Court Opinion

ID: 9682788
Source: CourtListenerOpinion
Date Created: 2023-08-24 13:16:55.747654+00
Date Added: 2024-06-11T18:17:41.501153
License: Public Domain

SHIRLEY S. ABRAHAMSON, C.J.
¶ 88. (<dissenting). Here is the issue: Did the circuit court err in requiring Society Insurance to pay the Mullers their $59,725.60 unreimbursed loss before retaining the rest of its settlement with the tortfeasor's liability insurance company? My answer is No.
*450¶ 89. Here are the facts: A fire destroyed the Mullers' sporting goods store. Society Insurance, the Mullers' insurance company, paid the Mullers their policy limit under the fire policy of $407,378.88. The Mullers' damages exceeded this sum, and the Mullers sought to collect additional funds from an alleged tort-feasor and his insurance company, hereinafter referred to collectively as the tortfeasor's insurance company.
¶ 90. Society Insurance also pursued its subrogation claim against the tortfeasor's insurance company.1 The Mullers and Society Insurance initially worked together in pursuing their claims against the tortfeasor's insurance company but, for reasons unclear from the record, settled their claims separately with the tortfeasor's insurance company.
¶ 91. Before the Mullers settled with the tort-feasor's insurance company, Society Insurance reached a "tentative" settlement with the tortfeasor's insurance company, pending resolution of the Mullers' claim. The terms of this tentative settlement apparently were not known to the Mullers.
¶ 92. After Society Insurance made its "tentative" deal with the tortfeasor's insurance company, the Mull-ers settled with the tortfeasor's insurance company for $120,000. Thereafter Society Insurance "finalized" its "tentative" settlement of its own subrogation rights with the tortfeasor's insurance company for $190,000.
*451¶ 93. Although the tortfeasor's liability policy had a limit of $1,000,000, neither Society Insurance nor the Mullers were able to recover in full from the tortfeasor's insurance company. The Mullers and Society Insurance stipulated in mediation that the Mullers' settlement of $120,000, when added to Society Insurance's payments to the Mullers, left the Mullers with an unreimbursed loss of $59,725.60.
¶ 94. The circuit court found that the tortfeasor's insurance company was prepared to pay only $310,000 (the total sum of the Mullers' and Society Insurance's settlement awards) to settle both the Mullers' and Society Insurance's claims against the tortfeasor. The circuit court held that the Mullers and Society Insurance were in competition for this limited pool of $310,000. Applying the made whole doctrine, the circuit court concluded that Society Insurance had to make the Mullers whole. The circuit court required Society Insurance to pay the Mullers their $59,725.60 unreimbursed loss out of the proceeds of Society Insurance's $190,000 settlement with the tortfeasor's insurance company.
¶ 95. Here is the law on the doctrine of sub-rogation and the made whole doctrine: Many cases over a long time have interpreted the doctrine of subro-gation and the made whole doctrine in a great variety of fact situations. The case law is not easy to follow, but certain principles are very clear: Subrogation and the made whole doctrine are equitable doctrines. An insured must be made whole before the insurer may recover based on its subrogation claim. Subrogated insurance companies should not compete with their insureds for limited settlement funds.2
*452¶ 96. This court has declared that "the cause of action (against the tort-feasor) is indivisible and the 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 insured has paid it to assume. . .. [T]here is no subrogation until the insured has been made whole."3
¶ 97. Writing for a unanimous court, Justice Prosser stated the Wisconsin law on subrogation as follows: "Ordinarily, subrogation does not arise until.. . the insured's loss has been fully paid. ... [T]he burden of loss should rest on the party paid to assume the risk, and not on the inadequately compensated insured. . . . [Ujnder basic principles of subrogation .. . the insurer is not entitled to recoup anything until the insured has been made whole. . . . Subrogation in [circumstances where the insured had not been made whole] . . . would turn 'the entire doctrine of subrogation on its head.' "4
¶ 98. The insured and the subrogated insurance company cannot override by contract the equitable principles of subrogation and the made whole doctrine. When faced with the question whether parties to an insurance contract may override or negate the made whole doctrine by writing specific, unambiguous con*453tractual language stating that the insurer's rights to subrogation are superior to the insured's right to be made whole, the court (with Justice Prosser writing) unanimously answered No!5
¶ 99. The circuit court's judgment in the present case is consistent with this case law, with the equitable principles stated therein, and with sound public policy. The majority opinion is not. I therefore dissent.
¶ 100. Here is my reasoning:
