Opinion ID: 1290952
Heading Depth: 2
Heading Rank: 5

Heading: Applicability of Vogt v. Schroeder

Text: ¶ 49. We believe that the factors relied on in Schmidt and Vogt are equally applicable to the situation here, where the settlement is not with the tortfeasor's insurer, but rather with the tortfeasor herself. The dual settlements in this case had the same effect as the single settlement in Vogt the full release of both the tortfeasor and the tortfeasor's insurer. [8] ¶ 50. The balance of equities between the underinsurer and the tortfeasor is the same. It is important to preserve the underinsurer's subrogation right, and under this extension of Vogt the underinsurer retains the right of subrogation against the tortfeasor. ¶ 51. The second rationale articulated by the Vogt court is controlling. As the court noted, an insured motorist has a right to a settlement and should not be required to sue for what is being freely offered, thus incurring substantial legal fees. Vogt, 129 Wis. 2d at 18. The right to a prompt settlement does not depend on whether the motorist has settled with the tortfeasor or the tortfeasor's insurer. Rather, Wisconsin has a long-standing policy in favor of settlements. Schulte, 176 Wis. 2d at 634 (citing Collins v. Am. Family Mut. Ins. Co., 153 Wis. 2d 477, 490, 451 N.W.2d 429 (1990) (internal citations omitted)). Prompt settlement of claims is in the public interest. See id. (citing Loy v. Bunderson, 107 Wis. 2d 400, 425, 320 N.W.2d 175 (1982)). ¶ 52. Sentry asserts that until a determination was made as to the value of the Pittses' UIM claim, Sentry would not be in a position to know the amount it would seek in subrogation. The passive construction of that sentence disguises the fundamental question of who must make the critical valuation of the insured's damages. Sentry prefers it to be the circuit court. Under Vogt, Sentry must do so on its own. The rationale underpinning the Vogt procedure is that an insurer is best suited to determine whether substitution is in its own best interests. ¶ 53. The assessment of risk and uncertainty is at the very heart of the insurer's business. It is the keystone of the insurance enterprise. This court has previously pointed out that the critical element in [the parties' competing definitions of insurance] is a contractual shifting of risk in exchange for premiums.  Hillegass v. Landwehr, 176 Wis. 2d 76, 81, 499 N.W.2d 652 (1993) (emphasis added); see also Nat'l Motorists Ass'n v. Office of the Comm'r of Ins., 2002 WI App 308, ¶¶ 31-32, 259 Wis. 2d 240, 655 N.W.2d 179. Indeed, the transfer of risk is the only reason that insureds pay premiums to insurers. See Black's Law Dictionary 802 (7th ed. 1999) (Insurance is defined as an agreement by which one party assumes a risk faced by another party in return for a premium payment.). Sentry, and all insurers, evaluate damages and make determinations about benefits on a daily basis. These determinations inevitably involve a degree of risk, for which insurers are compensated by insureds in the form of premiums. [9] ¶ 54. In Vogt, the circuit court stated the issue as follows: Can the insured [of an underinsured motorist's policy] settle with the tort feasor, and receive additional payments from the under-insured motorist's carrier and prevent the underinsured motorist's carrier from exercising subrogation rights of reimbursement against the tort feasor? Vogt, 129 Wis. 2d at 10 (emphasis added). This court did not disturb that statement of the issue, the plain language of which contemplates settlement with the tortfeasor. The court concluded that the underinsurer has the right of subrogation against the tortfeasor and his insurer to the extent that the underinsurer has paid benefits to its own insured. Vogt, 129 Wis. 2d at 17 (emphasis added). ¶ 55. After holding that the underinsurer had the right to subrogation as long as it substituted its own funds, the court listed several factors the underinsurer might consider in deciding whether to consent or substitute. These factors include the amount of the settlement, the amount of liability insurance remaining, if any, the amount of assets held by the tortfeasor and the likelihood of their recovery via subrogation, the total amount of the insured's damages, and the expenses and risks of litigating the insured's cause of action.  