Title: Dufour v. Progressive Classic Ins. Co.
Citation: N/A
Docket Number: 2014AP000157
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: July 6, 2016

2016 WI 59 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2014AP157 
COMPLETE TITLE: 
Dennis D. Dufour, 
          Plaintiff-Appellant-Cross-Respondent, 
     v. 
Progressive Classic Insurance Company and 
Milwaukee Painters Local Union 781 Health Fund, 
          Defendants, 
Dairyland Insurance Company, 
          Defendant-Respondent-Cross-Appellant-
Petitioner. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
(Reported at 364 Wis. 2d 757, 869 N.W.2d 169) 
(Ct. App. 2015 – Unpublished) 
 
 
OPINION FILED: 
July 6, 2016 
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
April 5, 2016 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit 
 
COUNTY: 
Dodge 
 
JUDGE: 
Brian A. Pfitzinger 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
      
 
CONCURRED/DISSENTED: 
DISSENTED: 
ABRAHAMSON, J. and BRADLEY, A. W., J. concur 
and dissent (Opinion filed). 
 
NOT PARTICIPATING: 
         
 
 
 
ATTORNEYS: 
 
For 
the 
defendant-respondent-cross-appellant-petitioner, 
there were briefs by Robert F. Johnson, Douglas M. Raines, and 
von Briesen & Roper, S.C., Milwaukee and oral argument by 
Douglas M. Raines. 
 
 
For the plaintiff-appellant-cross-respondent, there was a 
brief by Jason F. Abraham, Kyra K. Plier, and Hupy and Abraham, 
S.C., Milwaukee. Oral argument by Jason F. Abraham. 
 
 
 
 
2 
There was an amicus curiae brief by Jesse B. Blocher and 
Habush Habush & Rottier S.C., Waukesha, on behalf of the 
Wisconsin Association for Justice. Oral argument by Jesse B. 
Blocher. 
 
 
There was an amicus curiae brief by James A. Friedman, 
Dustin B. Brown and Godfrey & Kahn, S.C., Madison on behalf of 
the Wisconsin Insurance Alliance and the Property Casualty 
Insurers Association of American. Oral argument by James A. 
Friedman. 
 
 
 
 
 
 
 
2016 WI 59
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2014AP157 
(L.C. No. 
2011CV874) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Dennis D. Dufour, 
 
          Plaintiff-Appellant-Cross-Respondent, 
 
     v. 
 
Progressive Classic Insurance Company and 
Milwaukee Painters Local Union 781 Health Fund, 
 
          Defendants, 
 
Dairyland Insurance Company, 
 
          Defendant-Respondent-Cross-Appellant- 
          Petitioner. 
FILED 
 
JUL 6, 2016 
 
Diane M. Fremgen 
Clerk of Supreme Court 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed.   
 
¶1 
PATIENCE 
DRAKE 
ROGGENSACK, 
C.J.   We 
review 
an 
unpublished decision of the court of appeals,1 affirming in part 
and reversing in part the summary judgment granted by Dodge 
County Circuit Court relative to injuries Dennis D. Dufour 
                                                 
1 Dufour v. Progressive Classic Ins. Co., No. 2014AP157, 
unpublished slip op. (Wis. Ct. App. July 16, 2015).  
No. 
2014AP157 
 
2 
 
(Dufour) suffered in an accident for which Dufour was not at 
fault.2   
¶2 
Dufour, the insured of Dairyland Insurance Company 
(Dairyland), sustained bodily injury and property damage while 
operating his motorcycle.  The tortfeasor's insurer paid Dufour 
its bodily injury policy limit of $100,000, and Dairyland paid 
Dufour $100,000 as its underinsured bodily injury policy limit.  
The parties agree that Dufour's bodily injury damages were in 
excess of $200,000.  Under another provision of Dairyland's 
policy, it also paid Dufour $15,589.86 for 100% of the property 
damage to his motorcycle.  After paying Dufour all proceeds to 
which he was entitled under the Dairyland policy, and after 
Dufour had settled with the tortfeasor's insurer, Dairyland 
sought and obtained subrogation from the tortfeasor's insurer 
for the property damages that it previously paid to Dufour.  
Dufour demanded Dairyland pay him the funds it obtained on its 
subrogation claim, and Dairyland refused.  Dufour then sued 
Dairyland for breach of contract and bad faith.   
¶3 
The central issue before us is whether Dairyland is 
entitled to retain funds it obtained from the tortfeasor's 
insurer for property damages Dairyland paid Dufour because 
Dufour's bodily injury damages exceed both policies' limits for 
bodily injury.  More specifically, we must determine whether the 
made whole doctrine applies to preclude Dairyland from retaining 
                                                 
2 The Honorable Brian A. Pfitzinger of Dodge County 
presided. 
No. 
2014AP157 
 
3 
 
its subrogation award in this instance.  We also consider 
whether Dairyland acted in bad faith by refusing to turn over to 
Dufour the funds it obtained as a result of its subrogation 
claim.  
¶4 
We conclude that the made whole doctrine does not 
apply to preclude Dairyland from retaining the funds it received 
from its subrogation claim because the equities favor Dairyland:  
(1) Dairyland fully paid Dufour all he bargained for under his 
Dairyland policy, which included the policy's limits for bodily 
injury and 100% of Dufour's property damage; (2) Dufour had 
priority in settling with the tortfeasor's insurer; and (3) if 
Dairyland had not proceeded on its subrogation claim, Dufour 
would have had no access to additional funds from the 
tortfeasor's insurer.  We further conclude that Dairyland did 
not act in bad faith with respect to Dufour's demand for the 
funds Dairyland obtained as subrogation for the property damages 
it paid Dufour.  Accordingly, we reverse the court of appeals 
decision in all respects.  
I.  BACKGROUND 
¶5 
On August 6, 2011, Dufour sustained bodily injury and 
property 
damage 
in 
a 
motorcycle 
accident 
for 
which 
an 
underinsured motorist was at fault.  Dufour's Dairyland policy 
included a bodily injury limit of $100,000 for underinsured 
motorists and a separate property damage limit of $40,000.  
American Standard Insurance Company of Wisconsin (American 
Standard) insured the tortfeasor, with a bodily injury limit of 
$100,000.   
No. 
2014AP157 
 
4 
 
¶6 
As a result of the accident, Dairyland paid Dufour 
$100,000 as its underinsured motorist bodily injury policy 
limit.  American Standard also paid Dufour $100,000 pursuant to 
its bodily injury policy limit.  It is undisputed that Dufour's 
bodily injuries arising out of the accident were in excess of 
$200,000.  In addition to bodily injury proceeds, Dairyland paid 
Dufour $15,589.86, which was agreed upon as the full amount of 
property damage Dufour sustained.3  
¶7 
After Dairyland and American Standard paid Dufour, 
Dairyland sought subrogation from American Standard for the 
property damages it paid to Dufour.  Dufour's Dairyland policy 
included a subrogation clause that provided, "[a]fter we have 
made payment under this policy and, where allowed by law, we 
have the right to recover the payment from anyone who may be 
held responsible."  American Standard paid Dairyland $15,559.86 
on this subrogation claim.4  
¶8 
Dufour contacted Dairyland, requesting payment of the 
funds it received on its subrogation claim, based on Wisconsin's 
made whole doctrine.  His request stated in relevant part:   
Dennis Dufour[] is entitled to the full amount 
recovered for property damage by Dairyland Insurance 
from American [Standard].  Valley Forge Insurance Co. 
                                                 
3 Some portions of the record indicate that the settlement 
was in the amount of $15,589.85.   
4 The record is unclear as to why Dairyland received $30 
less than the property damage amount that it paid to Dufour.  
Both parties acknowledge this discrepancy, and it is unimportant 
to our decision.  
No. 
2014AP157 
 
5 
 
v. Home Mutual Insurance Co., 133 Wis. 2d 364, 396 
N.W.2d 348 ([Ct. App.] 1986) held that an insurer of 
an automobile accident victim was not entitled to 
subrogation for property damage paid to victim, when 
the insured is not fully compensated for his damages.  
This ruling follows longstanding law in Wisconsin 
regarding subrogation, see 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).  
Subrogation is to be allowed only when the insured is 
compensated in full by recovery from the tortfeasor. 
Dufour's December 2, 2011 letter to Dairyland.  Dairyland 
responded to Dufour's request, disputing that he was entitled to 
further payments from Dairyland: 
Mr. Dufour has been paid all limits to which he is 
entitled.  Mr. Dufour has no right to Dairyland 
Insurance's claim for subrogation related to property 
damage.  Accordingly, we are denying your claim. 
Dairyland's March 13, 2012 letter to Dufour.   
¶9 
Based on Dairyland's refusal, Dufour amended his 
complaint, alleging that Dairyland breached its insurance 
contract and acted in bad faith by unreasonably failing to turn 
over the funds it received in subrogation.  Relying on Valley 
Forge, the circuit court granted Dufour's motion for summary 
judgment with respect to turnover of the funds from Dairyland's 
subrogation claim.  However, the circuit court agreed with 
Dairyland with respect to bad faith, concluding that Dairyland 
did not unreasonably withhold the funds.   
¶10 Both parties appealed, and the court of appeals 
affirmed the circuit court's grant of Dufour's motion for 
summary judgment because it concluded that Dufour had not been 
made whole for his bodily injuries and, therefore, Dairyland was 
No. 
2014AP157 
 