¶ 101. (I) I agree with the circuit court's reasoning, which rests on case law and equitable principles. The Schulte6 and Petta7 cases, as well as the equitable principles that are the basis of both the made whole doctrine and the doctrine of subrogation,8 support the circuit court's judgment requiring Society Insurance to pay the Mullers their unreimbursed loss before retaining the rest of its settlement with the tortfeasor's insurance company.
¶ 102. (II) The premises upon which the majority opinion decides the present case are incorrect. The majority opinion rests on two central premises:
¶ 103. The first (and primary) premise is that the made whole doctrine applies only when the tortfeasor's policy limits are less than the total damages the victim suffers. In the words of the majority opinion, "Where *454policy limits are sufficient to cover all related claims ... [t]he made whole doctrine simply does not apply. . . inasmuch as the inequitable prospect of an insurer competing with its insured for a limited pool of funds is not present."9
¶ 104. The second premise, which serves as support for the first, is that the tortfeasor's insurance company in the present case would have been prepared to pay any amount up to the tortfeasor's policy limit of $1,000,000 in order to settle the Mullers' and Society Insurance's claims against the tortfeasor's insurance company. With this premise firmly in mind, the majority opinion concludes that the pool of settlement funds available to the Mullers was the tortfeasor's $1,000,000 policy limit, not the $310,000 that the tortfeasor's insurance company actually paid to settle the Mullers' and Society Insurance's claims. The majority opinion concludes that the Mullers may blame only themselves, not any competition provided by Society Insurance, for their failure to be compensated fully in their settlement with the tortfeasor's insurance company.
¶ 105. Both premises are factually unsupported and contrary to this court's case law. The circuit court got it right: "In this case, the limited pool became $310,000. .. . Pursuant to Rimes and its well established principles, Society is not entitled to retain any of those funds unless and until the plaintiffs have been 'made whole'."
¶ 106. In contrast to the majority opinion, this court has often explicitly recognized that given the realities of settlements, settling plaintiffs and subro-gated insurers compete in a practical sense for limited settlement funds. "[Settlement funds may be either *455practically or psychologically limited. .. . The practical competition between an insured and the subrogated insurer is an equitable factor we cannot ignore."10
¶ 107. Here that competition is clear. Society Insurance was an adversary of the Mullers, competing with the Mullers for the limited funds that the tortfeasor's insurance company was prepared to pay to settle the Mullers' and Society Insurance's claims against it.
¶ 108. (Ill) The majority opinion contravenes sound public policy by effectively requiring a plaintiff in the Mullers' position to structure his or her settlement agreement to include a clause indemnifying the tortfea-sor and the tortfeasor's insurance company against any claim brought by the plaintiffs subrogated insurance carrier.
r*H
¶ 109. The Schulte and Petta cases, as well as the equitable principles underlying the doctrine of subro-gation and the made whole doctrine, support the circuit court's judgment requiring Society Insurance to pay the Mullers their unreimbursed loss before retaining the rest of its settlement with the tortfeasor's insurance company.
¶ 110. The made whole doctrine is "the general rule that there is no subrogation until the insured has been made whole."11 The made whole doctrine exists to *456combat "the inequitable prospect of [an insurer] competing with [its insured] for funds which indisputably fail to make the [insured] whole."12 It rests upon the equitable principle that "[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."13 The more general doctrine of subrogation, whether conventional subrogation or legal subrogation, is also applied according to the rule of equity.14
¶ 111. Applying the made whole doctrine, this court has outlined a three-step "settlement procedure plaintiffs [are] to utilize to determine how a settlement impact[s] an insurer's subrogation rights."15 The key cases in which this settlement procedure is set forth are Schulte v. Frazin, 176 Wis. 2d 622, 500 N.W.2d 305 (1993), and Petta v. ABC Ins. Co., 2005 WI 18, 278 Wis. 2d 251, 692 N.W.2d 639. The present case is a Schulte/Petta case.
¶ 112. The Schulte/Petta procedure requires the following three steps: (1) The plaintiff-insured settles with the tortfeasor and the tortfeasor's insurance company without resolving the subrogated insurer's part of the claim; (2) The settling parties ask the circuit court to determine whether the injured party has been made whole; and (3) The subrogated insurer has an opportunity to participate in the hearing (commonly called a Rimes hearing) that the circuit court holds to decide *457whether the injured party has been made whole.16 If the circuit court determines at the Rimes hearing that the settlement- does not make the plaintiff whole, then the subrogated insurer has no right of subrogation.17
¶ 113. The Schulte/Petta procedure implicitly requires the insured to settle its claim before the subro-gated insurance company settles its claim. This order fits the court's rule that "the cause of action (against the tort-feasor) is indivisible and the owner of the policy should be first to make good his own loss . .. ."18
