American Standard Ins. Co. of Wisconsin v. Cleveland

• Decision Date: 09 April 1985
• Docket Number: No. 84-1437,84-1437
• Citation: 369 N.W.2d 168,124 Wis.2d 258
• Parties: AMERICAN STANDARD INSURANCE COMPANY OF WISCONSIN, Plaintiff-Respondent, Thomas R. McGree and Equitable Assurance Company, Plaintiffs, v. Ilerd CLEVELAND and Home Mutual Insurance Company, Defendants-Appellants.
• Court: Wisconsin Court of Appeals

Page 168

369 N.W.2d 168

124 Wis.2d 258

AMERICAN STANDARD INSURANCE COMPANY OF WISCONSIN, Plaintiff-Respondent, Thomas R. McGree and Equitable Assurance Company, Plaintiffs, v. Ilerd CLEVELAND and Home Mutual Insurance Company,

Defendants-Appellants.

No. 84-1437.

Court of Appeals of Wisconsin.

Argued March 16, 1985.

Opinion Released April 9, 1985.

Opinion Filed April 9, 1985.

Charles B. Harris, Hudson, argued, for appellants; Charles B. Harris and Richards, Wall & Harris, Hudson, on brief.

Susan Schleif Gherty, Hudson, argued, for respondent; Susan Schleif Gherty and Gherty and Dunlap, Hudson, on brief.

Before CANE, P.J., and DEAN and LaROCQUE, JJ.

CANE, Presiding Judge.

Ilerd Cleveland and his insurer, Home Mutual Insurance Company, appeal a judgment imposing liability for damages caused to Thomas McGree. Cleveland and Home Mutual contend that Minnesota's no-fault automobile insurance statutes apply to this case and that McGree's insurer is liable under the no-fault law for paying part of McGree's damages. The trial court applied Wisconsin law, pursuant to which Cleveland and Home Mutual were liable for all of McGree's damages, including those paid by collateral sources. Because Wisconsin law is applicable to this action, we affirm the judgment.

McGree and Cleveland were both Wisconsin residents when they were involved in an automobile accident in Minnesota. They were traveling in separate automobiles. Cleveland was 100% negligent in causing the accident. Both parties were insured by Wisconsin insurers under policies issued in Wisconsin.

The jury awarded McGree damages, including an amount for past medical bills and past wage loss that was paid by McGree's insurer, American Standard Insurance Company of Wisconsin. American Standard was subrogated to McGree's claim for this amount because of a provision in an insurance contract between them. The jury also awarded damages to McGree for future medical expenses and future retraining costs.

Cleveland and Home Mutual moved the trial court to deny recovery for past and future medical expenses, the past wage loss, and the retraining cost on the basis that McGree's insurer is liable for these items of damage under Minnesota's no-fault insurance law. The trial court decided that Minnesota law did not apply to this case and denied the motion to reduce the judgment.

We can dispose of part of this appeal summarily. Cleveland and Home Mutual contend that McGree's insurer is liable for future medical expenses and retraining costs under Minnesota's no-fault insurance law. In Haugen v. Town of Waltham, 292 N.W.2d 737, 740-41 (Minn.1980), the Minnesota Supreme Court held to be unconstitutional the part of the Minnesota no-fault law making the plaintiff's insurer liable for certain types of future losses. Because the Haugen decision unconditionally invalidates that part of the statute, no conflict exists between Minnesota and Wisconsin law. Under either state's law, Cleveland and Home Mutual are liable for the future damages.

A true conflict of law does exist, however, on the issue of liability for past medical expenses and wage loss paid by McGree's insurer. Under Minnesota's no-fault law, a plaintiff cannot recover from a tortfeasor for benefits paid by his own insurer. Section 65B.51(1), Minn.Stats. Also, the plaintiff's insurer generally has no subrogation right to recover from the tortfeasor for benefits paid to the plaintiff. Section 65B.53, Minn.Stats. Under Wisconsin law, however, a plaintiff may recover from a tortfeasor for damages paid by the plaintiff's insurer unless the insurer has a contractual subrogation right to recover such amounts. Rixmann v. Somerset Public Schools, 83 Wis.2d 571, 582, 266 N.W.2d 326, 331-32 (1978). Regardless of whether the insurer is subrogated to the plaintiff's claim, the tortfeasor is liable under Wisconsin law to either the plaintiff or his insurer for amounts paid by collateral sources.

