolved.  
 
 
No. 95-0932.jpg 
 
16
¶32 Although the Rimes and Garrity decisions did not apply 
the made whole doctrine to a contributorily negligent injured 
person, in Sorge this court tried to satisfy the underlying 
policies behind both the doctrine of subrogation reimbursement 
and the made whole rule of those earlier cases.  Sorge said that 
a contributorily negligent injured person is made whole such 
that her insurers may assert their reimbursement rights when the 
insured has been compensated for all of her losses less the 
amount corresponding to her contributory negligence.  Sorge, 182 
Wis. 2d at 58, 62. 
¶33 This court ultimately concluded in Sorge that an 
injured plaintiff who is at most 50 percent negligent must 
reimburse the insurance company for the share of the medical 
bills it paid corresponding to the tortfeasor's share of 
negligence.  Id. at 61-63.  As we now read Sorge, that 
conclusion would lead to the following result: for example, if a 
jury 
finds 
a 
plaintiff 
to 
be 
10 
percent 
contributorily 
negligent, the plaintiff's net award is 90 percent of his or her 
awarded damages.  Likewise, the subrogated insurer would recover 
90 percent of the subrogated medical expenses rather than the 
full 100 percent.  The Sorge court wrote that if no subrogated 
amounts were to be paid back until the insured had received 100 
percent of his or her total damages, a plaintiff who conceded 
contributory negligence would never have to repay any subrogated 
 
 
No. 95-0932.jpg 
 
17
medical expenses.13  Id. at 60.  We now are of the opinion that 
our conclusion in Sorge was erroneous. 
The Made Whole Inquiry Today 
¶34 We recognize that, in light of our decision in Sorge, 
the court of appeals below took a logical step by remanding for 
a determination of 
Michael 
Ives' 
contributory 
negligence.  
Although not explicitly directed by the court of appeals, the 
circuit court would necessarily have to determine the negligence 
of all of the alleged tortfeasors.  The court of appeals also 
was compelled to rule on the applicability of the contributory 
negligence bar as contained in Wis. Stat. § 895.045. The Iveses' 
attorney vividly described the possible outcomes, based on prior 
case law: 
 
In this case, under the Court of Appeals ruling, 
Michael Ives'(sic) is made whole if he is found to be 82.58 
percent or greater contributorily negligent.  So, at the 
"mini-trial," Rhinelander must focus on Michael Ives' 
contributory negligence and get a ruling of at least 82.58 
percent of contributory negligence from the trial court in 
order to recover at all.  If the trial court reaches that 
magic number, then Rhinelander recovers.  Under the Court 
                     
13  Justice Steinmetz' concurrence incorrectly asserts that 
the Wisconsin Academy of Trial Lawyers ("WATL") proposed 
factoring 
in 
the 
plaintiff's contributory 
negligence 
when 
determining the made whole number.  Steinmetz conc. at 5, n.4.  
WATL's proposal, referred to in footnote 4, is consistent with 
Rimes and Garrity: the settlement amount plus the insurers' 
payments equals the total amount of her losses, or the made 
whole number.  Both Justice Steinmetz' concurrence and the 
opinion in Sorge misinterpret WATL's position.  WATL's amicus 
brief in Sorge did not advocate a proration of the settlement 
recovery from the tortfeasors between plaintiff Sorge and her 
subrogated insurers.  Rather, WATL merely suggested that any 
amounts the plaintiff recovered beyond her made whole number be 
divided between her two insurers.  Brief of Amicus WATL at 8, 
Sorge v. National Car Rental System, Inc., 182 Wis. 2d 52, 60 
n.5, 512 N.W.2d 505 (1994). 
 
 
No. 95-0932.jpg 
 
18
of Appeals formula, they would recover up to 17.42 percent 
of its total lien. 
 
However, if Rhinelander does a somewhat better job in 
proving Michael Ives' negligence, and the trial court finds 
Michael Ives 90 percent negligent, Rhinelander recovers 
only 10 percent of its total lien.  To take this a step 
further, if Rhinelander does the best job it can in proving 
Michael Ives' contributory negligence, and the trial court 
finds Michael Ives 100 percent negligent, Rhinelander gets 
nothing, just as it would have if Michael Ives had not been 
made whole. 
 
Respondents' brief, at 12. 
¶35 The parties before the court acknowledge the uncertain 
and unworkable status of the current law on subrogation 
reimbursement.  They seek guidance so that the principles of 
earlier decisions may be properly applied, where possible, to 
pre-trial settlements.14  Neither party seeks a trial on 
liability.15  At oral argument, counsel for Rhinelander and the 
Iveses agreed 
that 
a 
full 
trial 
on 
liability 
would be 
unworkable, time-consuming, expensive and contrary to judicial 
economy. 
¶36 To respond to the parties before us, we would return 
to traditional principles of subrogation.  We give the doctrine 
of subrogation a liberal application.  D'Angelo v. Cornell 
Paperboard Products Co., 19 Wis. 2d 390, 402, 120 N.W.2d 70 
(1963); Perkins v. Worzala, 31 Wis. 2d 634, 639, 143 N.W.2d 516 
(1966). However, subrogation reimbursement will not be permitted 
                     
14  When we refer to a settlement by the parties here, we 
refer to a settlement between the injured plaintiff and all 
remaining tortfeasor defendants.  In this concurrence, we do not 
address a settlement with fewer than all of the defendants. 
15  Nor did either party request a jury to hear the evidence 
offered at the post-settlement subrogation hearing. 
 