6 
 
not entitled to retain the funds it obtained as subrogation.5  
Further, the court of appeals held that Dairyland acted in bad 
faith in light of its obligations under the made whole doctrine 
and remanded for a determination of damages for Dufour's bad 
faith claim.6  
¶11 We granted Dairyland's petition for review. 
II.  DISCUSSION  
A.  Standard of Review  
¶12 We review grants of summary judgment independently, 
applying the same methodology as the circuit court and the court 
of appeals, while benefitting from their analyses.  Preisler v. 
Gen. Cas. Ins. Co., 2014 WI 135, ¶16, 360 Wis. 2d 129, 857 
N.W.2d 136.  "The standards set forth in Wis. Stat. § 802.08 are 
our guides."  Id.  Summary judgment "shall be rendered if the 
pleadings, 
depositions, 
answers 
to 
interrogatories, 
and 
admissions on file, together with the affidavits, if any, show 
that there is no genuine issue as to any material fact and that 
the moving party is entitled to a judgment as a matter of law."  
Wis. Stat. § 802.08(2) (2013-14).  
¶13 Our review requires us to determine the applicability 
of the made whole doctrine to funds Dairyland recovered in 
subrogation from American Standard.  This is a question of law 
                                                 
5 Dufour, unpublished slip op., ¶26.   
6 Id., ¶36.   
No. 
2014AP157 
 
7 
 
that we review independently.  Muller v. Society Ins., 2008 WI 
50, ¶20, 309 Wis. 2d 410, 750 N.W.2d 1. 
B.  Subrogation 
¶14 Dairyland's 
insurance 
policy 
expressly 
provides:  
"[a]fter we have made payment under this policy and, where 
allowed by law, we have the right to recover the payment from 
anyone who may be held responsible."  Accordingly, we determine 
whether, because Dufour was not made whole for his bodily 
injury, Dairyland is precluded by law from retaining funds 
American Standard paid to it as subrogation for the property 
damages Dairyland paid to Dufour.  Prior to undertaking our 
discussion of the made whole doctrine's applicability to 
Dufour's claim, we first address the law of subrogation, 
generally.  
1.  General subrogation principles 
¶15 Subrogation is the "substitution of one party for 
another whose debt the party pays, entitling the paying party to 
rights, remedies, or securities that would otherwise belong to 
the debtor."  Black's Law Dictionary 1563-64 (9th ed. 2009).  
Contractual subrogation and equitable subrogation both exist 
under Wisconsin law.7  Jindra v. Diederich Flooring, 181 Wis. 2d 
579, 601, 511 N.W.2d 855 (1994).  With either type of 
                                                 
7 Contractual 
subrogation 
has 
been 
referred 
to 
as 
"conventional subrogation."  Jindra v. Diederich Flooring, 181 
Wis. 2d 579, 601, 511 N.W.2d 855 (1994).  Equitable subrogation 
has been referred to as "common law subrogation."  Garrity v. 
Rural Mut. Ins. Co., 77 Wis. 2d 537, 541, 253 N.W.2d 512 (1977). 
No. 
2014AP157 
 
8 
 
subrogation, equities affect the asserted right to subrogation 
when it is presented by an insurance company.  Garrity v. Rural 
Mut. Ins. Co., 77 Wis. 2d 537, 540-41, 253 N.W.2d 512 (1977).  
Recently, we summarized subrogation in an insurance context 
where we applied equitable principles to a contractual right of 
subrogation: 
[S]ubrogation is a purely derivative right that 
permits 
an 
insurer 
who 
has 
been 
contractually 
obligated to satisfy a loss created by a third party 
to step into the shoes of its insured and to pursue 
recovery from the responsible wrongdoer. . . .  The 
doctrine of subrogation enables an insurer that has 
paid an insured's loss pursuant to a policy of 
property insurance to recoup that payment from the 
party responsible for the loss.   
Muller, 309 Wis. 2d 410, ¶22 (internal citations omitted).8   
¶16 Subrogation 
avoids 
unjust 
enrichment 
because 
it 
precludes double payment for the same loss.  Id., ¶29.  
Moreover, "[s]ubrogation rests upon the equitable principle that 
one, other than a volunteer, who pays for the wrong of another 
should be permitted to look to the wrongdoer to the extent he 
has paid and be subject to the defenses of the wrongdoer."  
Garrity, 77 Wis. 2d at 541.  Therefore, subrogation balances 
equities 
between 
parties 
by 
precluding 
the 
insured 
from 
recovering twice for the same loss while compelling payment by 
                                                 
8 Mullers' contract with Society contained a subrogation 
clause with language providing for recoupment of payment by 
Society.  Muller v. Society Ins., 2008 WI 50, ¶71, 309 Wis. 2d 
410, 750 N.W.2d 1.   
No. 
2014AP157 
 
9 
 
the tortfeasor who caused the harm in the first instance.  
Muller, 309 Wis. 2d 410, ¶24.  
¶17 Further, we repeatedly have emphasized the fact-
specific and equitable nature of subrogation.  See, e.g., id., 
¶26 (recognizing that subrogation is "heavily influenced by 
particular facts"); Vogt v. Schroeder, 129 Wis. 2d 3, 12, 383 
N.W.2d 876 (1986) (stating that "subrogation is an equitable 
doctrine and depends upon a just resolution of a dispute under a 
particular 
set 
of 
facts"); 
Rimes, 
106 
Wis. 2d 
at 
271 
(acknowledging 
that 
"subrogation 
is 
based 
upon 
equitable 
principles").   
¶18 We have identified three non-exhaustive, equitable 
principles that may affect subrogation:  "(1) ensuring that the 
plaintiff is fully compensated for loss; (2) preventing unjust 
enrichment; and (3) ensuring that the wrongdoer is held 
responsible for his conduct and not allowed to go scot-free by 
failing to respond to damages while another, the plaintiff's 
insurer, is required to do so."  Muller, 309 Wis. 2d 410, ¶60 
(citing Vogt, 129 Wis. 2d at 13).  We now turn to discuss the 
made whole doctrine both generally and in some detail. 
2.  Made whole doctrine 
a.  made whole, generally 
¶19 Ensuring that the insured is fully compensated for his 
loss is the essence of the made whole doctrine.  Namely, "equity 
provides that subrogation ordinarily does not arise until the 
underlying debt or loss has been paid in full.  This 
'antisubrogation rule' is known as the made whole doctrine."  
No. 
2014AP157 
 
10 
 
Id., ¶25 (citations omitted).  The made whole doctrine attempts 
to "[b]alanc[e] the insurer's right to recoup benefits it has 
paid against an insured's right to obtain full compensation."  
Id.  
¶20 Our decisions demonstrate that the made whole doctrine 
is but one consideration in determining whether an insurer is 
entitled to subrogation.  Vogt, 129 Wis. 2d at 13 (recognizing 
"distinct and separate equitable polic[ies]" in considering 
subrogation); Muller, 309 Wis. 2d 410, ¶60 ("[T]he made whole 
doctrine is not applicable in all situations, and thus the test 
of 'wholeness' stated in Rimes is not the sole criterion for 
determining whether an insurer may pursue its subrogation 
interest").  Stated otherwise, an insurer is not always 
precluded from retaining funds obtained as subrogation for 
payments the insurer previously made simply because the insured 
has not been fully compensated for the loss.  Rather, the 
specific facts and equities dictate whether the made whole 
doctrine will apply to prevent an insurer from retaining funds 
received for its subrogation claim.  
b.  made whole, in detail 
¶21 Because Garrity and Rimes are the foundation of the 
made whole doctrine, it is important to understand what they say 
and why, as well as to recognize the issues they did not 
address.  The made whole doctrine embodies the principle that, 
"[o]rdinarily, subrogation does not arise until the debt [to the 
injured party] has been fully paid."  Garrity, 77 Wis. 2d at 
541.  We explained in Garrity that the insurer "has no share in 
No. 
2014AP157 
 
11 
 
the recovery from the tort-feasor if the total amount recovered 
by the insured from the insurer does not cover his loss."  Id. 
at 544.  In Rimes, we also said: 
The purpose of subrogation is to prevent a double 
recovery by the insured.  Under circumstances where an 
insured has received full damages from the tortfeasor 
and has also been paid for a portion of those damages 
by the insurer, he receives double payment——he has 
been 
made 
more 
than 
whole. 
 
Only 
under 
those 
circumstances is the insurer, under principles of 
equity, entitled to subrogation. 
Rimes, 106 Wis. 2d at 272.  
¶22 Subsequent to our initial setting out of the made 
whole doctrine, we recognized that both Garrity and Rimes 
presented the same factual scenario where equity drove our 
conclusion that the made whole doctrine applied.  We explained:  
The 
circumstances 
in 
each 
of 
those 
cases 
were 
substantially the same, and therefore the subrogation 
problem posed in each was subject to resolution by 
applying the same equitable principle to the facts——
that the insured had a right to be made whole, but no 
more than whole.  Hence, the insurer was to be 
subrogated only if further recovery would do more than 
make the insured whole.   
Vogt, 129 Wis. 2d at 13. 
¶23 It is important to note that in both Garrity and 
Rimes, 
the 
insurer 
attempted 
to 
exercise 
its 
claim 
of 
subrogation against funds that otherwise would have gone to its 
insured.  Id. at 14.  Therefore, if the insurer had prevailed on 
its subrogation claim, the insured would not have been paid all 
that he had contracted to receive under his own policy.  The 
issue in Garrity and Rimes may be summarized as one of priority:  
No. 
2014AP157 
 
12 
 
there was a limited pool of funds available, and the issue was 
whether the insurer or the insured enjoyed priority to those 
funds for which they were competing.  Id. at 14-15.   
¶24 For example, in Garrity, the insureds' barn sustained 
damages due to a negligently operated truck, and the insureds 
sought proceeds under both their own policy and the tortfeasor's 
policy.9  Garrity, 77 Wis. 2d at 539.  The insureds recovered the 
policy limit under their own policy, $67,227.12; however, 
damages to the barn were in excess of $100,000.  Id.  
Accordingly, the insureds also required proceeds under the 
tortfeasor's insurance policy, which had a policy limit of 
$25,000, as they attempted to cover their loss.  Id. at 543.   
¶25 The insurer asserted a subrogation claim against the 
tortfeasor's policy limit of $25,000 to recoup part of the 
$67,227.12 that it had paid to its insureds.  Id. at 540-41.  
Consequently, permitting the insurer's subrogation claim would 
have 
reduced 
the 
insureds' 
recovery 
by 
$25,000, 
thereby 
increasing the amount by which the insureds were not made whole.  
See Vogt, 129 Wis. 2d at 14-15.  In concluding that the insureds 
maintained priority to the tortfeasor's $25,000 policy limit for 
which the insurer was competing, we stated that, "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 
insured has paid it to assume."  Garrity, 77 Wis. 2d at 542.   
                                                 
