Court Opinion

ID: 8203880
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:50:00.909652+00
Date Added: 2024-06-11T16:41:04.922876
License: Public Domain

SHIRLEY S. ABRAHAMSON, C.J.
¶ 83. {concurring in part and dissenting in part). I agree with most *74of the majority's conclusions. I part ways with the majority on the "Indemnification Reduction" issue (issue number four). Majority op., ¶¶ 2, 64-70.
¶ 84. This appeal presents a number of challenging issues, both factually and legally. A glance at the parties' briefs might suggest that the indemnification reduction issue is the most complex issue of the bunch. But the issue, properly analyzed, turns out to be a relatively simple matter of contract interpretation.
¶ 85. The contract in question is the "Hold Harmless Agreement." According to the text of the Agreement, Excel promised to "defend, indemnify and hold harmless" E&B "from all actions, suits, claims and proceedings ("Claims"), and any judgments, damages, fines, costs and expenses . . . resulting therefrom."1
¶ 86. E&B was sued by a number of plaintiffs, including the "non-Kriefall plaintiffs." Their claims arose from Excel's meat products.
¶ 87. The majority concludes that Excel breached its duty to defend under the agreement, leaving E&B to negotiate a settlement with the non-Kriefall plaintiffs without Excel's assistance. Majority op., ¶ 62. As the majority explains, E&B's claim against Excel is based "on Excel's breach of the Hold Harmless Agreement, by which Excel promised to defend and indemnify E&B against claims such as those asserted by the nonKriefall plaintiffs." Majority op., ¶ 58.
¶ 88. The Hold Harmless Agreement covered claims against E&B arising from Excel's meat products. *75According to the majority opinion, "[t]he only limitation on Excel's obligation under the Hold Harmless Agreement in regard to indemnification is 'the extent' to which the claims asserted against E&B were caused by the 'negligent acts or omissions' of E&B." Majority op., ¶ 58 (emphasis added). See also majority op., ¶¶ 12, 48.
¶ 89. I agree with the majority that E&B is entitled to recover from Excel only 80% of the settlement under the Agreement because the jury apportioned 20% of the causal negligence to E&B.
¶ 90. E&B settled with the non-Kriefall plaintiffs for payment in the sum of $3.5 million. Crucially, $2.5 million of the settlement was funded by one insurer (Secura) and the remaining $1 million was funded by another (Federal Insurance). Both insurance policies gave the insurers subrogation rights, meaning that if the insurance company paid a claim and the insured (E&B here) had the right to recover the money from another entity (Excel here), the insurance company could stand in E&B's shoes and assert E&B's right to recover funds.
¶ 91. Secura joined the present lawsuit, which was to assign ultimate responsibility among a number of actors for payment of the $3.5 million settlement and other settlements that are not relevant to the indemnification reduction issue. Secura seeks to stand in E&B's shoes and assert E&B's right against Excel to the $2.5 million Secura contributed. Federal Insurance, on the other hand, is not a party in the present lawsuit and does not intend to exercise its subrogation rights against Excel. Issue four, the indemnification reduction issue, focuses on whether Excel must indemnify E&B for the $1 million that Federal Insurance paid to the nonKriefall plaintiffs on E&B's behalf.
¶ 92. Nothing in the Hold Harmless Agreement addresses subrogation. Despite having emphasized that *76the only limitation on Excel's contractual indemnification duties is the extent to which E&B's negligence caused the claims, the majority reads into the Hold Harmless Agreement another limitation on Excel's obligation to indemnify E&B. The majority concludes that Excel is not obligated to indemnify E&B for the $1 million provided by Federal Insurance because Federal Insurance is not exercising its subrogation rights. Majority op., ¶¶ 64-68.
¶ 93. According to the majority, because Federal is not exercising its subrogation rights, "E&B made no payment in satisfaction of a judgment, or as damages, fines, costs or expenses.... Accordingly E&B has no contractual right to be indemnified for the $1 million payment that Federal Insurance made." Majority op., ¶ 68.1 disagree with the majority's analysis and conclusion.
¶ 94. E&B was liable to satisfy the settlement. It was E&B, not E&B's insurers, who entered into a settlement with the non-Kriefall plaintiffs. As the majority explains, "E&B was forced to pay [$3.5 million] to the non-Kriefall plaintiffs . . . for settlement of the tort claims against it. . .Majority op., ¶ 62 (emphases added).
¶ 95. The Hold Harmless Agreement provides that Excel would indemnify E&B from "all actions, suits, claims, and proceedings"... from "any judgments, damages, fines, costs and expenses" (emphases added). The $3.5 million settlement, including Federal Insurance's $1 million dollar payment on behalf of E&B, falls directly within the text and reach of the Agreement.
¶ 96. Nothing in the Hold Harmless Agreement turns on whether E&B personally made payment from its resources to settle the claims against it or whether another entity made payment on behalf of E&B. Pur*77suant to the Hold Harmless Agreement, Excel is contractually obligated to indemnify E&B from any claims against E&B and any judgments and expenses that result from those claims.