 
No. 95-0932.jpg 
 
19
where it works a result that is contrary to public policy.  
First Nat. Bank of Columbus v. Hansen, 84 Wis. 2d 422, 429, 267 
N.W.2d 367 (1978). "Subrogation is based on equity and is 
permitted only when the rights of those seeking subrogation have 
greater equity than those who oppose it." 84 Wis. 2d at 429.  As 
the court said in Cunningham v. Metropolitan Life Ins. Co., 121 
Wis. 2d 437, 455, 360 N.W.2d 33 (1985), we are not ready to 
dispose of our long standing doctrine of equitable subrogation. 
 Here we would reaffirm the equitable principles which underlie 
the doctrine.16 
¶37 The made whole principle has been characterized as the 
primary doctrine developed to alleviate the harshness of 
subrogation.  Roger M. Baron, Subrogation: A Pandora's Box 
Awaiting Closure, 41 S. Dak. L. Rev. 237, 238 (1996).  This 
court defined made whole in Rimes by saying that where there is 
a claim for either equitable or conventional subrogation, the 
insurer will not share in the recovery from the tortfeasor if 
the total amount recovered by the insured from the insurer and 
the wrongdoer does not cover his or her entire loss.  106 Wis. 
2d at 271.  After the plaintiff and defendants have settled, 
either the settling plaintiff or the subrogated insurer may 
request a Rimes hearing.  At that hearing the circuit court will 
determine whether the injured plaintiff has been made whole, 
                     
16  The made whole rule, requiring as it does case-by-case 
"satellite litigation" after the underlying action has been 
settled, has been criticized as counterproductive and as further 
diminishing the funds available to the injured insured for 
compensation.  Roger M. Baron, Subrogation: A Pandora's Box 
Awaiting Closure, 41 S. Dak. L. Rev. 237, 251 (1996). 
 
 
No. 95-0932.jpg 
 
20
that 
is, 
whether 
the 
injured 
plaintiff 
has 
been 
fully 
compensated for the loss sustained. 
¶38 We believe that the Sorge court failed to apply this 
formula, in part because the parties created a stipulated record 
that did not contain the plaintiff's total damage figure.17  
Nonetheless, the Sorge court proceeded to rule that the insurers 
were entitled to reimbursement because the insured had "received 
all that she was legally entitled to receive," without actually 
calculating her total damages.  We would now vote to overrule 
our holding in Sorge.  By doing so, we would preserve the 
                     
17  It is appropriate to note at this juncture, as even 
counsel for the Iveses stated at oral argument here, that Sorge 
was a "set-up" case.  The payments made by the insurers were 
quite small, and represented a very small portion of plaintiff 
Sorge's total damages, based on her ultimate settlement amount. 
 It is clear that the parties, including the amicus in that 
case, were interested in a rule of law to apply to future cases. 
 Unfortunately, at the time Sorge was decided this court did not 
envision the problems we now face in determining rights to 
subrogation reimbursement.  The Sorge decision represented a 
fundamental change from our long-standing rule in Rimes, and in 
our view, is not tenable.  Without performing the made whole 
calculation established in Rimes, the Sorge court erred by 
broadly stating that a contributorily negligent plaintiff could 
never be made whole. 
 
 
No. 95-0932.jpg 
 
21
requirement for a made whole determination before a subrogated 
insurer may be reimbursed.18 
¶39 A 
majority 
of 
jurisdictions 
that 
still 
permit 
reimbursement to a subrogated carrier in personal injury actions 
adhere to the made whole rule of Garrity and Rimes.19  See, e.g., 
Powell v. Blue Cross & Blue Shield, 581 So. 2d 772, 777 (Ala. 
1990); Marquez v. Prudential Property & Cas. Ins. Co., 620 P.2d 
29, 32-33 (Colo. 1980)(interpreting statute to be consistent 
with insured-whole rule); Magsipoc v. Larsen, 639 So. 2d 1038, 
1042 (Fla. Dist. Ct. App. 1994); Hardware Dealers Mut. Fire Ins. 
Co. v. Ross, 262 N.E.2d 618, 621 (Ill. App. Ct. 1970); Capps v. 
Klebs, 382 N.E.2d 947, 951 (Ind. Ct. App. 1978)(construing 
statute as intending to confer right of subrogation only in 
                     