9 Both the insured and the tortfeasor maintained insurance 
policies with the same insurance company.   
No. 
2014AP157 
 
13 
 
¶26 Rimes involved an automobile accident where the 
insured sustained damages in excess of $300,000.  Rimes, 106 
Wis. 2d at 264-65.  The insured received $9,649.90 from its 
insurer, State Farm Automobile Insurance Company, under medical-
pay policy provisions in two State Farm policies, each with a 
$5,000 limit.  Id. at 265-66.  Subsequently, the insured 
stipulated to a $125,000 settlement with the tortfeasors' 
insurers, which amount included $9,649.90 for medical-pay.  
Rimes was paid all but $9,649.90, which amount was paid into 
court subject to State Farms' subrogation claim.  Id. at 267.   
¶27 The circuit court held a mini-trial on damages, 
finding Rimes' total damages were $300,433.54, of which past 
medical expenses were $26,560.70.10  Id. at 268-69.  In applying 
the made whole doctrine to preclude the insurer from accessing 
funds for which it was competing with its own insured, we stated 
that, "[u]nder Wisconsin law[,] the test of wholeness depends 
upon whether the insured has been completely compensated for all 
the elements of damages, not merely those damages for which the 
insurer has indemnified the insured."  Id. at 275.  In Rimes, 
the insured was not made whole for either medical-pay damages or 
for personal injury damages.  Therefore, the insured was not 
required to disgorge amounts for which he was indemnified by his 
insurer.  Id. at 276.  
                                                 
10 This type of evidentiary hearing on damages has become 
known as a Rimes hearing or a made whole hearing.  Schulte v. 
Frazin, 176 Wis. 2d 622, 627, 500 N.W.2d 305 (1993). 
No. 
2014AP157 
 
14 
 
¶28 We subsequently clarified that the broad statements 
from Garrity and Rimes were to be applied only when the 
application of the made whole doctrine would yield an equitable 
result.  Vogt, 129 Wis. 2d at 12.  For example, in Vogt, the 
insured, who was the injured party in an automobile accident, 
suffered damages in excess of the tortfeasor's insurance 
policy's $15,000 limit of liability.  Id. at 7.  The 
tortfeasor's insurer offered to settle with the insured-injured 
party for its $15,000 policy limit in exchange for a release of 
the tortfeasor and the tortfeasor's insurer from any further 
liability.  Id. at 8.  Because the insured-injured party's 
damages exceeded the tortfeasor's $15,000 limit of liability, 
the insured also was entitled to recover under his own policy's 
$50,000 underinsured motorist coverage.  Id.  The insured-
injured party's insurer refused to approve the settlement and 
release without preserving its right to subrogation, and the 
matter came before the circuit court for resolution.  Id.   
¶29 We explained in Vogt that our central inquiry was 
"[w]hether an automobile insurer which by the terms of its 
contract pays its own insured under the underinsured motorist 
coverage has a right of subrogation against the tortfeasor . . . 
once a payment has been made to its own insured."  Id. at 15-16.  
In answering this question in the affirmative, we noted a 
"distinct and separate equitable [principle]" that is important 
when considering how the made whole doctrine is to function.  
Id. at 13.  Specifically, we concluded that the tortfeasor 
No. 
2014AP157 
 
15 
 
should be held "responsible for his conduct and not [] allowed 
to go scot-free by failing to respond in damages."  Id.   
¶30 Notably, the issue in Vogt was not the same as the 
issue of priority that was presented in Garrity and Rimes where 
subrogation would have operated to reduce the insured's recovery 
to which he was entitled under his own policy.  See id. at 15.  
Rather, in Vogt, there was no competition, and the insured 
maintained priority to all proceeds to which he was entitled 
under the tortfeasor's policy limit, as well as under his own 
policy.  Id. at 17-18.  In such a situation, it would have been 
inequitable to allow the insured unilaterally to prevent his 
insurer from seeking subrogation from the tortfeasor, and 
thereby hold the tortfeasor accountable if subrogation would 
have no discernible effect on the insured's recovery.  See id. 
at 17-19.  Consequently, we declined to apply the made whole 
doctrine to prevent the insurer from seeking subrogation from 
the tortfeasor.  Id. at 19. 
¶31 In 
Mutual 
Service, 
we 
further 
explained 
the 
independent nature of subrogation claims and their connection to 
the made whole doctrine.  We clarified that an insurer who pays 
a claim to its insured for which a tortfeasor is responsible has 
a derivative, but separate claim against the tortfeasor and the 
tortfeasor's 
insurer. 
 
"In 
such 
a 
situation, 
we 
have 
characterized the interests of the insurer and the insured as 
each owning separately a part of the claim against the 
tortfeasor."  Mut. Serv. Cas. Co. v. Am. Family Ins. Grp., 140 
Wis. 2d 555, 561, 410 N.W.2d 582 (1987).  
No. 
2014AP157 
 
16 
 
¶32 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 
subrogated insurer's insured has previously settled with the 
tortfeasor."  Id. at 563-64.  As with Vogt, we did not apply the 
made whole doctrine to preclude the insurer's claim for 
subrogation.  See id.  It is important to note that in the 
absence of the insurer's success on its subrogation claim, there 
would not have been any funds that the insured could seek to 
collect after having recovered under her own policy as well as 
under the settlement agreement with the tortfeasor.  See id.; 
see also Vogt, 129 Wis. 2d at 17-19.  
¶33 In Schulte v. Frazen, 176 Wis. 2d 622, 500 N.W.2d 305 
(1993), a medical malpractice action, we examined a settlement 
that permitted Schulte, through an indemnification agreement 
among Schulte, the tortfeasor and the tortfeasor's insurer, to 
unilaterally defeat the insurer's subrogation claim against the 
tortfeasor and his insurer.  Id. at 625.  There, Schulte 
received $90,000 in medical payments from her insurer, Compcare 
Health Services Insurance Corporation.  Id. at 625-26.  Schulte 
then settled with the tortfeasor and the tortfeasor's insurer 
for $2,460,000.  Id. at 626.  As part of the settlement, Schulte 
agreed to indemnify the tortfeasor and the tortfeasor's insurer 
for any further liability they incurred from the medical 
malpractice.  Id. at 626-27.   
No. 
2014AP157 
 
17 
 
¶34 Schulte 
then 
moved 
to 
extinguish 
Compcare's 
subrogation lien and requested a Rimes hearing.  Id.  Because of 
the indemnification agreement, Compcare, who was not consulted 
prior to Schulte's settlement, found itself in competition with 
Schulte over the funds she had received.  Id. at 633-34 ("[A]n 
indemnification agreement indirectly creates the prospect that 
the insurer will be competing with its own insured."). 
¶35 At the Rimes hearing, the circuit court found that 
Schulte's damages were between $2,950,000 and $4,790,000 and 
therefore, Schulte had not been made whole by the settlement.  
Id. at 627.  If Compcare prevailed on its subrogation claim that 
arose from the $90,000 it paid Schulte in medical-pay, Schulte 
would have been required to indemnify the tortfeasor for that 
amount.  See id.  Therefore, the recovery to which she was 
entitled under her own insurance policy would have been reduced 
by $90,000, for which coverage Schulte had paid a premium.  See 
id.  Consequently, we concluded that the circuit court correctly 
applied the made whole doctrine when it extinguished Compcare's 
subrogation claim due to the indemnification agreement.  Id. at 
633-35.  
¶36 Most recently, we considered the applicability of the 
made whole doctrine in Muller, where the pool of money available 
was sufficient to fully satisfy the injured parties' losses and 
the subrogation claim of their insurer.  The Mullers' property 
was destroyed by a fire, resulting in damages of $697,981.58.  
Muller, 309 Wis. 2d 410, ¶5.  The Mullers' insurer, Society 
Insurance, paid them $407,378.88, Society's policy limit.  This 
No. 
2014AP157 
 
18 
 
payment left the Mullers uncompensated by $290,602.70.  Id., ¶6.  
The tortfeasor was insured under a United Fire and Casualty 
policy with a liability limit of $1,000,000.  Id., ¶5.   
¶37 Although the tortfeasor's United policy was sufficient 
to cover the remaining loss, the insureds voluntarily settled 
with the tortfeasor for $120,000.  Id., ¶11.  The settlement 
agreement contained no indemnification obligation for the 
Mullers.  Id., ¶12.  Subsequently, Society and United settled 
Society's subrogation claim for $190,000.  Id.  The Mullers then 
argued that they were entitled to receive the remainder of their 
loss from those funds, as they had not yet been made whole.  
Id., ¶13.   
¶38 We set forth the issue as follows: 
[W]hether an insurer may retain in full a subrogation 
settlement with a tortfeasor and a tortfeasor's 
insurer after its insureds have settled with the 
tortfeasor and the tortfeasor's insurer for an amount 
less than necessary to make the insureds "whole," even 
though the tortfeasor's insurance policy limits were 
sufficient to cover all claims, including those of 
both the insureds and the insurer. 
Id., ¶2.  Given the equities created by the facts of the case, 
we did not apply the made whole doctrine, which would have 
deprived the insurer of its subrogation rights.  Instead, we 
held that Society had fulfilled all of its obligations under its 
insurance policy by paying the Mullers' policy limits, by not 
competing with the Mullers for a limited pool of funds and had 
done nothing to otherwise reduce the Mullers' recovery.  Id., 
¶4.   
No. 
2014AP157 
 