¶ 97. Thus, when E&B was forced to enter into a $3.5 million settlement to address claims that were covered by the Hold Harmless Agreement, E&B obtained a contractual right from Excel to be indemnified for that amount. E&B's right to indemnification from Excel does not hinge on whether E&B's various insurers paid E&B's obligations or planned to exercise their separate subrogation rights.
¶ 98. The majority interprets the Hold Harmless Agreement as if E&B is entitled to indemnification from Excel when, and only when, E&B's insurers exercise their subrogation rights. In fact, the opposite is true. E&B's insurers are entitled to exercise subrogation rights when, and only when, E&B is entitled to indemnification from Excel. If an insurer waives its subrogation rights, E&B's underlying right to indemnification (which created the possibility of a subrogation right for the insurer in the first place) does not disappear.
¶ 99. The majority seemingly reads language into the Hold Harmless Agreement. Under the majority's reading, Excel is obligated to indemnify E&B from claims against it and judgments and expenses that result from those claims, but only if either E&B pays those judgments and expenses out of its own pocket or one of E&B's insurers covers the judgments and expenses and then exercises its subrogation rights. The emphasized language does not appear in the Hold Harmless Agreement, but under the majority's interpretation, the clause is read into the Agreement. The majority opinion gives us no reason for rewriting the parties' Agreement. This court should hold the parties to their Agreement.
*78¶ 100. Thus, I believe the majority misinterprets the Hold Harmless Agreement. Further, this court has held that indemnification agreements "are liberally construed when they deal with the negligence of the indemnitor [Excel here], but are strictly construed when the indemnitee [E&B here] seeks to be indemnified for his own negligence."2 Here, the agreement deals with the negligence of the indemnitor (Excel), and the indemnitee (E&B) does not seek indemnification for its own 20% causal negligence. Under these circumstances, our case law commands a liberal construction of the Hold Harmless Agreement, which further supports my conclusion.
¶ 101. Therefore, I resolve this issue on the basis of the language of the Hold Harmless Agreement. The parties and the majority opinion also discuss the application of the collateral source rule to this contract dispute. Majority op., ¶¶ 69-70. The collateral source rule is generally associated with tort law. This fourth issue, which is a contract dispute, becomes more difficult when the collateral source rule is considered. The analysis of the parties and the majority regarding the collateral source rule is undeveloped, and I will touch on this issue only briefly.
¶ 102. The application of the collateral source rule to contracts cases is a complex subject. "Whether the collateral source rule applies in 'contract' cases is subject to some dispute. .. . Possibly the right answer depends somewhat on the equities or economic concerns in the individual case. . . . "3
*79¶ 103. The collateral source rule is an equitable doctrine, as the majority notes. Majority op., ¶ 69. Each case has to be analyzed, as I see it, by asking how the various policies underlying the collateral source rule apply in the particular case, depending on whether the parties are connected by contract, tort, or some combination of the two. The unique circumstances of each particular case must be carefully considered.
¶ 104. The majority opinion disposes of the collateral source rule by simply characterizing E&B as a tortfeasor — because E&B was adjudged 20% causally negligent with respect to the non-Kriefall plaintiffs— and stating that "the policies that underlie the collateral source rule support its use to benefit only injured plaintiffs." Majority op, ¶ 70.
¶ 105. The majority's reasoning oversimplifies or mischaracterizes the present case. The present lawsuit is a contract dispute in which E&B is an injured plaintiff and Excel is a defendant. E&B is suing Excel to recover under the Hold Harmless Agreement. It was in the underlying lawsuit against the non-Kriefall plaintiffs that E&B was a 20% responsible tortfeasor and Excel was an 80% responsible tortfeasor.
*80¶ 106. Here, the court should balance equitable considerations and the policies behind the collateral source rule to determine whether the breaching defendant (Excel) or the plaintiff (E&B), who was insured by Federal Insurance, should benefit from the payments made by Federal Insurance that Federal Insurance does not seek to recover.4
¶ 107. In the present case, under the Agreement, E&B shoulders the damages its conduct caused and Excel shoulders the damages its conduct caused. Applying the collateral source rule would ensure that Excel is not relieved from shouldering the damage its conduct caused just because E&B had the foresight to voluntarily pay premiums over the years in order to maintain insurance.51 therefore would apply the collateral source rule in the present case.
*81¶ 108. For the reasons stated above, I disagree with the majority's resolution of the "indemnification reduction" issue and dissent with respect to that issue.
¶ 109. I am authorized to state that Justice ANN WALSH BRADLEY joins this concurrence/dissent.