18  We take this view notwithstanding our recognition of 
appellate decisions that a statute may limit or preempt the 
common law made whole rule.  See, e.g., Waukesha County v. 
Johnson, 107 Wis. 2d 155, 161-62, 320 N.W.2d 1 (Ct. App. 
1982)(reimbursement formula set forth in Wis. Stat. § 49.65 
(1977) rendered inapplicable common law rule and permitted 
counties to be reimbursed for medical assistance payments from 
the proceeds of automobile accident settlements despite the fact 
that the recipients had not been fully compensated); Martinez v. 
Ashland Oil, Inc., 132 Wis. 2d 11, 15-16, 390 N.W.2d 71 (Ct. 
App. 1986)(distribution scheme in Wis. Stat. § 102.29 (1975) 
permitted a worker's compensation carrier to share in the 
settlement proceeds recovered from a third party by a wife and 
child of a worker killed in an industrial accident, even though 
the wife and child had not been made whole); Petro v. D.W.G. 
Corp., 148 Wis. 2d 725, 727-28, 436 N.W.2d 875 (Ct. App. 
1989)(by enacting Employee Retirement Income Security Act of 
1974, Congress preempted state's subrogation law and proof that 
the injured person had been made whole not necessary for 
insurer's recovery from the settlement proceeds).  
19  See Roger M. Baron, Subrogation: A Pandora's Box 
Awaiting Closure, 41 S. Dak. L. Rev. 237, 250 (1996). See also 
collected cases in Elaine M. Rinaldi, Apportionment of Recovery 
between Insured and Insurer in a Subrogation Case, 29 Tort & 
Ins. L.J. 803, 807 (1994). 
 
 
No. 95-0932.jpg 
 
22
event the insured has been fully compensated for his or her 
adjudged losses); Ludwig Farm Bureau Mut. Ins. Co., 393 N.W.2d 
143, 
144-46 
(Iowa 
1986)(upholding 
made 
whole 
rule, 
but 
permitting subrogation reimbursement where amounts recovered by 
insured from tortfeasor can be identified and credited toward 
subrogated claims); Southern Farm Bureau Cas. Ins. Co. v. 
Sonnier, 406 So. 2d 178, 180 (La. 1981); Wescott v. Allstate 
Ins. Co., 397 A.2d 156, 169 (Me. 1979); Frost v. Porter Leasing 
Corp., 436 N.E.2d 387, 389-90 (Mass. 1982)(where insurance 
policy contained no subrogation clause, court unwilling to 
extend implied rights of subrogation to insurance for personal 
injuries); Union Ins. Soc'y v. Consolidated Ice Co., 245 N.W. 
563, 564, (Mich. 1932); Westendorf v. Stasson, 330 N.W.2d 699, 
703 (Minn. 1983); Home Ins. Co. v. Hartshorn, 91 So. 1, 3 (Miss. 
1922);  Skauge v. Mountain States Tel. & Tel. Co., 565 P.2d 628, 
632 (Mont. 1977)(holding that insured is entitled to be made 
whole for his or her entire loss and any costs of recovery, 
including attorney fees, before insurer can assert its right of 
legal subrogation); Providence Washington Ins. Co. v. Hogges, 
171 A.2d 120, 124 (N.J. Super. Ct. App. Div. 1961); St. Paul 
Fire & Marine Ins. Co. v. W.P. Rose Supply Co., 198 S.E.2d 482, 
484-85 (N.C. Ct. App.) cert. denied, 200 S.E.2d 655 (N.C. 1973); 
Lombardi v. Merchants Mut. Ins. Co. 429 A.2d 1290, 1292 (R.I. 
1981); Wimberly v. American Cas. Co. of Reading, Pa., 584 S.W.2d 
200, 203 (Tenn. 1979); Ortiz v. Great Southern Fire & Cas. Ins. 
Co. 597 S.W.2d 342, 344 (Tex. 1980); Hill v. State Farm Mut. 
Auto Ins. Co., 765 P.2d 864, 868 (Utah 1988); Vermont Indus. 
 
 
No. 95-0932.jpg 
 
23
Dev. Auth. v. Setze, 600 A.2d 302, 307 (Vt. 1991); Thiringer v. 
American Motors Ins. Co., 588 P.2d 191, 193-94 (Wash. 1978); 
Kittle v. Icard, 405 S.E.2d 456, 464 (W. Va. 1991). 
¶40 We now believe that our decision in Sorge, while 
seemingly reasonable, misapplied the made whole rule of Garrity 
and Rimes.  Because the stipulation by the parties focused the 
court on what the plaintiff was legally entitled to receive, 
instead of focusing on what loss the plaintiff had actually 
sustained, none of the courts considering the issue addressed 
Ms. Sorge's total damages.  Total damages, however, are the 
heart of the made whole determination.  The focus of made whole 
is not on what the plaintiff can legally receive, but on what 
the plaintiff lost.  See, e.g., Rimes, 106 Wis. 2d at 275: 
 
It is clear that a payment of [the settlement amount], 
unless that sum had been arrived at by a jury whose intent 
was to make the plaintiff whole, was irrelevant.  Under the 
facts of this case, the payment . . . was the price that 
the defendant tortfeasors were willing to pay to avoid the 
risk of greater exposure; and it was the sum that [the 
injured plaintiff] was willing to accept.  It has nothing 
to do with the determination of whether [the injured 
plaintiff] was made whole. 
 