¶ 114. The Mullers and the circuit court followed the three-step Schulte/Petta procedure. The Mullers settled with the tortfeasor and the tortfeasor's insurance company without resolving Society Insurance's part of the claim. In Schulte and Petta, the plaintiff-victim agreed to indemnify the tortfeasor against any liability to the subrogated insurance company. In the instant case the Mullers and the tortfeasor's liability insurance company did not include this type of "indem*458nification agreement."19 In any event the subrogated insurance company's (Society Insurance's) part of the claim was not resolved, and Society Insurance's subro-gated right was protected.
¶ 115. The settling parties, the Mullers and the tortfeasor's insurance company, asked the circuit court to determine whether the injured party had been made whole. Society Insurance objected to the hearing. The circuit court decided that the Mullers were entitled to a hearing to determine whether they had been made whole. Thus the Schulte/Petta three-step procedure was followed in the present case.
¶ 116. The Mullers and Society Insurance waived the Rimes hearing, stipulating that the Mullers' settlement with the tortfeasor and his insurer left the Mullers with an uncompensated loss of $59,725.60. The circuit court then determined upon the parties' stipulation that the Mullers had not been made whole and that Society Insurance consequently could claim no right of subrogation.
¶ 117. If any party disregarded the Schulte/Petta procedure in the present case, it was Society Insurance. At the same time as the Mullers were negotiating with the tortfeasor's insurance company, Society Insurance was engaging in its own negotiations. It chose to settle its subrogation claim against the tortfeasor's insurance company tentatively before the Mullers reached their settlement and before permitting the circuit court an opportunity to determine whether Society Insurance could claim a right of subrogation in the first place. In settling its claim in this manner, Society Insurance assumed the risk that it would need to hand over some *459portion of its settlement award to the Mullers in order to make the Mullers whole.
¶ 118. To be sure, the bottom line in the present case must accord with equitable considerations, not the black letter of this court's decisions in Schulte or Petta. "The doctrine of subrogation is based upon equitable principles,"20 and "[e]quity does not lend itself to the application of black letter rules."21
¶ 119. I agree with the majority opinion that the equitable doctrine of subrogation exists (1) to ensure that the plaintiff is fully compensated for loss; (2) to prevent unjust enrichment; and (3) to ensure that the wrongdoer is held responsible for his conduct and not allowed to go scot-free by failing to respond to damages while the plaintiffs insurer is required to do so.22
¶ 120. The first equitable principle obviously weighs in favor of affirming the circuit's judgment requiring Society to pay the Mullers their $59,725.60 uncompensated loss.
¶ 121. The second and third equitable principles have no application to the present case. The circuit court's judgment did not overcompensate the Mullers for their loss and thus did not result in unjust enrichment.23 In addition, the circuit court's judgment of *460course did not require Society Insurance to send any of its settlement proceeds back to the tortfeasor or the tortfeasor's insurance company.
¶ 122. The circuit court's judgment in the present case was precisely what the equitable principles required. The judgment made the Mullers whole and permitted Society Insurance to retain the $130,274.40 that was left of its $190,000 settlement with the tortfeasor's insurance company. The injured Mullers were given priority over their insurance company.24 Society Insurance, the Mullers' insurance company, was given priority over the tortfeasor and the tortfeasor's insurance company.
¶ 123. Applying Schulte and Petta, as well as the equitable principles underlying the made whole doctrine and the doctrine of subrogation, I would affirm the circuit court's judgment requiring Society Insurance to pay the Mullers their unreimbursed loss before retaining the rest of its settlement with the tortfeasor's insurance company. At the same time as the Mullers were negotiating with the tortfeasor's insurance company for payment, Society Insurance was trying to cut its own deal with the tortfeasor's insurance company. Society Insurance was in direct competition with its insured for the limited amount of money the tortfeasor's insurance company was prepared to pay. The issue in the instant case is whether there was competition between the Mullers and Society Insurance for the limited funds from the tortfeasor's insurance company. There was. The reality of settlements and competition between an insured and insurer are equitable factors that the court has considered very important in past cases.
*461HH HH
¶ 124. In contrast to the circuit court's well-reasoned decision, the majority opinion decides the present case on the incorrect premise of law that the made whole doctrine does not apply when the tortfeasor's policy limits are, as in the present case, greater than the total damages the victim suffers.25