Vogt, 129 Wis. 2d at 20 (quoting Schmidt, 338 N.W.2d at 263) (emphasis added). As already discussed, the substitution of the underinsurer's funds gives it the right to proceed against both the tortfeasor and her insurer; this indicates that underinsurers are already making judgments about the risks posed by suing a tortfeasor with uncertain assets. ¶ 56. The reasonable period between notice of the proposed settlement and the required decision to consent or substitute gives the underinsurer time to attempt to determine the tortfeasor's assets. Indeed, that is one of the factors expressly delineated in the Schmidt decision, as adopted in Vogt. Vogt, 129 Wis. 2d at 20. In this case, Sentry did attempt to determine the assets in the Trust. See Letter from Tina Zblewski, Sentry Claims Representative, to Attorney Thomas Foy (Feb. 12, 2001) (announcing Sentry's intent to substitute its funds for American Family's tendered policy limits, thus maintaining its subrogation right, and requesting counsel to provide us with an affidavit indicating the assets in the trust). It is unclear whether Sentry ever received a response to this inquiry, but Sentry had already set in motion the types of inquiries that are necessary to determine whether to consent or substitute when a settlement offer is made by the tortfeasor. [10] ¶ 57. We note that one insurance treatise reviewed standard policy forms from 35 states, and found that 30 of them incorporated the Schmidt approach in some form. Schermer, Automobile Liability Insurance 3d § 59.10, at 59-34 n.7 (3d ed. 1995). Most jurisdictions following the Schmidt approach apply it to settlements with either tortfeasors or tortfeasors' insurers. [11] The most exhaustive treatise on the subject is also in accord: An [under]insurer may lose the right to be subrogated to an insured's claim by refusing to consent to a settlement with a tortfeasor or a tortfeasor's insurer.  3 Widiss, Uninsured and Underinsured Motorist Insurance § 43.6, at 519 (emphasis added); see also Anderson, Wisconsin Insurance Law § 4.7, at 4-37 (A UIM insurer is entitled to notice from the insured of settlement with a tortfeasor and an opportunity to pursue its right of subrogation) (emphasis added); J. Sue Myatt, Settlement Procedures in Underinsured Motorist Cases: The Underinsurer's Dilemma Between Preserving the Insurer's Subrogation Right and Protecting the Insured's Settlement Right, 14 J. Corp. L. 175, 185 (1988) (Common components of the prescribed settlement procedure include: (1) The insured's notice to the underinsured motorist carrier regarding the underinsurance claim and tentative settlement offer from the tortfeasor ) (emphasis added) (hereinafter Myatt, Settlement Procedures in Underinsured Motorist Cases ). Members of this court have touched on the subject in passing: Under Vogt, a plaintiff can take advantage of the defendant's settlement offer and an underinsurer can protect its right to subrogation reimbursement. Ives v. Coopertools, 208 Wis. 2d 55, 71, 559 N.W.2d 571 (1997) (Geske, J., concurring) (emphasis added). [12] ¶ 58. In summary, we believe that the procedure prescribed in Vogt to govern allocation of risk has equal applicability here. When the subrogated underinsurer substitutes its own funds for the settlement funds, it gains the right to proceed against the party or parties that would have been fully released by the settlement agreement. ¶ 59. Our continued endorsement of the prescribed Vogt procedure will afford a higher degree of certainty to the settlement process in underinsurance claims. See Myatt, Settlement Procedures in Underinsured Motorist Cases at 197-98. Therefore, we hold that an UIM insurer has an obligation to consent to, or substitute its own funds for, a proposed settlement between its insured and the tortfeasor, where the tortfeasor's insurer has already settled for its policy limit and the tortfeasor is offering an additional settlement payment. This obligation is not triggered, however, if the insured has failed to satisfy its contractual obligation to provide information to the underinsurer to assist the underinsurer in determining damages. ¶ 60. Sentry argues that its policy forecloses this result because it expressly adopts the Vogt procedure only when its insured settles with the tortfeasor's insurer. [13] The policy is silent on settlements with the tortfeasor herself. Sentry implicitly relies on the maxim, expressio unius est exclusio alterius (The ex-pression of one thing is the exclusion of another.). Black's Law Dictionary 1635 (7th ed. 1999). Even if we were to assume that the silence in the policy had significance, the silence in the Sentry policy, like the silence in the WECC policy at issue in Vogt, cannot trump public policy. The WECC policy also contained express settlement procedures that did not contemplate the procedure eventually adopted by the Vogt court. Vogt, 129 Wis. 2d at 9. The court was nonetheless persuaded by the public policy favoring an injured insured's right to prompt settlement. Id. at 17-18. Despite the fact that the insurance contract specifically addresses only settlement with a tortfeasor's insurance company, the motorist should not be required to sue for what is being offered by the tortfeasor.