¶41 Therefore, we would overrule the holding of Sorge that 
a plaintiff is made whole when he or she receives all that he or 
she is legally entitled to receive taking into account his or 
her 
contributory 
negligence. 
 
Instead, 
we 
believe 
that 
reaffirming the made whole rule would restore consistency of 
results and lead to more prompt resolution of subrogation claims 
between an insured and his or her insurer. 
¶42 Justice Steinmetz' concurrence asks "[o]f what value 
is precedent when a unanimous holding can be overruled two years 
 
 
No. 95-0932.jpg 
 
24
later due to a change in the minds of members of this court?"  
Steinmetz conc. at 6.  We answer by saying that it is now clear 
that Sorge misapplied 18 years of precedent by not correctly 
applying the made whole theory recognized in Garrity and Rimes. 
 Thus, it is indeed Sorge which changed existing precedent and 
which has created the problems now facing this court. 
¶43 Justice Steinmetz' concurrence states that settlements 
should be encouraged.  We agree.  We disagree, however, with the 
implication that the made whole rule of Garrity and Rimes has 
worked to discourage settlements.  Very few cases have come to 
this court in the past twenty years, other than Sorge, where the 
parties have asked us to interpret the Garrity and Rimes 
decisions.  We can only assume that parties have successfully 
achieved settlements, applying the made whole principles of our 
earlier cases. 
¶44 The made whole rule may best be explained by an 
example: 
A plaintiff has total damages of $60,000.  That is the 
made whole number.  The insurer has paid $40,000 in medical 
expenses on behalf of the plaintiff.  The plaintiff settles 
with the tortfeasor for $30,000.  Thus, the plaintiff has 
received, or received the benefit of, $70,000, or $10,000 
over his or her made whole number.  That excess $10,000 is 
available to reimburse the subrogated insurer. 
 
After that, the plaintiff will likely pay $10,000 in 
attorney's fees (1/3 of $30,000 settlement) and have 
$10,000 left over to pay costs of litigation, and as 
compensation for all of the other elements of damage for 
which the plaintiff was not insured. 
 
¶45 Contrary 
to 
the 
position 
of 
Justice 
Steinmetz' 
concurrence, insureds may well settle for an amount which, when 
combined with the dollars already paid by the insurer, is in 
 
 
No. 95-0932.jpg 
 
25
excess of the insured's total damages or made whole number.  
Justice Steinmetz' concurrence fears that our willingness to 
maintain the made whole rule of Garrity and Rimes would work an 
injustice to insurers who seek subrogation reimbursement.  This 
fear is misplaced.  Were our analysis that of a majority, it 
would not allow insured plaintiffs to reap a new benefit.  
Simply put, we believe that the rule of Garrity and Rimes should 
remain.  And, as we have noted earlier, the made whole rule is 
applied in a vast number of states permitting subrogation in 
personal injury actions. 
¶46 Nonetheless, in place of the made whole rule Justice 
Steinmetz' concurrence would adopt Rhinelander's position and 
allow the insurer to recover a pro rata portion of the 
settlement proceeds from the insured, even when the sum of the 
subrogated payments and the settlement dollars does not equal 
the plaintiffs' total damages.  Justice Steinmetz' concurrence 
offers no Wisconsin precedent for this proposal, a proposal 
which would effectively overrule Garrity and Rimes.  Instead, 
the concurrence cites a bar journal article written 15 years 
ago, in which the author proposed to attorneys that they settle 
subrogation cases by executing a pro rata agreement with the 
insured.20  Donald H. Piper, The Garrity and Rimes Dilemma, The 
Milwaukee Lawyer, October, 1982, at 3. 
[I]t is possible in an appropriate case for an insurer 
and its insured to enter into a binding agreement modifying 
the Garrity-Rimes rules for purposes of the specific 
                     
20 At least as of the time he wrote this article, Mr. 
Piper's 
practice 
included 
representing 
insurers 
who 
have 
subrogation claims.  Piper at 3. 
 
 
No. 95-0932.jpg 
 
26
lawsuit. . . .  The essence of such a solution to the 
problem would be an agreement that the insured and the 
insurer would share pro rata in any recovery according to a 
negotiated percentage that reflects the amounts of the 
claims of both parties, the strengths and weaknesses of the 
plaintiff's noninsured claims, and the roles that both 
parties intend to play in prosecuting the litigation. 
Attorney Piper's proposal was not directed at the courts, 
but at the parties to the subrogation dispute.21 
¶47 Although not required by the facts of this case, 
Justice Steinmetz' concurrence also proposes a formula for 
sharing of attorney's fees between the insured and subrogated 
insurer. In that discussion, the concurrence relies again on the 
Piper article.  While Justice Steinmetz' concurrence seeks to be 
"completely equitable," Steinmetz conc. at 10, it fails to 
recognize the varying degrees of participation by lawyers for 
subrogated insurers.  In any given case, the insurer may have a 
lawyer who enters an appearance and does nothing, or who does 
little work and advances no costs, or who is substantially 
involved in the prosecution of the claim.  Applying the 
suggestion of Justice  Steinmetz' concurrence, under either of 
these three scenarios the insured plaintiff would have to bear 
the full amount of his or her attorney's fees and litigation 
costs. 
¶48 In sum, Justice Steinmetz' concurrence proposes a 
fractured remedy for subrogation claims.  Under that proposal, 
                     