 The first place to look when analyzing a contract is to the language of the contract itself, as "the best indication of the parties' intent is the language of the contract itself, for that is the language the parties 'saw fit to use.'" Town Bank v. City Real Estate Dev., LLC, 2010 WI 134, ¶ 33, 330 Wis. 2d 340, 793 N.W.2d 476 (citations omitted).

 Bialas v. Portage Cnty., 70 Wis. 2d 910, 912, 236 N.W.2d 18 (1975).

 3 Dan B. Dobbs, Dobbs Law of Remedies § 12.6(4) at 154-55 (2d ed. 1993).
*79For articles discussing the collateral source rule in contract cases, as well as the relevance of subrogation (or the lack of subrogation) in these cases, see Joseph M. Perillo, The Collateral Source Rule in Contract Cases, 46 San Diego L. Rev 705 (2009), and John G. Fleming, The Collateral Source Rule and Contract Damages, 71 Cal. L. Rev 56 (1983).
The Restatement (Second) of Contracts briefly alludes to the collateral source rule and does not take a position on its applicability, but states that "[t]he principle that a party's liability is not reduced by payments or other benefits received by the injured party from collateral sources is less compelling in the case of a breach of contract than in the case of a tort." Restatement (Second) of Contracts § 347 cmt. e (1981).
*80Professors Perillo and Fleming are both somewhat critical of the Restatement's limited analysis. See Perillo, supra, at 706; Fleming, supra, at 79.

 This court has addressed similar questions in tort suits when an insurer waives its subrogation rights or is unable to pursue them. In Voge v. Anderson, 181 Wis. 2d 726, 512 N.W.2d 749 (1994), the plaintiffs insurer had waived its subrogation rights, id. at 728, and the court held that the collateral source rule was still applicable. Id. at 732. The court explained:
The collateral source rule does not allow a tortfeasor to reduce his or her liability for personal injury by benefits that the injured person receives from one acting on the tortfeasor's behalf. Rather, the collateral source rule requires that the tortfeasor be held responsible for his conduct by requiring the tortfeasor to compensate the injured party the full amount of damages.
We recognize that the results in this case allow the injured party a double recovery. However, a contrary conclusion would result in giving the tortfeasor a windfall....
Voge, 181 Wis. 2d at 732-33.

 According to Professor Fleming, "In the tort context, it *81has been consistently considered decisive that if the plaintiff himself procured insurance through his own initiative and at his own cost, the defendant is not entitled to benefit from the insurance by a reduction of damages. As it is commonly put, the plaintiff is free to 'bargain for double recovery' even when . . . the insurer is not entitled to reimbursement." Fleming, supra note 3, at 81.
See also Leitinger v. DBart, Inc., 2007 WI 84, ¶ 28, 302 Wis. 2d 110, 736 N.W.2d 1 ("The tortfeasor who is legally responsible for causing injury is not relieved of his obligation to the victim simply because the victim had the foresight to arrange, or good fortune to receive, benefits from a collateral source for injuries and expenses" (quoting Ellsworth v. Schelbrock, 2000 WI 63, ¶ 7, 235 Wis. 2d 678, 611 N.W.2d 764).).