19 
 
¶39 Additionally, we acknowledged that an insurer has a 
separate subrogation claim against the tortfeasor, which the 
insurer was entitled to pursue as long as it recognized the 
priority of the insureds to available funds, which Society did.  
Id., ¶72.  
¶40 Even though the Mullers were not made whole,11 they 
received all benefits under their own insurance policy for which 
they bargained and all benefits from their settlement agreement 
with the tortfeasor.  Id., ¶70.  Had Society chosen not to 
pursue its subrogation claim, the Mullers would not have had 
access to any additional monies after collecting under both 
their policy with Society and the settlement agreement with 
United.  Id., ¶86.  Therefore, we concluded that it would have 
been inequitable to allow the Mullers to prevent their insurer, 
Society, from retaining funds received on its subrogation claim 
and "would discourage subrogees from pursuing their subrogation 
rights."  Id.  
¶41 We now consider the court of appeals' Valley Forge 
decision, upon which both the circuit court and court of appeals 
relied when denying Dairyland's retention of funds it recovered 
in subrogation from the tortfeasor's insurer.  There, the 
insured, Samuel McIlrath, was injured in an automobile accident 
and also sustained property damage to his vehicle.  Valley 
Forge, 133 Wis. 2d at 366.  McIlrath maintained a Valley Forge 
                                                 
11 There was no Rimes hearing, but the parties agreed that 
Mullers were not made whole by the payments they received. 
No. 
2014AP157 
 
20 
 
automobile insurance policy with collision coverage, under which 
Valley Forge paid approximately $6,000 for property damages.  
Id. at 366-67.  The tortfeasor, Joseph E. Ropson, maintained an 
insurance policy with Home Mutual, which provided separate 
policy limits for bodily injury and property damage.  Id. at 
366.  
¶42 Pursuant to the settlement agreement, Home Mutual paid 
McIlrath and two passengers who were injured its bodily injury 
policy limits, with McIlrath receiving $25,000.  Id.  Home 
Mutual also paid McIlrath $6,000 in property damage.  Id. at 
366-67.  It was undisputed that McIlrath's bodily injury damages 
exceeded $25,000 and that he was paid twice for his property 
damage, once by Valley Forge and once by Home Mutual.  Id. at 
367, 369.  Further, the property damage payment was made 
directly to McIlrath, rather than to Valley Forge, at the 
direction of McIlrath's attorney.  The settlement agreement also 
required McIlrath to indemnify Home Mutual from any claims made 
against it or the tortfeasor by Valley Forge.  Id. at 367.  This 
placed Valley Forge's subrogation claim in direct competition 
with the recovery of its insured.  See Schulte, 176 Wis. 2d at 
633-34.  
¶43 Valley Forge sued Home Mutual, its insured, Ropson, 
and McIlrath, asserting a subrogation claim based on its 
previous $6,000 property damage payment to McIlrath.  The 
subrogation claim of Valley Forge against Home Mutual and 
Ropson, if successful, would have taken $6,000 from McIlrath due 
to McIlrath's indemnification obligation to Home Mutual and 
No. 
2014AP157 
 
21 
 
Ropson under the settlement agreement.  This would have caused 
McIlrath's first-party claim against Valley Forge to become 
unfunded.12  
¶44 Rejecting the insurer's claim to recoup the subrogated 
property damage funds from its own insured through the operation 
of the indemnification provision in the settlement agreement, 
the court of appeals over simplified the issue as whether the 
insurer or the insured should go unpaid, and concluded that "the 
loss should be borne by the insurer for that is a risk the 
insured has paid it to assume."  Valley Forge, 133 Wis. 2d at 
369-70 (quoting Garrity, 77 Wis. 2d at 542).  In so doing, the 
court of appeals overlooked the equities affecting Valley Forge 
and whether McIlrath was entitled to pursue subrogated property 
damage funds from Home Mutual in the first instance because he 
had been fully paid for that claim by Valley Forge.13 
                                                 
12 A first-party claim in an insurance context is a claim 
made by the insured on his contract of insurance with his 
insurer, as distinguished from the situation in which a third 
party sues an insurer.  Brethorst v. Allstate Prop. & Cas. Ins. 
Co., 2011 WI 41, ¶¶23-24, 334 Wis. 2d 23, 798 N.W.2d 467. 
13 As we have explained, one cause of action may arise out 
of an automobile accident, but it can contain two claims:  one 
for property damage and one for personal injury.  Borde v. Hake, 
44 Wis. 2d 22, 29, 170 N.W.2d 768 (1969).  Subsequent to the 
insurer's payment of the insured's property damage, the insurer 
and its insured have common ownership of that claim.  Id. at 28; 
see also Heifetz v. Johnson, 61 Wis. 2d 111, 122, 211 N.W.2d 834 
(1973) (withdrawing dicta from Borde relative to statute of 
limitations effect of failing to name subrogated insurer).    
No. 
2014AP157 
 
22 
 
¶45 Moreover, the court of appeals missed the import of 
the indemnity provision in the settlement agreement to the 
equities that related to the insurer, even though in Vogt we 
pointed out similar equitable issues to that which an indemnity 
agreement can raise.  Instead of paying heed to what we had said 
about the equities that affect subrogation, the court of appeals 
dismissed our decision in Vogt as "inapposite" to the issues 
presented in Valley Forge.  Id. at 369.   
¶46 By so doing, the court of appeals failed to consider 
the equitable bases upon which we refused to enforce full 
releases of the tortfeasor and his insurer required by the 
settlement offer in Vogt and how those equities would have been 
implicated as the court of appeals considered the indemnity 
provision of the settlement agreement in Valley Forge.  As we 
carefully explained in Vogt, when the insured has received 
payment under his own policy and an opportunity to settle with 
the tortfeasor and the tortfeasor's insurer, "a just result" 
puts the ultimate burden on the tortfeasor, not on the insurer 
who has paid a first-party claim in full under its contract with 
its insured.  Vogt, 129 Wis. 2d at 19.  
¶47 More specifically, in Vogt, we examined contentions 
that related to a settlement agreement that required full 
releases of the tortfeasor and his insurer by the injured party:  
(1) payment to the injured party of $15,000, the tortfeasor's 
policy limits; (2) release of the tortfeasor from any obligation 
for damages he caused; and (3) termination of the insurer's 
subrogation rights.  Id. at 8.  After balancing the equities 
No. 
2014AP157 
 
23 
 
among 
the 
parties, 
we 
did 
not 
terminate 
the 
insurer's 
subrogation claim.  Rather, we offered the insurer the choice of 
paying its insured's first-party claim from the $50,000 of 
underinsured motorist coverage14 and then pursuing the tortfeasor 
for payment in subrogation or paying its insured's first-party 
claim and accepting the settlement if the insurer determined 
that the tortfeasor was not collectable and, therefore, not 
worth pursuing.  Id. at 26.   
¶48 Given the record before us, we were unsure whether the 
tortfeasor was collectable; therefore, we remanded the matter to 
the circuit court to give the insurer sufficient time to decide 
how it would proceed.  Id.  Importantly, the balance we effected 
did not put the insurer in competition with its own insured and 
permitted the insurer to hold the tortfeasor responsible for the 
damages he had caused.   
3.  Application:  made whole or subrogation 
¶49 We conclude that, given the facts presented in the 
instant case, the made whole doctrine does not apply to preclude 
Dairyland from retaining funds obtained in subrogation even 
though Dufour has not recovered all of his bodily injury damages 
flowing from the accident.  First, Dairyland fully paid Dufour 
its bodily injury policy limit of $100,000 as well as 100% of 
the 
damage 
to 
his 
motorcycle 
under 
its 
property 
damage 
                                                 
14 "There is nothing in the record to show the total amount 
of damages to which Vogt may be entitled."  Vogt v. Schroeder, 
129 Wis. 2d 3, 7, 383 N.W.2d 876 (1986).  
No. 
2014AP157 
 
24 
 
provision.  As with Muller, these proceeds constituted every 
dollar to which Dufour was entitled under his contract of 
insurance with Dairyland.  See Muller, 309 Wis. 2d 410, ¶70.  
Had Dufour wished to insure himself against greater bodily 
injury losses, he could have paid a higher premium for higher 
policy limits.  
¶50 Second, Dufour also had priority in recovering from 
the tortfeasor's policy, as required by Garrity, wherein he was 
paid the policy limit of $100,000 for bodily injury.  Garrity, 
77 Wis. 2d at 542-43.  Dairyland permitted Dufour to recover all 
benefits to which he was entitled under both policies before it 
pursued its separate subrogation claim against the tortfeasor's 
insurer.  Third, by waiting until Dufour recovered all available 
proceeds under both insurance policies, Dairyland was not in 
competition with Dufour for a limited pool of funds.  As Dufour 
acknowledges, but for Dairyland's subrogation action against the 
tortfeasor's insurer, Dufour would have no access to any 
additional funds from either insurer.  Consequently, allowing 
Dairyland to seek and obtain subrogation had no effect on 
Dufour's recovery.  Muller, 309 Wis. 2d 410, ¶4.  
¶51 Therefore, the equities presented favor Dairyland, 
which has wholly fulfilled its contractual obligations to 
Dufour.  Dufour purchased two types of insurance coverage that 
are relevant here:  bodily injury and property damage.  Each 
coverage type gave rise to a separate premium, a separate policy 
limit and a separate description of the kind of damage for which 
it would indemnify Dufour.  He exhausted his underinsured 
No. 
2014AP157 
 
25 
 
motorist bodily injury policy limit and now is attempting to tap 
into his property damage policy limit in order to satisfy his 
remaining 
bodily 
injury 
losses. 
 