21  It is interesting to note that Mr. Piper is one of the 
authors of the publication, The Law of Damages in Wisconsin, 
(State Bar of Wisconsin CLE Books, 2d ed. 1995).  Sec. 32.20 of 
that volume sets out the made whole rule of Garrity v. Rural 
Mutual Ins. Co., 77 Wis. 2d 537, 253 N.W.2d 512 (1977) and Rimes 
v. State Farm Mut. Auto Ins. Co., 106 Wis. 2d 263, 316 N.W.2d 
348 (1982).    
 
 
No. 95-0932.jpg 
 
27
resolution of a claim for subrogation will depend upon whether 
there 
is 
a 
trial 
finding 
of 
contributory 
negligence, 
a 
stipulation as to gross damages and contributory negligence22, or 
a settlement without such stipulations.  Our position is simple 
- only one rule should apply.  The made whole rule as set out in 
Garrity and Rimes, and as applied in subsequent case law, best 
meets the equitable and legal principles behind subrogation and 
should apply to each of the situations addressed herein. 
I am authorized to state that Chief Justice Shirley S. 
Abrahamson and Justice William A. Bablitch join this concurring 
opinion. 
                     
22  We doubt that the parties will stipulate to gross 
damages and contributory negligence with any frequency. 
 
 
No. 95-0932.dws 
 
1
 
¶49 DONALD W. STEINMETZ, J. (concurring.) 
 
This 
concurring opinion and the one of Justice Geske result from a 3-
3 vote on the merits of the case.  I would reverse the court of 
appeals decision.   
¶50 The origin of the theory of "made whole" for an 
insured in Wisconsin can be traced back to Essock v. Mawhinney, 
3 Wis. 2d 258, 88 N.W.2d 659 (1958).  Essock had nothing to do 
with liability and attending subrogation of an insurance 
company; rather,   Essock was a case dealing with a mortgage.  
The suit was against an auctioneer for negligence.  The court 
held the auctioneer liable for negligence in conducting a sale, 
which resulted in delay and departure of prospective buyers, on 
the ground of probability that prices obtained were reduced.  
The circuit court also considered the negligence of the loan 
company in rendering its decision.   
¶51 The closest the Essock case came to the current made 
whole theory was the jury being satisfied that the $10,700 
payment was accepted upon the Mawhinneys' indebtedness and not 
as payment in full.  The court held that "[s]ince the Mawhinneys 
are to be made whole by the granting to them of damages 
suffered, it follows that the Loan Company is entitled to 
credits for its commission and to the amount which it will have 
paid to plaintiffs in excess of the sale proceeds."  Id. At 272. 
 From this case, where the concept of being made whole had 
nothing to do with subrogation, it is a far leap to Garrity v. 
Rural Mut. Ins. Co., 77 Wis. 2d 537, 253 N.W.2d 512 (1977), a 
 
 
No. 95-0932.dws 
 
2
case upon which Justice Geske's concurring opinion in the 
present case relies heavily.  
¶52 Without precedent, in Garrity, 77 Wis. 2d at 538, this 
court held "the insured is entitled to be made whole before the 
insurer may share in the amount recoverable from the tort-
feasor."23  This was a new and substantial holding as to 
subrogation without any basis in Wisconsin law.  The Garrity 
court repeats this holding twice again without precedent.  Id. 
at 540.  Thus, a giant step was invented by this court, changing 
the 
law 
of 
subrogation 
and 
ignoring 
existing 
insurance 
contracts.   
¶53 In Garrity, this court relied on Hammill v. Kuchler, 
203 Wis. 414, 232 N.W. 877, 234 N.W. 879 (1931), a case 
involving a mortgage and a warranty deed.  The court discussed  
subrogation:  "'Subrogation is based on rules of equity.  It is 
a creation of the law whereby the substantial ends of justice 
may 
be 
accomplished 
regardless 
of 
contract 
relations.'"  
                     
23 See Judge Posner's discussion contrasting the economic 
merits of applying the make whole interpretive principle versus 
utilizing a subrogation clause in Cutting v. Jerome Foods, Inc., 
993 F.2d 1293, 1297-99 (7th Cir. 1993), cert. denied, 510 U.S. 
916 (1993) ("It is true that rejecting 'make whole' would bring 
subrogation closer to assignment, but that would not necessarily 
be a bad thing.  Assignment, by shifting the insured's tort 
rights to the insurance company, reduces the price of insurance 
and thus enables the insured to obtain more coverage, in effect 
trading an uncertain bundle of tort rights for a larger certain 
right, which is just the sort of trade that people seek through 
insurance.").  Judge Posner also noted another drawback to 
perpetuating the make whole rule:  "[it] simply shifts the 
disincentive to press hard (for a higher recovery from the 
tortfeasor) from the insurer to the insured."  Cutting, 993 F.2d 
1293, 1298.   
 