¶ 125. This incorrect premise of law rests on an equally incorrect premise of fact. The majority opinion assumes that the tortfeasor's liability insurance company would have been prepared to pay much more than the $310,000 it actually paid to settle the Mullers' and Society Insurance's claims. Indeed, the majority opinion blithely concludes that the tortfeasor's insurance company would have been prepared to pay any amount not exceeding the tortfeasor's policy limit of $1,000,000. According to the majority opinion, the Mullers were unable to obtain more money from the tortfeasor's insurance company only because the Mullers went into settlement negotiations "waving a white flag" and because they were "not willing to pull their own weight in litigation."26 According to the majority opinion, the inequitable prospect of an insurer competing with its insured for a limited pool of funds is not present in this case 27
¶ 126. The majority opinion's tale about the parties' settlement negotiations makes little sense. The $310,000 that the tortfeasor's insurer agreed to pay is the sole available estimate of'; the amount that the tortfeasor's liability insurance company was prepared to pay to settle the Mullers' and Society Insurance's *462claims against the tortfeasor. The tortfeasor's $1,000,000 policy limit is not an estimate of the amount the insurer was prepared to pay to settle the Mullers' and Society Insurance's claims, as the majority opinion states. The policy limit represents only the maximum that the insurer would have ordinarily been required to pay under the law. A defendant insurer's decision whether to settle (and for how much) is based on calculations far more complex than a simple comparison of the plaintiffs request to the tortfeasor's policy limit.
¶ 127. Indeed, the facts show that Society Insurance — whom the majority opinion does not accuse of waving a white flag — apparently fared worse in settlement negotiations with the tortfeasor's insurance company than the Mullers did. The Mullers fell only $59,725.60 short of full compensation for their loss. Society Insurance settled for $217,378.88 less than the full value of its $407,378.88 subrogation claim against the tortfeasor's insurance company. Given the lack of any criticism directed at Society Insurance, the majority opinion's caustic remarks about the Mullers are simply baffling. The majority opinion has no cause to conclude that the Mullers' efforts were less than vigilant.
¶ 128. The simple truth is that we have no idea why the Mullers and Society Insurance were collectively unable to get more than $310,000 from the tortfeasor's insurance company. Perhaps the amount of the Mullers' damages was uncertain.28 Or perhaps it was uncertain whether the Mullers could prove the tortfeasor's liabil*463ity for their damages. In any case, the bottom line is the same: The tortfeasor's insurance company agreed to pay only $310,000 to settle the Mullers' and Society Insurance's claims against the tortfeasor, and the Mull-ers and Society Insurance were necessarily in competition over this limited pool of funds.
¶ 129. The majority opinion's narrow focus on the tortfeasor's policy limits not only flies in the face of the facts but also flies in the face of this court's precedent. The court has repeatedly stated that "[gjiven the realities of settlements, settling plaintiffs and subrogated insurers usually compete in a practical sense for limited settlement funds. Settling defendants typically have limited policy limits and assets and typically want to pay as little as possible.... The practical competition between an insured and the subrogated insurer is an equitable factor we cannot ignore."29
¶ 130. In the present case, the practical realities are that the Mullers and Society Insurance were in competition for a pool that the tortfeasor's insurance company limited to $310,000, which is less money than *464was needed both to make the Mullers whole and to repay Society Insurance.
¶ 131. The present case is not the first involving a plaintiff-victim who agreed to settle below the tortfeasor's policy limit. Like the Mullers, the plaintiffs in both Rimes v. State Farm Mutual Automobile Insurance Co., 106 Wis. 2d 263, 316 N.W.2d 348 (1982), and Schulte settled for well below the tortfeasor's policy limits. In both cases the court nevertheless applied the made whole rule.
¶ 132. The Rimeses settled for $125,000.30 The combined policy limits of the tortfeasors were $375,000.31 The total medical payment made by the subrogated insurance company in Rimes was $9,649.90. The sum of $9,649.90 was paid from the settlement amount into the circuit court to be held in escrow pending the outcome of a "trial" to the circuit court concerning the subrogated insurance company's claimed subrogation rights for the medical payment made on behalf of the Rimeses. In Rimes no indemnification agreement had been reached between the Rimeses and the tortfeasors; the issue before the circuit court was how much the insurance company should recover from the total settlement under its subrogation rights. This court applied the made whole doctrine in the Rimes case, held that the subrogated insurance company could not recover any of the $9,649.90, and did *465not fault the Rimeses for failing to garner a larger settlement award even though they had not tapped the combined policy limits of the tortfeasors.