We 
decline 
to 
rewrite 
Dairyland's policy to provide for lump sum coverage where such 
coverage was not contemplated by the parties.  Brethorst v. 
Allstate Prop. & Cas. Ins. Co., 2011 WI 41, ¶68, 334 Wis. 2d 23, 
798 N.W.2d 467 (declining to rewrite insurance policy "to bind 
an insurer to a risk which it did not contemplate and for which 
it was not paid"); Maxwell v. Hartford Union High Sch. Dist., 
2012 
WI 
58, 
¶¶34-35, 
341 
Wis. 2d 
238, 
814 
N.W.2d 
484 
(emphasizing importance of both insurers and insureds receiving 
the benefit of their bargain as premiums are based on risk 
assessment).  Although we are sympathetic to Dufour's personal 
injuries for which he was not made whole, preventing an insurer 
from pursuing its subrogation claim for property damage payments 
under circumstances such as presented herein would not solve the 
problem of underinsurance for personal injuries.15   
¶52 Finally, although we have serious concerns about the 
court of appeals decision in Valley Forge and caution against 
its use, given our discussions in Vogt, subsequent cases and 
herein, we do not overrule Valley Forge.  The holding in Valley 
Forge requires a settlement agreement whereby the injured party 
becomes obligated to indemnify the tortfeasor and its insurer 
                                                 
15 Insurers would not proceed on their subrogation claims 
were they not able to retain the funds awarded from those 
claims.   
No. 
2014AP157 
 
26 
 
for 
any 
award 
the 
injured 
party's 
insurer 
obtains 
in 
subrogation.  Such an agreement sets up the potential for 
competition for a limited pool of funds between the insurer and 
its insured.  Schulte, 176 Wis. 2d at 633-34.  There is no 
indemnification agreement here, no potential competition for a 
limited pool of funds and no potential to apply Valley Forge.  
C.  Bad Faith 
¶53 A bad faith claim is a separate and distinct cause of 
action from an insured claiming that the insurer breached its 
insurance contract.  Brethorst, 334 Wis. 2d 23, ¶23.  Bad faith 
sounds in tort, not in contract, and it constitutes "a separate 
intentional wrong, which results from a breach of duty imposed 
as a consequence of the relationship established by contract."  
Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 687, 271 N.W.2d 368 
(1978).   
¶54 In order to prevail on a bad faith claim, an insured 
must establish three elements.  Brethorst, 334 Wis. 2d 23, ¶¶49, 
65 (citing Weiss v. United Fire & Cas. Co., 197 Wis. 2d 365, 
377, 541 N.W.2d  753 (1995) and Benke v. Mukwonago-Vernon Mut. 
Ins. Co., 110 Wis. 2d 356, 362, 329 N.W.2d 243 (Ct. App. 1982)).  
The insured must show all of the following:  First, "that there 
is no reasonable basis for the insurer to deny the insured's 
claim for benefits under the policy."  Id.  Second, "that the 
insurer knew of or recklessly disregarded the lack of a 
reasonable basis to deny the claim."  Id.  Third, "some breach 
of contract by an insurer is a fundamental prerequisite for a 
No. 
2014AP157 
 
27 
 
first-party bad faith claim against the insurer by the insured."  
Id., ¶65.   
¶55 As we have explained above, Dairyland paid Dufour 
every dollar to which he was entitled under its policy.  
Therefore, Dairyland did not breach its insurance contract.  
That Dairyland sought and obtained subrogation for payments it 
made to Dufour is not in contravention of the parties' contract.  
Quite to the contrary, Dairyland's policy specifically provided, 
"[a]fter we have made payment under this policy and, where 
allowed by law, we have the right to recover the payment from 
anyone who may be held responsible."  As insurer of the 
tortfeasor, American Standard was a person who may be held 
responsible for the tortfeasor's negligence and it was from 
American 
Standard 
that 
Dairyland 
obtained 
subrogation.  
Accordingly, we conclude that Dairyland did not act in bad faith 
by retaining the funds it obtained as subrogation. 
III.  CONCLUSION 
¶56 We conclude that the made whole doctrine does not 
apply to preclude Dairyland from retaining the funds it received 
from its subrogation claim because the equities favor Dairyland:  
(1) Dairyland fully paid Dufour all he bargained for under his 
Dairyland policy, which included the policy's limits for bodily 
injury and 100% of Dufour's property damage; (2) Dufour had 
priority in settling with the tortfeasor's insurer; and (3) if 
Dairyland had not proceeded on its subrogation claim, Dufour 
would have had no access to additional funds from the 
tortfeasor's insurer.  We further conclude that Dairyland did 
No. 
2014AP157 
 
28 
 
not act in bad faith with respect to Dufour's demand for the 
funds Dairyland obtained as subrogation for the property damages 
it paid Dufour.  Accordingly, we reverse the court of appeals 
decision in all respects.  
By the Court.—The decision of the court of appeals is 
reversed. 
 
 
 
No.  2014AP157.ssa 
 
1 
 
¶57 SHIRLEY S. ABRAHAMSON, J.   (concurring in part and 
dissenting in part).  The instant case focuses on the interplay 
of subrogation and the made whole doctrine.  Subrogation enables 
an insurance company that has paid its insured's loss pursuant 
to its policy to recoup that payment from the party responsible 
for the loss.1  The made whole doctrine limits an insurance 
company's rights to subrogation in recognition of the injured 
insured's right to obtain full compensation for his or her 
losses.   
¶58 A tension exists between the two doctrines.   
¶59 The made whole doctrine is an equitable limitation on 
subrogation.  Indeed, the court has called the made whole 
doctrine "an antisubrogation rule."2  The made whole doctrine, 
simply and generally stated, is "that there is no subrogation 
until the insured has been made whole,"3 that is, an insurer may 
                                                 
1 Muller v. Society Ins., 2008 WI 50, ¶22, 309 Wis. 2d 410, 
750 N.W.2d 1; see also Garrity v. Rural Mut. Ins. Co., 77 
Wis. 2d 537, 541, 253 N.W.2d 512 (1977) ("Subrogation rests upon 
the equitable principle that one, other than a volunteer, who 
pays for the wrong of another should be permitted to look to the 
wrongdoer to the extent he has paid and be subject to the 
defenses of the wrongdoer.") (citations omitted).  
The subrogation provision in Dairyland's policy states: 
"After we have made payment under this policy and, where allowed 
by law, we have the right to recover the payment from anyone who 
may be held responsible."  Majority op., ¶7.   
2 Muller, 309 Wis. 2d 410, ¶25. 
3 Garrity, 77 Wis. 2d at 542.   
No.  2014AP157.ssa 
 
2 
 
not recover payments from the tortfeasor or the tortfeasor's 
insurer until the insured has been compensated for all elements 
of damages he or she sustained. 
¶60 The limitations on subrogation imposed by the made 
whole doctrine exist to prevent the inequitable prospect of an 
insurance company competing with its insured for funds when the 
insured has indisputably not been made whole.4  The court has 
explained:  "Where either the [insurance company] or the insured 
must to some extent go unpaid, the loss should be borne by the 
[insurance company] for that is a risk the insured has paid it 
to assume."5     
¶61 Numerous cases focus on the interplay of subrogation 
and the made whole doctrine in a variety of fact situations.  
Because the essence of the case law is that equitable principles 
apply to subrogation and the made whole doctrine,6 these cases 
turn on their specific facts.   
                                                 
4 Schulte v. Franzin, 176 Wis. 2d 622, 625, 500 N.W.2d 305 
(1993). 
See Petta v. ABC Ins. Co., 2005 WI 18, ¶38, 278 
Wis. 2d 251, 692 N.W.2d 639 ("Outside of situations where a 
person has a competing claim with a subrogated insurer, the 
equities will vary dramatically.").   
5 Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 263, 
276, 316 N.W.2d 348 (1982) (quoting Garrity, 77 Wis. 2d at 542).   
6 Fischer v. Steffen, 2011 WI 34, ¶34, 333 Wis. 2d 503, 797 
N.W.2d 501. 
No.  2014AP157.ssa 
 
3 
 
¶62 Although the case law is not easy to follow, certain 
principles are very clear:  Subrogation and the made whole 
doctrine are equitable doctrines.  There is no subrogation until 
an insured is made whole.  Subrogated insurance companies should 
not compete with their insureds for limited settlement funds.   
¶63 The undisputed facts here are that Dufour recovered 
from the tortfeasor's insurance company, American Standard, and 
his insurance company, Dairyland, a total of $200,000 for bodily 
injuries stemming from a motorcycle accident.  This sum did not 
cover Dufour's full losses for bodily injuries.   
¶64 In 
addition, 
Dairyland 
paid 
Dufour 
the 
sum 
of 
$15,589.86, to compensate for damages to Dufour's motorcycle.  
¶65 Based on this payment for damages to the motorcycle, 
Dairyland sought reimbursement for the $15,589.86 from American 
Standard.  Under American Standard's policy insuring the 
tortfeasor, American Standard was liable to the injured person 
for property damage caused by American Standard's insured (the 
tortfeasor). 
No.  2014AP157.ssa 
 
4 
 
¶66 After Dairyland was reimbursed $15,589.86 by American 
Standard, Dufour sought this $15,589.86 from Dairyland on the 
grounds that he was not made whole.7   
¶67 The issue in the instant case is who is entitled to 
this $15,589.86——Dufour, or Dairyland, his insurance company——
given that Dufour has not been fully compensated for his bodily 
injuries from the accident. 
¶68 Contrary to the majority opinion's assertions, in the 
instant case, the insured and his insurance company are 
competing for a limited pool of funds that is not sufficient to 
satisfy both the insured's losses and the insurance company's 
subrogation interest.  An overriding concern of the made whole 
doctrine is the "inequitable prospect of insurance companies 
attempting to take the funds that should have gone to the 
insured."8  The majority opinion ignores this competition for the 
                                                 
7 An article refers to the three parties involved in 
subrogation and the made whole doctrine as follows:  The 
tortfeasor is referred to as the "loss-causer"; the injured 
party is referred to as the "loss-victim"; and the loss-victim's 
insurance company is referred to as the "loss-insurer."  See 
Brendan 
S. 
Maher 
& 
Radha 
A. 
Pathak, 
Understanding 
and 
Problematizing Contractual Tort Subrogation, 40 Loy. U. Chi. 
L.J. 49, 50 (2008).  Although I do not use this terminology, I 
find it descriptive and helpful.   
8 Vogt v. Schroeder, 129 Wis. 2d 3, 14, 383 N.W.2d 876 
(1986). 
No.  2014AP157.ssa 
 