 
 
No. 95-0932.dws 
 
3
Hammill, 203 Wis. at 425 (citation omitted).  The case did not 
deal with the concept of being made whole.   
¶54 In declining to apply the doctrine of subrogation to 
the situation, the court in Hammill noted: "The general rule is 
that a person is not entitled to be subrogated to a creditor's 
securities until the claim of the creditor against the debtor to 
secure which the securities were given has been paid in full . . 
. ."  Id. at 426, quoting 25 Ruling   This is 
not a valid basis to support the holding in Garrity which allows 
courts to ignore existing insurance contracts under the guise of 
the "common law."   
¶55 In Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 
2d 263, 316 N.W.2d 348 (1982), this court reluctantly found that 
the only way the amount of Palmer and Patricia Rimes' damages 
could be ascertained was through a post-settlement trial.  The 
Rimes court concluded that the amount of the insured's losses 
can best be established through a trial or hearing. This court 
further held in Rimes that the cause of action against a 
tortfeasor is indivisible. "Accordingly, it is only when there 
has been full compensation for all the damage elements of the 
 
 
No. 95-0932.dws 
 
4
entire cause of action that the insured is made whole."24  Id. at 
275.  At the mini-trial in Rimes, the trial court determined the 
plaintiff's total loss.  It also considered contributory 
negligence, and determined that Rimes did not negligently 
contribute to his loss.  Id. at 268. However, determining this 
requires 
establishing the 
nebulous 
"damages 
elements," as 
further explained below. 
¶56 Only two years ago in Sorge v. National Car Rental 
System, Inc., 182 Wis. 2d 52, 57, 512 N.W.2d 505 (1994), the 
petitioner advanced the following argument: 
 
 [A]n injured party is made whole when she 
receives compensation for all her losses.  The 
settlement in this case did not compensate Sorge for 
all of her losses because her recovery was reduced by 
an 
amount 
corresponding 
to 
her 
contributory 
negligence. 
 
Sorge 
claims, 
therefore, 
that 
the 
settlement did not make her whole. 
Sorge, 182 Wis. 2d at 57.  The court unanimously rejected 
this theory which Justice Geske's concurrence now embraces.   
¶57 Instead, in Sorge the court unanimously adopted the 
respondent's argument that "an injured party is made whole when 
she receives the amount of compensation she would be legally 
entitled to recover from a trial in which the jury awarded her 
                     
24 Justice Geske's concurrence notes that the made whole 
rule of Rimes v. State Farm Mut. Ins. Co., 106 Wis. 2d 263, 316 
N.W.2d 348 (1982), has become the default rule in the Seventh 
Circuit "where an employee benefit plan fails to designate 
priority rules or provide its fiduciaries the discretion 
necessary to construe the plan accordingly." Concurring op. at 
13, note 8 (citations omitted).  However, the concurrence 
neglects to note that another Seventh Circuit decision, Cutting 
v. Jerome Foods, Inc., 993 F.2d 1293 (7th Cir. 1993), cert. 
denied, 510 U.S. 916 (1993), pointed out that the make whole 
rule of Rimes is not "universal," and may not even be 
"predominant." Id., at 1297.   
 
 
No. 95-0932.dws 
 
5
damages and the court reduced the damage award to account for 
the injured party's contributory negligence pursuant to Wis. 
Stat. § 895.045."  (emphasis added.)  Id.25 In Sorge even the 
amicus curiae brief of the Wisconsin Academy of Trial Lawyers 
(WATL) allowed for consideration of contributory negligence of 
the injured party in the made whole formula. Id. at 60, n. 5.  
WATL further argued that a pro rata formula should be applied to 
determine the rights of the parties.  Id.26  The holding in Sorge 
that a plaintiff is made whole by a settlement covering his or 
her losses less the amount corresponding to his or her 
contributory negligence is now plainly ignored by Justice 
Geske's concurrence.   
¶58 Of what value is precedent when a unanimous holding 
can be overruled two years later due to a change in the minds of 
                     
25 All that a person is ever legally entitled to receive is 
his or her total damages less a deduction for contributory 
negligence.  A plaintiff is not legally entitled to receive an 
amount 
that 
does 
not 
consider 
his 
or 
her 
contributory 
negligence.   
26 WATL's position was explained in Sorge as follows: 
Amicus curiae, the Wisconsin Academy of Trial 
Lawyers 
(WATL), 
advances 
a 
position 
similar 
to 
Sorge's.  However, WATL avoids this incentive problem 
by acknowledging that a contributorily negligent party 
could be made whole, or even more than whole, if the 
combination of the settlement and her own insurers' 
payments is equal to or greater than the total amount 
of her losses.  In this situation, WATL suggests that 
the subrogated insurers would be entitled to recover a 
pro rata share of that portion of the injured party's 
recovery that is beyond her total losses. . . . 
Sorge, 182 Wis. 2d at 60, n. 5.  In the case at hand, Ives 
v. Coopertools, amicus curiae, the Wisconsin Health Insurers, 
also advocate a position similar to that of WATL in Sorge, also 
suggesting the use of a pro rata formula.  Amicus curiae at 8. 
 