¶ 133. In Schulte, the plaintiffs settled for less than policy limits and agreed to indemnify the tortfea-sor for the claims of the subrogated insurance company. Justice Steinmetz wrote in dissent that "[flor tactical reasons, the plaintiffs settled their claim for less than the defendants' insurance policy limits."32 The basis of Justice Steinmetz's dissenting opinion was that "[b]e-cause the plaintiffs agreed to accept less than the defendants' insurance policy limits, it cannot be said that the plaintiffs have not been made whole."33 The majority opinion in Schulte did not accept Justice Steinmetz's reasoning. The majority opinion in the present case is little more than a repackaging of Justice Steinmetz's dissenting opinion that the six justices in the Schulte majority rejected.
¶ 134. The majority opinion's analysis lacks a basis in the facts or the case law. The majority opinion errs in treating the tortfeasor's liability insurance policy limits as the amount that the tortfeasor's insurance company was prepared to pay to settle claims *466brought by the plaintiff and the plaintiffs subrogated insurer. The majority opinion errs in failing to recognize that as a practical matter the funds available from the tortfeasor's insurance company were limited to $310,000 and were less than the Mullers' damages, as the circuit court found.
HH HH I — I
¶ 135. The majority opinion likely will have a troubling effect upon settlements in future cases. As a practical matter, the majority opinion writes a fourth step into the Schulte/Petta procedure that plaintiffs are to utilize to determine how a settlement affects an insurer's subrogation rights. The majority opinion effectively requires a plaintiff following the Schulte/Petta procedure to structure his or her settlement agreement to include a clause indemnifying the tortfeasor and the tortfeasor's insurance company against any claim brought by the plaintiffs subrogated insurer.
¶ 136. According to the majority opinion, the made whole doctrine would apply in the present case if the Mullers had structured their settlement agreement to include a clause indemnifying the tortfeasor and his insurer against any claim brought by the plaintiffs subrogated insurer. The absence of such an indemnification clause is all that prevents the present case from being on all fours with Schulte,34 in which this court applied the made whole doctrine and determined that the subrogated insurer's right of subrogation had been extinguished. Relying on Schulte, the majority opinion *467in the present case concludes as follows: "An indemnification agreement limits available funds. If the insured is not made whole by a settlement that includes an indemnification agreement, the insured has claimed the available pool, and . . . the insurer is out of luck."35
¶ 137. This requirement of an indemnification provision represents a curious development in our made-whole jurisprudence. Some 20 years ago, this court strongly disfavored agreements obligating the victim-plaintiff to indemnify a defendant-tortfeasor against claims brought by a subrogated insurer. In Blue Cross & Blue Shield United v. Fireman's Fund Ins. Co., 140 Wis. 2d 544, 411 N.W.2d 133 (1987), the court criticized such indemnification agreements as "attempt[ing] to circumvent an insurer's subrogation rights by placing the responsibility for the tortfeasor's wrong on the victim . . . ."36 We even suggested that such agreements might be void, declining to "reach the issue of whether. . . indemnification clauses are enforceable between the tortfeasor and the injured party" but noting that "at least one jurisdiction has determined that this type of indemnification agreement is void as against public policy."37
¶ 138. Schulte overruled the language in Blue Cross disapproving of indemnification agreements, on the ground that this language constrained a plaintiffs *468ability to settle with the defendant.38 The Schulte court reasoned that "the injured party should have the right to settle on its own terms" and that "refusing to recognize indemnification agreements could hamper plaintiffs' settlement attempts."39
¶ 139. In the present case, the majority opinion takes an unwarranted step. The majority opinion all but requires the very sort of indemnification agreements that this court initially all but prohibited.
¶ 140. Our decision in Schulte recognizing indemnification agreements properly furthered the policy of promoting settlement. In contrast, the majority opinion's de facto requirement that a plaintiff wanting to take advantage of the made whole doctrine utilize an indemnification agreement constrains both the plaintiff-victim's and the defendant-tortfeasor's ability to settle on their own preferred terms. This constraint does not seem *469to offer any benefits that might offset its obvious cost. The majority opinion provides no rationale for its apparent preference for indemnification agreements.
¶ 141. For the foregoing reasons, I dissent.
¶ 142. I am authorized to state that Justices ANN WALSH BRADLEY and LOUIS B. BUTLER, JR. join this opinion.