5 
 
funds, but "[t]he practical competition between an insured and 
the subrogated insurer is an equitable factor we cannot ignore."9  
¶69 I dissent in part because I would affirm that part of 
the decision of the court of appeals holding that the made whole 
doctrine applies in the instant case and that Dairyland is 
barred from retaining the $15,589.86.  This result is just and 
equitable under the circumstances.   
¶70 Although "Wisconsin decisional law has done more to 
influence the expansion of the made whole doctrine than that of 
any other jurisdiction,"10 recent Wisconsin cases are chipping 
away at the doctrine.  The majority opinion in the instant case 
continues this process of chipping away and in so doing, fails 
to clarify the already messy interplay between subrogation and 
                                                 
9 Schulte, 176 Wis. 2d at 633. 
10 Johnny C. Parker, The Made Whole Doctrine:  Unraveling 
the Enigma Wrapped in the Mystery of Insurance Subrogation, 70 
Mo. L. Rev. 723, 771 (2005).   
No.  2014AP157.ssa 
 
6 
 
the made whole doctrine in Wisconsin.11  I disagree with chipping 
away at the made whole doctrine.  
¶71 I concur in part, however, because I agree with the 
majority opinion's conclusion that Dairyland did not act in bad 
faith when it denied Dufour's claim.  I do not agree with the 
majority's discussion of this issue.  I conclude that Dairyland 
had a reasonable basis "to conclude that [its insured's] claim 
                                                 
11 See Donald H. Piper & Terry J. Booth, Subrogation, in 3 
The Law of Damages in Wisconsin § 32.22 (Russell Ware ed., 6th 
ed. 2016) (stating that the scope of the made whole doctrine "is 
not currently well defined" in Wisconsin); John J. Kircher, 
Insurer Subrogation in Wisconsin: The Good Hands (Or a Neighbor) 
In Another's Shoes, 71 Marq. L. Rev. 33, 72 (1987) (noting that 
although "[m]uch water has passed over, under, around and 
through the judicial dam since the supreme court articulated the 
first principle affecting insurer subrogation in Wisconsin," 
"[c]larity has not always been the product of the courts' 
decisions."); see also Jeffrey A. Greenblatt, Comment, Insurance 
and Subrogation: When the Pie Isn't Big Enough, Who Eats Last?, 
64 U. Chi. L. Rev. 1337, 1345, 1360 (1997) (discussing the 
"messy difficulties of applying the made-whole doctrine," and 
suggesting that "[e]ven defining the term 'made whole' is 
difficult."). 
For discussions of subrogation and the made whole doctrine, 
see, e.g., 4 New Appleman Law of Liability Insurance ch. 42 
(Matthew Bender rev. ed., 2d ed. 2015);  16 Lee R. Russ & Thomas 
F. Segalla, Couch on Insurance 3d, chs. 222-226 (2005); II 
Arnold P. Anderson, Wisconsin Insurance Law ch. 10 (7th ed. 
2015); 3 The Law of Damages in Wisconsin, ch. 32 (Russell Ware 
ed., 6th ed. 2016); Maher & Pathak, supra note 7; Parker, supra 
note 7; Greenblatt, supra, at 1345, 1360; Kircher, supra, at 72; 
Matthiesen, Wickert & Lehrer, S.C., Made Whole Doctrine in All 
50 
States, 
https://www.mwl-law.com/wp-
content/uploads/2013/03/made-whole-doctrine-in-all-50-states.pdf 
(last updated Feb. 5, 2016)   
No.  2014AP157.ssa 
 
7 
 
is fairly debatable and that therefore payment need not be made 
on the claim."12   
¶72 Accordingly, I dissent in part, concur in part, and 
write separately.   
I 
¶73 I begin with the undisputed facts and the issue 
presented.   
¶74 Dennis Dufour was seriously injured in a motorcycle 
accident.  Dufour's bodily injuries exceeded $200,000.  Dufour's 
property damage, namely damage to his motorcycle, amounted to 
$15,589.86.   
¶75 Dairyland paid Dufour, its insured, $100,000, its 
policy limit for underinsured motorist coverage, for his bodily 
injuries. 
 
American 
Standard, 
the 
tortfeasor's 
insurance 
company, paid Dufour $100,000, its liability policy limit, for 
his bodily injuries.     
¶76 Dairyland also paid Dufour $15,589.86 for the damage 
to his motorcycle.   
¶77 As a result, Dufour received the full amount of his 
property damage from his insurance company.  Dufour has not, 
however, received full compensation for his bodily injuries.  He 
                                                 
12 See Brown v. LIRC, 2003 WI 142, ¶24, 267 Wis. 2d 31, 671 
N.W.2d 279.   
No.  2014AP157.ssa 
 
8 
 
has not been made whole for all bodily injuries he sustained in 
the motorcycle accident.     
¶78 After paying Dufour its $100,000 policy limit for 
bodily injury and $15,589.86 for his property damage, Dairyland 
sought and obtained in subrogation from American Standard, the 
tortfeasor's insurance company, $15,589.86——the sum Dairyland 
paid Dufour for damage to his motorcycle.  Obviously in paying 
Dairyland $15,589.86, American Standard agreed that its policy 
obligated it to pay Dufour for property damage 
to his 
motorcycle.   
¶79 The central question presented in the instant case is 
who is entitled to the $15,589.86 obtained by Dairyland from 
American Standard: Dairyland or Dufour?  The answer hinges on 
whether Dufour has been "made whole," the general rule being 
that "there is no subrogation until the insured has been made 
whole,"13 in light of the equities of this particular fact 
situation.   
II 
 
¶80 I turn now to applying subrogation and the made whole 
doctrine in the instant case. 
 
¶81 A premise of the made whole doctrine, as we have 
previously stated, is that subrogation does not ordinarily arise 
until the loss has been fully paid.  When speaking of the loss 
                                                 
13 Garrity, 77 Wis. 2d at 542.   
No.  2014AP157.ssa 
 
9 
 
in a tort case, "the loss" refers to all damages arising from a 
single occurrence.  Considering all damages arising from a 
single occurrence as "the loss" is in keeping with the rule that 
a cause of action in tort includes all elements of damages.14   
¶82 In the instant case, it is undisputed that Dufour has 
not been made whole for "all the elements of damages" he 
sustained as the result of the accident.  Dufour's bodily 
injuries exceeded the $200,000 he received.   
¶83 Since our seminal cases applying the made whole 
doctrine, Rimes v. State Farm Automobile Insurance Co., 106 
Wis. 2d 263, 275, 316 N.W.2d 348 (1982), and Garrity v. Rural 
Mutual Insurance Co., 77 Wis. 2d 537, 542-43, 253 N.W.2d 512 
(1977), this court has made clear that the made whole doctrine 
bars subrogation unless "the insured has been completely 
compensated for all the elements of damages, not merely those 
damages for which the insurer has indemnified the insured."15   
¶84 After this court decided Garrity and Rimes, the court 
clarified the role of the equities in applying subrogation and 
the made whole doctrine.  The court stated in Vogt v. Schroeder, 
129 
Wis. 2d 3, 
12, 
383 
N.W.2d 876 
(1986), 
that 
because 
                                                 
14 The cause of action against a tortfeasor is indivisible.  
Muller, 309 Wis. 2d 410 (citing Garrity, 77 Wis. 2d at 542); see 
also Caygill v. Ipsen, 27 Wis. 2d 578, 582-83, 135 N.W.2d 284 
(1965).  
15 Rimes, 106 Wis. 2d at 275 (quoted with approval in 
Schulte, 176 Wis. 2d at 628). 
No.  2014AP157.ssa 
 
10 
 
subrogation and the made whole doctrine are equitable doctrines, 
and "[e]quity does not lend itself to the application of black 
letter rules," the made whole doctrine as set forth in Garrity 
and Rimes would be applied only when it leads to equitable 
results.16  
¶85 Relying on this language in Vogt, the majority opinion 
concludes that even though Dufour has not been made whole for 
"all elements of damages"——namely his bodily injuries——the made 
whole doctrine does not apply because "the equities favor 
Dairyland . . . ."17  
¶86 The majority opinion relies on three non-exhaustive 
equitable principles that may affect subrogation:18 (1) ensuring 
that the injured person (here Dufour) is fully compensated for 
the loss; (2) preventing the injured person (here Dufour) from 
being unjustly enriched; and (3) ensuring that the tortfeasor is 
held responsible for his conduct and does not get off scot-free 
while another, here the injured person's (Dufour's) insurance 
                                                 
16 See Muller, 309 Wis. 2d 410, ¶44 ("'Hence, only under 
fact situations where an equitable result will follow should the 
statements quoted above [e.g., 'the conventionally subrogated or 
contractual insurer has no share in the recovery from the tort-
feasor if the total amount recovered by the insured from the 
insurer does not cover his loss' Garrity, 77 Wis. 2d at 544] be 
applied 
literally.'") 
(quoting 
Vogt, 
129 
Wis. 2d 
at 
12) 
(alteration in original) (emphasis omitted).   
17 See majority op., ¶4.   
18 See majority op., ¶18 (quoting Muller, 309 Wis. 2d 410, 
¶60).   
No.  2014AP157.ssa 
 
11 
 
company (Dairyland), is required to pay for the tortfeasor's 
conduct.   
¶87 The majority opinion weighs the equities and permits 
Dairyland to retain the $15,589.86 it obtained in subrogation 
from American Standard, the tortfeasor's insurance company.19   
¶88 I also weigh the equities.  Applying the three 
equitable principles set forth by the majority opinion, I 
conclude that the equities favor Dufour, not Dairyland (see part 
A below).  I also disagree with the majority's reading of the 
case law (see part B below). 
A 
 