 
No. 95-0932.dws 
 
6
members of this court?  For persons writing insurance contracts, 
there is no precedent.  Justice Geske's concurring opinion in 
this case contributes to the charge that there is no certainty 
in the law, because the law can change with the whims of the 
majority. 
¶59 Justice Geske's concurrence is further flawed in that 
it fails to recognize the difference between damages awarded as 
a result of a trial and damages awarded as the result of a 
settlement.  Settlement does not establish value of the 
plaintiff's loss; but rather, it is a compromise, a coming 
together of minds considering the potential award after a trial 
to a court or jury.  This involves the consideration of many 
factors such as the insured's contributory negligence, time 
before trial, attorney fees, attorney's ability, availability of 
witnesses and their credibility, and the potential and time for 
recovery.  However, the value of the insured's claim considering 
the pain and suffering can only be established by trial by a 
judge or a jury, or a post-settlement hearing.  Therefore, to 
say subrogation is available only after the insured has 
recovered all his or her losses from his or her own insurance 
company and the tortfeasor is incorrect.   
¶60 Under 
the 
theory 
advanced 
by 
Justice 
Geske's 
concurrence, the insured is not made whole until all of his or 
her losses have been recovered. See concurring op. at 8. The 
insured will rarely or never receive in excess of his or her 
losses because it is unlikely the insured will be paid more than 
the value of losses that include damages such as pain and 
 
 
No. 95-0932.dws 
 
7
suffering, 
lost 
past 
and 
future 
wages, 
embarrassment, 
disability, loss of consortium.  Consequently, the concurring 
opinion 
of 
Justice 
Geske 
effectively 
kills 
all 
future 
subrogation claims by a subrogated insurer. 
¶61 In addition, the concurrence allows the plaintiff to 
reduce or eliminate reimbursement to a subrogated insurer in at 
least two ways.  First, the injured plaintiff can settle with 
the alleged tortfeasors, thereby extinguishing the subrogated 
insurer's right of action against the tortfeasor.  Schulte v. 
Frazin, 176 Wis. 2d 622, 634-35, 500 N.W.2d 305 (1993).  Second, 
the plaintiff can settle with the tortfeasor for a little less 
than his or her total damages and then claim to have not been 
made whole or compensated for all of the elements of damages.  
Rimes, 106 Wis. 2d at 275. 
¶62 Despite its potential downfalls, settlement should be 
encouraged by this court.  It provides the parties with a fair, 
more rapid solution to their dispute than does a trial. The 
parties also often reach a settlement to avoid the expense and 
headaches of a drawn-out trial, and many of the factors that 
affect the outcome of a trial are taken into consideration by 
the 
parties 
in 
reaching 
the 
agreement, 
including 
the 
contributory negligence of the parties.  However, there are 
still differences between settlements and trials that should be 
considered in determining a subrogated insurer's rights.      
¶63 Based on the precedent of Rimes as spelled out by 
Sorge, then, if a case goes to trial, a plaintiff's contributory 
negligence as determined by a jury is a factor in determining if 
 
 
No. 95-0932.dws 
 
8
a plaintiff has been made whole.27  Sorge should also be applied 
in a settlement situation if the parties have stipulated to the 
plaintiff's gross damages and to the plaintiff's contributory 
negligence.28  If, on the other hand, a case settles and there 
have been no stipulations to a plaintiff's gross damages and 
contributory negligence, then fairness and equity require that 
the court assess the subrogated insurer's rights of recovery at 
a rate equal to the percentage of the plaintiff's recovery in 
relation to his or her gross damages. 
¶64 This pro rata recovery in such a settlement situation 
is a fair and equitable solution because to require a post-
settlement hearing to determine contributory negligence defeats 
the purpose of settlement, since contributory negligence of the 
plaintiff is generally a factor that is considered by the 
parties in reaching an agreement.  As Justice Geske's concurring 
opinion notes, this approach, as embraced by the court of 
appeals, could open the door to manipulation by the plaintiff:  
 
In this case, under the Court of Appeals ruling, 
Michael Ives'(sic) is made whole if he is found to be 
82.58 percent or greater contributorily negligent.  
So, at the "mini- trial," Rhinelander must focus on 
Michael Ives' contributory negligence and get a ruling 
of at least 82.58 percent of contributory negligence 
from the trial court in order to recover at all.  If 
the trial court reaches that magic number, then 
Rhinelander recovers.  Under the Court of Appeals 
                     
27 This statement assumes that the trial court has not 
exercised its additur or remittitur power.  Because this 
situation is not before this court, we decline to discuss this 
possibility. 
28 It is important to note that the parties in Sorge 
stipulated 
to 
the 
plaintiff's 
contributory 
negligence 
in 
reaching a settlement.   
 