 Paulson v. Allstate Ins. Co., 2003 WI 99, ¶ 27, 263 Wis. 2d 520, 665 N.W.2d 744.

 Garrity v. Rural Mut. Ins. Co., 77 Wis. 2d 537, 542, 253 N.W.2d 512 (1977).

 Ruckel v. Gassner, 2002 WI 67, ¶¶ 16, 17, 27, 41, 253 Wis. 2d 280, 646 N.W.2d 11 (citations omitted). See also Drinkwater v. Am. Family Mut. Ins. Co., 2006 WI 56, ¶¶ 20-23, 290 Wis. 2d 642, 714 N.W.2d 568 (quoting Ruckel with approval).
In Wisconsin the "insurer may not recover from a tortfeasor until the insured has been made whole." Jeffrey A. Greenblatt, Insurance and Subrogation: When the Pie Isn't Big Enough, Who Eats Last?, 64 U. Chi. L. Rev. 1337, 1342 (1997).

 Ruckel, 253 Wis. 2d 280, ¶¶ 2, 4.

 Schulte v. Frazin, 176 Wis. 2d 622, 500 N.W.2d 305 (1993).

 Petta v. ABC Ins. Co., 2005 WI 18, 278 Wis. 2d 251, 692 N.W.2d 639.

 "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." Garrity, 77 Wis. 2d at 541.

 Majority op., ¶ 77.

 Schulte, 176 Wis. 2d at 633.

 Garrity, 77 Wis. 2d at 542.
Garrity, a seminal case on the made whole doctrine, also involved a fire loss and fire insurance. See Garrity, 11 Wis. 2d at 539.

 Schulte, 176 Wis. 2d at 625.

 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).

 Rimes, 106 Wis. 2d at 270-71.

 Petta, 278 Wis. 2d 251, ¶ 29.

 Schulte, 176 Wis. 2d at 637; Petta, 278 Wis. 2d 251, ¶ 29.

 Schulte, 176 Wis. 2d at 637; Petta, 278 Wis. 2d 251, ¶ 29.
When the settling parties do not ask the circuit court to determine whether the injured party has been made whole, thus preventing the circuit court from making a finding on the issue, the subrogated insurer's right of subrogation is not extinguished. See Mut. Serv. Cas. Co. v. Am. Family Mut. Ins. Co., 140 Wis. 2d 555, 563-64, 410 N.W.2d 582 (1987) (stating that the made whole doctrine is not "applicable in an action 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."); Schulte, 176 Wis. 2d 635-36 (holding that the rule stated in Mutual Service does not apply when the settling parties request a Rimes hearing, the subrogated insurer has an opportunity to participate in the hearing, and the circuit court determines that the injured party has not been made whole).

 Garrity, 77 Wis. 2d at 542.

 See Schulte, 176 Wis. 2d at 633; Petta, 278 Wis. 2d 251, ¶¶ 29, 35, 42.

 Schulte, 176 Wis. 2d at 628 (citing Rimes, 106 Wis. 2d at 271). See also Petta, 278 Wis. 2d 251, ¶ 27.