¶89 The equities favor Dufour, not Dairyland.  
¶90 In the instant case, Dairyland is competing with 
Dufour, its insured, for a limited pool of funds.  Dairyland and 
Dufour are competing for the same $15,589.86 that the tortfeasor 
(through his insurance company, American Standard) was liable 
for under its policy as a result of the motorcycle accident.   
¶91 The made whole doctrine is designed to prevent 
competition between the injured party and his or her insurance 
company when the injured party's damages exceed the limited pool 
of funds from which recovery may be had.  The case law is clear:  
When a limited pool of funds is insufficient to make the injured 
                                                 
19 See majority op., ¶56.   
No.  2014AP157.ssa 
 
12 
 
party whole, the loss should be borne by the injured party's 
insurance company (here, Dairyland).20       
¶92 That the insurance company (here, Dairyland) bears the 
loss rather than the insured (here, Dufour) when funds are 
insufficient to pay the insured's entire damages is referred to 
as the "recovery priority rule" or the "subrogation rule of 
priority."21  The recovery priority rule establishes that Dufour, 
the injured party, should be the first to tap into the limited 
pool of funds and recover any uncompensated damages under the 
made whole doctrine.  
¶93 In acting on its subrogation rights to seek recovery 
from the tortfeasor, Dairyland must recognize Dufour's priority 
over the limited pool of available funds.  Because there was an 
insufficient pool of funds to satisfy Dufour's entire claim, 
Dufour takes priority over Dairyland in the allocation of these 
funds; the made whole doctrine applies with full force.22 
¶94 In sum, Dufour is entitled to recover in full any sums 
payable by the tortfeasor before Dufour's insurance company 
could exercise any right of subrogation.  "Subrogation is to be 
allowed only when the insured is compensated in full by recovery 
                                                 
20 See Muller, 309 Wis. 2d 410, ¶¶27-44; Rimes, 106 Wis. 2d 
at 275-76; Garrity, 77 Wis. 2d at 542. 
21 This principle was established by Garrity, 77 Wis. 2d at 
542-43, and is repeated in Muller, 309 Wis. 2d 410, ¶¶28-32. 
22 Muller, 2008 WI 50, ¶72, 309 Wis. 2d 410, 750 N.W.2d 1. 
No.  2014AP157.ssa 
 
13 
 
from the tortfeasor."  Rimes, 106 Wis. 2d at 272; see also 
Garrity, 77 Wis. 2d at 542.23    
¶95 I conclude that Dufour, the insured who has not been 
made whole for his bodily injuries in a settlement with the 
tortfeasor for the tortfeasor's policy limits, has priority over 
Dairyland for the $15,589.86 paid by the tortfeasor's insurance 
company for Dufour's subrogated property damage claim.  As a 
result, 
Dairyland 
should 
not 
be 
permitted 
to 
keep 
the 
$15,589.86.     
¶96 The three equitable principles outlined in Muller v. 
Society Ins., 2008 WI 50, ¶60, 309 Wis. 2d 410, 750 N.W.2d 1, 
and set forth by the majority opinion favor Dufour in the 
instant case.  First, Dufour was not fully compensated for his 
losses.  Second, Dufour will not be unjustly enriched if he 
receives $15,869.86 from Dairyland.  There is no double recovery 
here because Dufour has not been fully compensated for all his 
losses.  Third, the tortfeasor (through his insurance policy) is 
held responsible for his conduct regardless of whether Dufour or 
Dairyland retains the $15,589.86.  The tortfeasor has paid for 
                                                 
23 See Paulson v. Allstate Ins. Co., 2003 WI 99, ¶27 & n.3, 
263 Wis. 2d 520, 665 N.W.2d 744 (Rimes and Garrity apply when 
the "pie" is not big enough to completely satisfy the claims of 
both the injured insured and its insurance company); Drinkwater 
v. Am. Family Mut. Ins. Co., 2006 WI 56, ¶¶16-23, 290 
Wis. 2d 642, 714 N.W.2d 568 ("Subrogation under circumstances 
where the insured had not been made whole 'turn[s] the entire 
doctrine of subrogation in its head.'") (citing Ruckel v. 
Gassner, 2002 WI 67, ¶41, 253 Wis. 2d 280, 646 N.W.2d 11). 
No.  2014AP157.ssa 
 
14 
 
the property damage he caused, and the tortfeasor's insurance 
company is not permitted to retain the funds it owes for 
Dufour's property damage.  
¶97 In sum, this case is not a dispute between the 
tortfeasor and the injured party.  The dispute is between Dufour 
and Dairyland, his insurance company; Dufour and Dairyland are 
competing for the funds the tortfeasor owes and has paid under 
his policy.  
B 
¶98 Furthermore, 
the 
majority's 
conclusion 
favoring 
Dairyland over Dufour is based on a mistaken reading of Valley 
Forge 
Insurance 
Co. 
v. 
Home 
Mutual 
Insurance 
Co., 
133 
Wis. 2d 364, 396 N.W.2d 348 (Ct. App. 1986).24 
 
¶99 In Valley Forge, the court of appeals concluded that 
the equities favored the insured in a fact situation almost 
identical to that in the instant case.   
                                                 
24 The majority opinion uses sentences from cases taken out 
of context and, in my view, misreads several cases.  I do not 
point out each problem in the majority opinion.  See, for 
example, the majority opinion's discussion (at ¶¶32-33) of 
Mutual Service Casualty Co. v. American Family Insurance Group, 
140 Wis. 2d 555, 561, 410 N.W.2d 582 (1987).  Mutual Service was 
narrowed by Schulte, 176 Wis. 2d at 635-36.  Indeed, Justice 
Steinmetz's dissent in Schulte objected to the decision on the 
grounds that it "improperly violate[d] the doctrine of stare 
decisis by rejecting the result and some of the reasoning 
in . . . Mutual Service . . . .").  
No.  2014AP157.ssa 
 
15 
 
¶100 The plaintiff in Valley Forge was injured in a car 
accident.25  The plaintiff's insurance company, Valley Forge, 
paid the plaintiff $6,000 for damage to his vehicle.26       
¶101 The plaintiff then entered into a settlement agreement 
with Home Mutual Insurance Company (the tortfeasor's insurance 
company), whereby the plaintiff was paid $25,000 for his bodily 
injuries and $6,000 for property damage to his vehicle.27  The 
plaintiff agreed to indemnify Home Mutual against any liability 
Home Mutual incurred as a result of the settlement.28  The 
plaintiff's bodily injuries exceeded the sum that he was paid.29   
¶102 The 
plaintiff's 
insurance 
company, 
Valley 
Forge, 
asserted subrogation rights to (and requested payment of) the 
$6,000 from Home Mutual (the tortfeasor's insurance company) to 
avoid the possibility of a double recovery by the plaintiff.30   
¶103 The Valley Forge court noted that although it appeared 
that the plaintiff was receiving a double recovery for his 
property damage, there was no double recovery because the 
                                                 
25 Valley Forge Ins. Co. v. Home Mut. Ins. Co., 133 
Wis. 2d 364, 366, 396 N.W.2d 348 (Ct. App. 1986). 
26 Valley Forge, 133 Wis. 2d at 366.   
27 Valley Forge, 133 Wis. 2d at 366.   
28 Valley Forge, 133 Wis. 2d at 367.   
29 Valley Forge, 133 Wis. 2d at 367.   
30 Valley Forge, 133 Wis. 2d at 366.   
No.  2014AP157.ssa 
 
16 
 
plaintiff was not made whole for "'all the elements of 
damages . . . .'"31  According to Valley Forge, being made whole 
depends on the insured being completely compensated for all 
types of damages, including bodily injuries and property 
damage.32  
¶104 Because the plaintiff had not been made whole for 
"'all 
the 
elements 
of 
damages . . . ,'" 
his 
recovery 
of 
available 
subrogated 
property 
damage 
funds 
was 
not 
an 
impermissible double recovery.33 
¶105 Valley Forge follows long-settled Wisconsin law that, 
as a general rule, the subrogor (that is, the injured insured) 
must be made whole before the subrogee (that is, the injured 
insured's insurance company) may recover anything from the 
tortfeasor.34   
¶106 Relying on Vogt's pronouncement that subrogation is an 
equitable doctrine that "'depends upon a just resolution of a 
dispute under a particular set of facts,'" the court of appeals 
held that Valley Forge was not entitled to subrogation because 
                                                 
31 Valley Forge, 133 Wis. 2d at 368 (quoting Rimes, 106 
Wis. 2d at 275).   
32 See Valley Forge, 133 Wis. 2d at 368-69.   
33 Valley Forge, 133 Wis. 2d at 368 (quoting Rimes, 106 
Wis. 2d at 275).   
34 Garrity, 77 Wis. 2d at 541; Rimes, 106 Wis. 2d at 272-73. 
No.  2014AP157.ssa 
 
17 
 
the tortfeasor and Valley Forge together paid the plaintiff less 
than the total loss the plaintiff suffered.35   
¶107 Valley Forge concluded, as had previous cases, that 
where either the insurance company or the injured insured has to 
suffer a loss, the loss should fall on the insurance company.36  
¶108 The majority opinion expresses "serious concerns about 
the court of appeals decision in Valley Forge and caution[s] 
against its use . . . ."37  Nevertheless, the majority opinion 
declines to overrule Valley Forge.  Instead it distinguishes 
Valley Forge based on an overly narrow reading of the facts and 
longstanding case law.38   
¶109 I am not persuaded by the majority opinion's reading 
of Valley Forge.  As the court of appeals recognized in the 
instant case, "the facts before us here, for all relevant 
purposes, are identical to those in Valley Forge . . . ."39 
¶110 In both Valley Forge and in the instant case the issue 
is the same:  Do funds obtained from the tortfeasor's insurance 
company belong to the injured insured or to the insured's 
                                                 