 
No. 95-0932.dws 
 
9
formula, they would recover up to 17.42 percent of its 
total lien.   
Concurring op. at 18, citing Respondents' brief, at 12.  
Consequently, the pro rata solution works best in such a 
situation. 
¶65 Justice Geske's concurrence seeks to "reaffirm" the 
rules set forth in Garrity and Rimes while overruling its recent 
unanimous decision in Sorge. Concurring op. at 24-25.  However, 
the concurring opinion overlooks the fact that the Garrity rule 
was merely invented by the court and had no basis in precedent, 
and the Rimes decision was reached through reliance on this 
tenuous Garrity rule.  The concurrence of Justice Geske is based 
on shaky precedent, at best.  It serves to effectively destroy 
all subrogation claims because, under its reasoning, a plaintiff 
will rarely be "made whole" because he or she will not likely 
ever recover in excess of his or her losses if all factors are 
considered.   
¶66 The better decision would be that circuit courts need 
not determine whether a plaintiff has been made whole by a 
settlement.  Instead, a circuit court should only need to 
determine the amount of the plaintiff's gross damages and apply 
a pro rata formula to determine the amount, if any, of the 
subrogated insurer's recovery.29  
                     
29 The best way to demonstrate how this formula would work 
is through an example.  A plaintiff has total damages of 
$100,000.  The insurer has paid medical expenses of $20,000.  
The plaintiff settles with the defendants for $75,000.  Under 
the formula advanced in this concurrence, because the plaintiff 
has settled for 75% of his or her total damages, the insurer is 
entitled to receive 75% of its subrogated amount, or $15,000.  
 
 
No. 95-0932.dws 
 
10
¶67 In order for our solution to be completely equitable, 
attorney fees should be considered by the trial court in certain 
circumstances. There are arrangements in subrogation cases that 
may burden the subrogated insurer.  Such a situation is 
described as follows: 
 
In those cases in which the loss payment of the 
insurer is large enough to warrant a subrogation 
effort, it is the insurer who most often conducts the 
bulk 
of 
the 
investigation to marshal 
sufficient 
evidence 
to 
proceed 
against 
the 
wrongdoer, 
for 
example, by engaging and paying for experts and 
complicated 
testing 
in 
products 
liability 
cases.  
Under these circumstances, the insured, regardless of 
whether his claim of uninsured damages is reasonable 
or unreasonable, often secures the equivalent of a 
"free ride." 
Donald H. Piper, The Garrity and Rimes Dilemma, The 
Milwaukee Lawyer, October 1982, at 3, 4.  Occasionally, the 
plaintiff may bear the bulk of the expenses and attorney fees, 
and often, both the plaintiff and the subrogated insurer will 
employ counsel on their own.  For example, in the case at bar, 
both the Iveses and Rhinelander employed counsel to represent 
their interests.  See concurring op. at 1-2.  In such a case 
where both the plaintiff and the subrogated insurer have 
employed their own attorneys, attorney fees and costs should not 
                                                                  
Under the theory advanced by Justice Geske's concurring 
opinion, the court will first determine at what amount the 
plaintiff is made whole.  That amount is $100,000.  The 
plaintiff has received, in total, $95,000, including the $20,000 
in medical expenses paid by the insurer and the $75,000 
settlement.  Under the theory of the concurrence, then, the 
plaintiff has not been made whole, so the subrogated insurer is 
not entitled to receive any of the reimbursement it has 
contracted for.  This will be the case, under the concurring 
opinion, even if the plaintiff is 100% contributorily negligent. 
 In that case, Justice Geske's concurrence would allow the 
plaintiff a $95,000 windfall.     
 
 
No. 95-0932.dws 
 
11
be considered in applying the pro rata formula explained here.  
However, if the insurance company relies on the insured's 
attorney and does not hire its own attorney, then the attorney 
fees and costs should be paid by both the insured and his or her 
insurer, each paying 50% of the attorney fees and costs.30  "Such 
case-by case analysis is . . . consistent with the equitable 
underpinnings of the doctrine of subrogation."  Piper, supra at 
5.   
¶68 I would reverse the decision of the court of appeals 
and remand with directions to apply the principles of this 
concurrence.  Full or gross damages are at the heart of the 
equation.  I would therefore hold that by accepting the 
settlement, which includes medical expenses paid by Rhinelander, 
the Iveses must reimburse Rhinelander its pro rata share of the 
settlement recovery.  Because the Iveses settled for 17.42 
percent of their stipulated gross damages, the result in this 
case would be to award Rhinelander 17.42 percent of the 
subrogated amount.  Such a decision would return some certainty 
to subrogation law with an easy pro rata formula.  Additionally, 
such a decision would be grounded on the traditional principles 
of equity and fairness that underlie the subrogation doctrine as 
embraced by this court in Sorge.     
¶69 I would reverse the decision of the court of appeals 
for the reasons stated herein which are contrary to the 
                     
30 The attorney for the Ives argued that Rhinelander's 
proposed rule is only fair if the subrogated insurer also shares 
in the attorney fees and costs.  Respondent's brief at 23. 
 
 
No. 95-0932.dws 
 
12
reasoning of Justice Geske's concurrence and remand with 
instructions 
to 
apply 
the 
principles 
embraced 
by 
this 
concurrence.     
I am authorized to state that JUSTICES Jon P. Wilcox and  
N. Patrick Crooks join this concurring opinion.