 Schulte, 176 Wis. 2d at 628 (quoting Vogt v. Schroeder, 129 Wis. 2d 3, 12, 383 Wis. 2d 876 (1986)). See also Petta, 278 Wis. 2d 251, ¶ 34.

 See majority op., ¶ 60.

 See majority op., ¶ 23 ("Once an insured has been fully compensated for his loss, any additional recovery by the insured would constitute unjust enrichment.") (citing Couch on Insurance, § 223:133).

 See majority op., ¶ 28 ("[T]he insured has priority over his insurer when there is an inadequate pool of funds.").

 Majority op., ¶, 76..

 Majority op., ¶¶ 82, 84.

 Majority op., ¶ 76.

 Although the majority opinion assumes (at ¶ 40) that "the value of the plaintiffs property loss was largely undisputed," the basis of this assumption is unclear. The parties required mediation to resolve the issue of damages. Furthermore, the Mullers initially claimed a loss of $697,981.58 and accordingly argued before the circuit court that they were entitled to recover an unreimbursed loss of $170,602.70 from *463Society Insurance. The parties' stipulation to an unreimbursed loss of $59,725.60 implies that the Mullers agreed in their mediation with Society Insurance to subtract $110,877.10 from their claim for total damages.

 Schulte, 176 Wis. 2d at 633. See also Petta, 278 Wis. 2d 251, ¶¶ 29, 35.
The plaintiffs recovery is constrained by the subrogated insurer's cause of action, because "[a] tortfeasor who wishes to settle must inevitably address the insurer's separate rights in some way." Schulte, 176 Wis. 2d at 633 (quotation marks omitted).
The Schulte court put the matter concisely: "[W]e question why a defendant would offer as much to settle with only the plaintiff as to settle with both the plaintiff and the subrogated insurer." Schulte, 176 Wis. 2d at 633.

 Rimes, 106 Wis. 2d at 267.
In Rimes, the dissenting opinion stated that the made whole doctrine should not apply because "the plaintiffs voluntarily settled their entire claim for an amount less than the total limits of the available insurance monies...." Rimes, 106 Wis. 2d at 280 (Coffey, J., dissenting). The majority opinion rejected the dissent's position.

 Rimes, 106 Wis. 2d at 267.

 Schulte, 176 Wis. 2d at 637-38 (Steinmetz, J., dissenting).

 Id. at 638 (Steinmetz, J., dissenting).
The dissent in Schulte took the same position as the dissent in Rimes, namely that the made whole doctrine should not apply because the plaintiffs voluntarily settled their claim for less than the tortfeasor's policy limits.
Although the Schultes settled for well below the tortfeasor's policy limits, the majority opinion inexplicably asserts that Schulte provides no guidance on how the three-step Schulte/Petta procedure should be applied when the insured settles for less than the tortfeasor's policy limits. Majority op., ¶ 59 n.ll.

 The Schultes' settlement agreement with the tortfeasor and his insurer provided that the Schultes would indemnify the tortfeasor and his insurer for any liability arising from the tortfeasor's conduct. Schulte, 176 Wis. 2d at 626-27.

 Majority op., ¶ 74.
See also majority op., ¶ 76 ("The present case does not involve an indemnification agreement. Consequently, the insurer is free to exercise its subrogation rights against the tortfeasor.").

 Blue Cross & Blue Shield United v. Fireman's Fund Ins. Co., 140 Wis. 2d 544, 554, 411 N.W.2d 133 (1987).

 Id. at 554 n.6.

 Schulte, 176 Wis. 2d at 634.

 Id. at 634-35.
Schulte did not completely overrule Blue Cross, however. "Blue Cross still applies when a plaintiff and tortfeasor settle without involving the subrogated insurer and without submitting the issue of the subrogated insurer's rights to the circuit court." Schulte, 176 Wis. 2d at 635. In the instant case the Mullers and Society Insurance did submit the issue of the subrogated insurer's (Society Insurance's) rights to the circuit court.
In Blue Cross the subrogated insurance company sued the tortfeasor after the plaintiff had settled with the tortfeasor. The narrow holding of Blue Cross is that if the subrogated insurance company sues the tortfeasor after the plaintiff has settled with the tortfeasor, the subrogated insurance company need not plead that the insured had been made whole.
In the present case the Mullers and Society Insurance were negotiating with the tortfeasor's insurance company at the same time.