35 Valley Forge, 133 Wis. 2d at 369 (quoting Vogt, 129 
Wis. 2d at 12).   
36 See Valley Forge, 133 Wis. 2d at 368.   
37 Majority op., ¶52.   
38 Majority op., ¶52.   
39 Dufour v. Progressive Classic Ins. Co., No. 2014AP157, 
unpublished slip op., ¶26 (Wis. Ct. App. July 16, 2015).   
No.  2014AP157.ssa 
 
18 
 
insurance company when the insured has not been made whole for 
all the elements of damages suffered?  At its core, the question 
in both Valley Forge and the instant case is who ought to 
receive funds that are paid on behalf of the tortfeasor:  the 
injured person who has not been fully compensated for all his 
losses, or his insurance company? 
¶111 Valley Forge is applicable to the instant case because 
it addresses who is entitled to the limited pool of funds by 
applying the equitable subrogation and made whole doctrines.   
¶112 Paulson v. Allstate Insurance Co., 2003 WI 99, ¶25, 
263 Wis. 2d 520, 665 N.W.2d 744, confirmed that Valley Forge was 
an example of impermissible competition between the insurer and 
insured for a limited pool of funds:  "In Valley Forge . . . the 
court of appeals held that a victim's insurer was not entitled 
to subrogation where the victim recovered less than his total 
loss.  Again, the situation was one of the insurer competing 
with the insured for funds."   
¶113 In Valley Forge, the insured was in possession of the 
funds furnished by the tortfeasor's insurance company for 
property damage; in the instant case, Dairyland is in possession 
of the funds furnished by the tortfeasor's insurance company for 
property damage.         
¶114 The Valley Forge decision is not contingent on who 
possesses the limited pool of funds, but rather who is entitled 
to the funds. 
No.  2014AP157.ssa 
 
19 
 
¶115 As in Valley Forge, the insured and the insurance 
company in the instant case are fighting over a limited pool of 
money owed and supplied by the tortfeasor's insurance company.  
By relying on the factual difference in the two cases regarding 
possession of the pool of funds, the majority opinion elevates 
form over substance.  
¶116 The majority opinion attempts to distinguish Valley 
Forge by maintaining that, unlike the plaintiff in Valley Forge, 
Dufour had no access to any additional funds from either 
insurance company "but for Dairyland's subrogation action 
against the tortfeasor's insurer . . . .  Consequently, allowing 
Dairyland to seek and obtain subrogation had no effect on 
Dufour's recovery."40  But Dairyland did assert its subrogation 
rights, American Standard paid the sum its insured (the 
tortfeasor) owed Dufour, and the issue is who is entitled to 
these funds. 
¶117 The majority does not explain how, if Dufour had no 
right to seek funds for property damage from the tortfeasor's 
insurance company, Dairyland could seek such funds from the 
tortfeasor's insurance company.  After all, "subrogation confers 
no greater rights on the subrogee [Dairyland] than the subrogor 
[Dufour] had at the time of the subrogation . . . .  Thus, where 
one acquires a right by subrogation, that right is not a 
                                                 
40 Majority op., ¶50.   
No.  2014AP157.ssa 
 
20 
 
separate 
cause 
of 
action 
from 
the 
right 
held 
by 
the 
subrogor . . . . '[I]t is better to think of the insurer as an 
assignee of part of the claim.'"41   
¶118 In the instant case, Dufour's acceptance of payment 
for property damage from Dairyland does not operate as an 
assignment to Dairyland of Dufour's claim for property damage 
against the tortfeasor.  When the injured party has not been 
made whole, the made whole doctrine trumps any assignment based 
on the doctrine of subrogation.42  We stated this principle in 
Muller v. Society Insurance, 2008 WI 50, ¶29, 309 Wis. 2d 410, 
750 N.W.2d 1, as follows (citation and internal quotation marks 
omitted): 
The cause of action against the tortfeasor is viewed 
as an indivisible claim, and the plaintiff [here, 
Dufour] holds this claim until he is given the 
opportunity to fully recover his loss.  Logically, 
this principle establishes the insured's priority over 
his insurer [here, Dairyland] in pursuing recovery, 
                                                 
41 Wilmot v. Racine Cnty., 136 Wis. 2d 57, 63-64, 400 
N.W.2d 917 
(1987) 
(citation 
omitted) 
(quoting 
Heifetz 
v. 
Johnson, 61 Wis. 2d 111, 120, 211 N.W.2d 834 (1973)); see also 
Ruckel v. Gassner, 2002 WI 67, ¶27, 253 Wis. 2d 280, 646 
N.W.2d 11 ("[U]nder basic principles of subrogation . . . , the 
insurer is not entitled to recoup anything until the insured has 
been made whole.") (citing Garrity, 77 Wis. 2d at 543-44).   
42 Schulte, 176 Wis. 2d at 637. 
No.  2014AP157.ssa 
 
21 
 
and the general rule [is] that there is no subrogation 
until the insured has been made whole.43  
¶119 Dairyland asserts that allowing Dufour to retain the 
$15,589.86 amounts to rewriting the insurance policy to provide 
for a combined single coverage limit to make up for inadequate 
bodily injury coverage.  This argument has superficial appeal 
but on analysis is not convincing.   
¶120 The insured's policy is not being rewritten.  No 
combined single limit is imposed on Dairyland.  Nothing about 
the instant case requires that insurance funds covering one type 
of loss (e.g., property damage) be paid for another type of loss 
(e.g., personal injury). Rather, the instant case involves 
subrogation and the made whole doctrine and the application of 
equitable principles. 
¶121 The majority opinion suggests that "the made whole 
doctrine . . . is inapplicable if the claim is 'brought by a 
subrogated insurer against the tortfeasor or the tortfeasor's 
                                                 
43 In Muller, the tortfeasor's insurance liability was 
sufficient to cover all the property losses sustained by the 
insured and the insured's insurance carrier.  Muller, 309 
Wis. 2d 410, ¶4.  The court therefore held that the made whole 
doctrine did not apply even though the insured settled for less 
than full losses.  Muller, 309 Wis. 2d 410, ¶4.   
The Muller court, however, preserved the rule that when the 
funds are limited, the insured is entitled to be made whole.  
See Muller, 309 Wis. 2d 410, ¶72.   
Subrogation is not permitted in the instant case because 
unlike in Muller, the injured party, Dufour, exhausted all of 
the available insurance limits without being made whole. 
No.  2014AP157.ssa 
 
22 
 
insurer where the subrogated insurer's insured has previously 
settled with the tortfeasor.'"44   
¶122 This suggestion was repudiated in Schulte v. Franzin, 
176 Wis. 2d 622, 635-36, 500 N.W.2d 305 (1993).   
¶123 Schulte concluded that when an injured insured settles 
with the tortfeasor and the tortfeasor's insurance company 
without resolving the subrogated insurance company's part of the 
claim, the subrogated insurance company's rights of subrogation 
depend on whether the settlement made the insured whole.45  If 
the settlement does not make the insured whole, the subrogated 
insurance company has no right of subrogation.46     
¶124 I agree with the simple, clear implication of Rimes, 
Garrity, Vogt, and Valley Forge:  "[W]here 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 insured has paid it 
to assume."47 
 
¶125 In 
sum, 
the 
well-accepted 
principles, 
including 
equitable principles, relating to subrogation and the made whole 
                                                 
44 Majority op., ¶32 (quoting Mut. Serv. Cas. Co. v. Am. 
Family Ins. Grp., 140 Wis. 2d 555, 563-64, 410 N.W.2d 582 
(1987). 
45 Schulte, 176 Wis. 2d at 637.   
46 Schulte, 176 Wis. 2d at 637.   
47 Garrity, 77 Wis. 2d at 542.   
No.  2014AP157.ssa 
 
23 
 
doctrine weigh in favor of Dufour, not Dairyland.  A ruling in 
Dufour's favor:    
• 
Protects and defends the right of the insured injured 
person to be made whole;  
• 
Preserves the limitations on subrogation imposed by 
the made whole doctrine by not allowing subrogation 
for "discrete" coverages; 
• 
Reaffirms the equitable principle that if someone must 
suffer a loss, it should be the insurance company, not 
the injured insured;  
• 
Avoids a double recovery or windfall because the 
insured has not been made whole for the full extent of 
his or her losses; and 
• 
Ensures that an insurance company does not inequitably 
compete with its insured for a limited pool of funds 
insufficient to make the insured whole for the losses 
caused by the tortfeasor.  
¶126 Unfortunately, the majority opinion shifts away from 
the compensatory purpose of the made whole doctrine and instead 
protects the financial interests of the insurance company to the 
detriment of its insured who paid the premiums. 
¶127 Valley Forge is not distinguishable on its facts, is 
consistent 
with 
longstanding 
case 
law, 
does 
not 
rewrite 
Dairyland's policy, and correctly rules on equitable principles.  
No.  2014AP157.ssa 
 
24 
 
Accordingly, I would follow Valley Forge, as did the court of 
appeals. 
III 
¶128 I concur in part because I agree with the majority 
opinion's conclusion that Dairyland, Dufour's insurance company, 
did not act in bad faith when it denied Dufour's claim.  
Dairyland had a reasonable basis "to conclude that [its 
insured's] claim is fairly debatable and that therefore payment 
need not be made on the claim."48  The "fairly debatable" 
standard is an objective test that asks whether a reasonable 
insurance company under similar circumstances would have denied 
payment on the claim.49  I conclude that Dairyland has met this 
objective test by putting forward non-frivolous arguments in 
favor of its view that Dufour's claim was fairly debatable. 
¶129 For the reasons set forth, I dissent in part, concur 
in part, and write separately. 
¶130 I am authorized to state that Justice ANN WALSH 
BRADLEY joins this opinion. 
                                                 
48 See Brown, 267 Wis. 2d 31, ¶24.   
49 See Brown, 267 Wis. 2d 31, ¶24. 
No.  2014AP157.ssa 
 
1