Court Opinion

ID: 9722270
Source: CourtListenerOpinion
Date Created: 2023-08-26 09:22:59.4076+00
Date Added: 2024-06-11T18:24:33.313661
License: Public Domain

COFFEY, J.
(dissenting). I dissent because I believe that the case at bar is not controlled by the rule set forth in Garrity v. Rural Mutual Insurance Company, 77 Wis. 2d 537, 253 N.W.2d 512 (1977). Further, I believe that the majority’s decision will not have a significant effect on the actual recoveries of injured plaintiffs while it will compel full-scale trials in cases where the plaintiff has already settled his principal claim and, thus, the decision is contrary to the policy interest in judicial economy. Finally, I dissent because the majority opinion places insurers in the embarrassing position of having to dispute the extent and validity of its own insured’s case in order to exercise its statutorily permitted1 right to subrogation where the insured settles its case.
*280As the majority properly notes, the facts in Gwrrity differ from those presented in the instant case. I believe the critical distinction between this case and Gar-rity is the fact that in the case at bar, the plaintiffs voluntarily settled their entire claim for an amount less than the total limits of the available insurance monies, whereas, in Garrity, the plaintiff was seeking- to recover all available insurance monies and it was assumed that that amount would be less than the total loss. This distinction is important because in the case at bar, had the plaintiffs fully litigated their case and had they received a favorable verdict, they would have undoubtedly been made whole2 and the insurer could have collected on its subrogation claim. The fact that there was a settlement of this case is a matter generally favored by the law, but a settlement should not be forced or so encouraged as to allow it to become a vehicle for impairing the rights of another; in this case, the rights of the subrogated insurer. The majority’s expansion of the Garrity rule that a subrogated insurer cannot share in the insured’s recovery until the insured is made whole allows the insured to effectively eliminate the insurer’s statutory right of sub-rogation, where, as in the case at bar, the insureds settled their entire claim for an amount less than the total available insurance monies and less than their total damages. I believe this result is both erroneous and inequitable.
*281This court has consistently acknowledged that “the purpose of the doctrine [of subrogation] is to avoid unjust enrichment.” Id. at 541. Preventing the insurer from exercising its subrogation rights where an insured settles for less than the amount of available insurance policy limits and for an amount less than the insured’s total loss, effectively bars the subrogor from recovering his payment from the wrongdoer and, thus, unjustly enriches not only the wrongdoer but also the insured who has been reimbursed for his damages by the settlement. Thus, the majority’s decision contravenes the very equitable principles upon which the doctrine of subrogation rests.
Under the majority’s decision, the insurer is barred from recovering any part of the monies it paid from either the wrongdoer or the insureds, although it is obvious that some portion of settlement is intended to compensate the insureds for the damages for which they were indemnified by the insurer. The majority justifies this result by stating that the insureds must receive full compensation for all their damages before they are made whole as their damages are indivisible. But, in actuality, doesn’t an insured impliedly concede that he is being made whole by accepting a payment in settlement of his claim, especially where the payment is less than the total monies available under the insurance contracts? In a personal injury case, both the valuation of compensatory damages and the determination of relative fault are inexact and always open to dispute. In light of that fact, I believe it is fair and reasonable to assume that a party is made whole by the amount for which he voluntarily settles his entire claim. Further, the majority’s conclusion that the settling of insureds’ damages is indivisible ignores the fact that in reality the injured parties’ actual medical expenses are the most readily determined and often serve as a measuring stick for *282evaluating the plaintiffs' remaining compensatory damages.
This court has described subrogation as putting one to whom a legal right did not originally belong in the position of the legal owner of the right, and that the original right measures the extent of the new right.
“Subrogation has also been described as putting one to whom a particular right does not legally belong in the position of the legal owner of the right. Insofar as a new right is created in favor of the subrogee, ‘the original right measures the extent of the new right.’ 4 Williston, Contracts sec. 1265, p. 844 (Third ed 1967).” Id. at 541.