The parties incorrectly identify the threshold issue to be whether to apply Wisconsin's law permitting subrogation or Minnesota's no-fault law prohibiting subrogation. Subrogation is derivative of the plaintiff's right to recover from the tortfeasor. The original right of the plaintiff measures the extent of the subrogated party's right. Garrity v. Rural Mutual Insurance Co., 77 Wis.2d 537, 541, 253 N.W.2d 512, 514 (1977). Unless the plaintiff has a right to recover from the tortfeasor, no issue of subrogation arises. This is especially true in this case because McGree's insurer has only a contractual subrogation right. ¹ Rixmann, 83 Wis.2d at 582, 266 N.W.2d at 331-32. As a result, the threshold question we must answer is whether McGree has a right to recover from Cleveland and Home Mutual for damages paid by McGree's insurer.

Wisconsin adheres to the collateral source rule. Id. at 582-83, 266 N.W.2d at 332. Under this rule, a plaintiff may recover the reasonable value of all items of loss, regardless of whether the plaintiff received compensation for his damages from a source other than the tortfeasor. Payne v. Bilco, 54 Wis.2d 424, 433, 195 N.W.2d 641, 647 (1972). By contrast, Minnesota does not recognize the collateral source rule. Section 65B.51(1) of Minnesota's no-fault insurance law specifically provides that economic loss benefits that have already been paid shall be deducted from any tort recovery. ² Because the applicability of the collateral source rule determines Cleveland's and Home Mutual's liability for the damages paid by McGree's insurer, an outcome determinative conflict exists.

Two tests apply to determine which state's law to apply. First, we consider whether the contacts of one state to the facts of the case are so obviously limited and minimal that application of that state's law constitutes officious intermeddling. Gavers v. Federal Life Insurance Co., 118 Wis.2d 113, 115-16, 345 N.W.2d 900, 901-02 (Ct.App.1984). Second, if no officious intermeddling would result, then we apply the choice-influencing considerations adopted in Heath v. Zellmer, 35 Wis.2d 578, 596, 151 N.W.2d 664, 672 (1967). The choice-influencing factors are:

(1) Predictability of results;

(2) Maintenance of interstate order;

(3) Simplification of the judicial task (4) Advancement of the forum state's governmental interest;

(5) Application of the better rule of law.

Minnesota's only contact with the facts of this case is as the site of the accident. By contrast, both parties are Wisconsin residents. They are insured by Wisconsin insurers under policies issued in this state. Based on these facts, Minnesota's primary interest is to regulate highway safety within its borders. See Hunker v. Royal Indemnity Co., 57 Wis.2d 588, 602, 204 N.W.2d 897, 904 (1973). Only Wisconsin, however, has an interest in regulating the economic and social consequences of the tortious conduct.

Considering the respective interests of the two states in relation to the collateral source rule, we conclude that Wisconsin's law should apply. Minnesota's no-fault law is intended to regulate the economic and social consequences of tortious conduct, and it is not intended to reduce the incidence of such conduct. See sec. 65B.42, Minn.Stats. (purposes of no-fault insurance law identified); see also Milbrandt v. American Legion Post, 354 N.W.2d 499, 502 (Minn.App.1984). Application of Minnesota's law therefore would constitute officious intermeddling. Also, Wisconsin's collateral source rule is intended to deter negligent conduct by placing the full cost of the wrongful conduct on the tortfeasor. Rixmann, 83 Wis.2d at 580-81, 266 N.W.2d at 331. Application of Wisconsin's law actually promotes Minnesota's interest in assuring highway safety.

Our conclusion that Minnesota has a minimal interest in this lawsuit is supported by our supreme court's decision in a factually similar case. In Wilcox v. Wilcox, 26 Wis.2d 617, 133 N.W.2d 408 (1965), the supreme court considered whether to apply Wisconsin's law permitting a guest to recover from a host upon proof of ordinary negligence, or Nebraska's law permitting recovery from a host only upon proof of gross negligence. The accident occurred in Nebraska, but all of the parties, including the liability insurer, were domiciled in Wisconsin. The supreme court concluded that the occurrence of the accident outside the state was fortuitous and should not influence the choice of law to apply. Id. at 633, 133 N.W.2d at 416. Similarly, in this case the occurrence of the accident in Minnesota is fortuitous, and the refusal to apply the collateral source rule has no relationship to regulating conduct within that state.

We arrive at the same conclusion in favor of Wisconsin law by applying the choice-influencing factors. The determinative factors are advancement of the forum state's governmental interest and application of the better rule of law. The first factor, predictability of results, weighs slightly in favor of Wisconsin because all of the parties are Wisconsin residents or corporations whose expectations presumably were that Wisconsin law would apply in the event of an accident. Hunker, 57 Wis.2d at 600-01, 204 N.W.2d at 903. Maintenance of interstate order is not implicated by the application of either state's law because neither choice would be totally unreasonable. Heath, 35 Wis.2d at 600, 151 N.W.2d at 674. Simplification of the judicial task is also not a factor in this case. Wisconsin courts already are familiar with the...