In this case, however, the majority allows the insureds to eliminate the right of action created by the doctrine of subrogation in the insurer by means of a settlement of their claims. This abuse of the rights of the insurer raises questions as to the applicability of the tort of bad faith recognized by this court in Anderson v. Continental Insurance Co., 85 Wis. 2d 675, 271 N.W.2d 368 (1978). Although in Anderson, we were concerned with allegations of bad faith on the part of the insurer, we recognized that the principle underlying the tort of bad faith was a duty of good faith and fair dealing on the part of each party to the contract.
“That such a duty [of good faith] arises out of the relationship between the contracting parties themselves cannot be doubted. As black letter law, Restatement, Law of Contracts 2d, sec. 231 (Tentative Drafts Nos. 1-7, Rev. and Edited, 1973), provides: ‘Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.’ ” Id. at 688-89.
Thus, it is clear that there is a duty of good faith imposed on the insured as well as the insurer. I believe that this duty of good faith applies to the right of subrogation which the insurer acquired through his good faith *283payment of the insured’s claim. I would find that this duty has been breached where an insured settles his claim in such a manner as to maximize his recovery, yet prejudice the subrogation rights of the insurer and, therefore, cannot agree with the contrary result fostered, if not approved, by the majority decision.
Because the majority’s application of the equitable doctrine of subrogation in this case reaches the wholly unfair result of barring the insurer from exercising its subrogation rights even though the insureds voluntarily settled their claim, I believe the decision is erroneous. I dissent from the majority opinion for the additional reason that the opinion both sanctions and necessitates another trial between the insurer and insured, even though the insured has settled his claim with the actual tortfeasors. Such mini-trials are contrary to the interest of judicial economy and in fact they undermine the very benefit supposedly gained in the settlement of a claim. The error in sanctioning such mini-trials is compounded when it is realized that such trials would be unnecessary were this court to determine that whenever an insured settles his claim with the responsible tortfeasors the subrogated insurer is entitled to recover for its payments to a proportionate amount equated with the insured’s percentage recovery of his actual loss.
The error in the majority’s sanctioning of “mini-trials” is further highlighted when one realizes that in reality, the majority decision will not result in a greater recovery for a plaintiff-insured. This is because knowledgeable counsel will be aware that medical-pay coverage payments will not be recoverable by the subrogated insurer and, thus, they will view those payments as an offset in determining the settlement value of the case when the plaintiff-insured has received such payments.
Finally, I believe that the majority’s decision is in error because it places the insurer in the untenable and *284difficult position of having to disprove the claim of its own insured if it seeks to prove by a “mini-trial” that the insured was made whole through its settlement of the case. This result is especially undesirable when one realizes that the insurer often possesses confidential information it gathered from its own investigation of the insured’s claim and of the responsible party. The insurer then might be placed in the position of having to use this information in the “mini-trial” or purposely avoid using such information and thus it either prejudices its own case or is forced to cloud the truth in those proceedings. The use at trial of the confidential information gathered by the insurer raises several questions regarding the boundaries of the attorney-client privilege and the ethical considerations raised in the Code of Professional Responsibility. Because the majority opinion pushes the insurer and its attorney to the point where it must resolve these potential ethical dilemmas, I do not agree with the majority opinion.
None of the detrimental results of the majority opinion discussed above would be necessary if they were to adopt the more equitable rule of allowing the subrogated insurer to recover its payments from a settling insured and for this reason, I dissent.

 Sec. 632.32 (4) (b), Stats., expressly provides that medical payments insurers are subrogated to the rights of its insured to the extent of their payments. This section reads as follows:
“(b) Medical payments. To indemnify for medical payments or chiropractic payments or both in the amount of at least $1,000 per person for protection of all persons using the insured motor vehicle from losses resulting from bodily injury or death. The named insured may reject the coverage. If the named insured *280rejects the coverage, it need not be provided in a subsequent renewal policy issued by the same insurer unless the insured requests it in writing. Under the medical or chiropractic payments coverage, the insurer shall be subrogated to the rights of its insured to the extent of its payments. Coverage written under this paragraph may be excess coverage over any other source of reimbursement to which the insured person has a legal right.”

 We note that the total of available insurance monies was $360,000, nearly $60,000 in excess of the trial court’s determination of the plaintiffs’ damages.