Fischer v. Steffen

• Decision Date: 24 May 2011
• Docket Number: No. 2009AP1669.,2009AP1669.
• Citation: 797 N.W.2d 501,2011 WI 34
• Parties: Roger H. FISCHER, Sr. and Sandra J. Fischer, Plaintiffs–Appellants–Petitioners,v.Pamela A. STEFFEN and Wilson Mutual Insurance Co., Defendants–Respondents,Kohler Company and Medicare Secondary Payer Recovery Contractor, Subrogated Defendants.
• Court: Wisconsin Supreme Court

797 N.W.2d 501

2011 WI 34

Roger H. FISCHER, Sr. and Sandra J. Fischer, Plaintiffs–Appellants–Petitioners,

v.Pamela A. STEFFEN and Wilson Mutual Insurance Co., Defendants–Respondents,Kohler Company and Medicare Secondary Payer Recovery Contractor, Subrogated Defendants.

No. 2009AP1669.

Supreme Court of Wisconsin.

Argued Jan. 6, 2011.Decided May 24, 2011.

For the plaintiffs-appellants-petitioners there were briefs and oral argument by Shawn Brock and Wurtz, Roth, Basler & Brock, S.C., Sheboygan.For the defendants-respondents there was a brief and oral argument by James O. Conway and Olsen, Kloet, Gunderson & Conway, Sheboygan.An amicus curiae brief was filed by Mark L. Thompson, Edward E. Robinson, Brett A. Eckstein and Cannon & Dunphy, S.C., Brookfield, for the Wisconsin Association for Justice.SHIRLEY S. ABRAHAMSON, Chief Justice.

¶ 1 This is a review of a published decision of the court of appeals, ¹ which affirmed the judgment of the circuit court of Sheboygan County, L. Edward Stengel, Judge.

¶ 2 This review arises from an automobile accident. Roger H. Fischer, Sr. and Sandra J. Fischer, the injured plaintiffs, seek $10,000 from Pamela A. Steffen, the driver defendant; the defendant's insurer is Wilson Mutual Insurance Co. The $10,000 is the amount received by the plaintiffs from the plaintiffs' insurer, American Family Insurance Company, for medical expenses. The policy maximum for no-fault medical expenses was $10,000.

¶ 3 The jury found the defendant 100% liable for the plaintiffs' injuries. The jury awarded the plaintiffs $21,000 for pain and suffering and loss of consortium from the defendant. The parties stipulated that $12,157.14 was the reasonable value of past medical expenses; the circuit court entered this amount in the jury verdict.

¶ 4 The plaintiffs moved for judgment on the verdict, and the defendant filed a motion for partial judgment, asking the circuit court to reduce the award for medical expenses from $12,157.14 to $2,157.14 because the plaintiffs had already recovered $10,000 of the medical expenses from their insurer, American Family. American Family did not recover its subrogation claim for $10,000 against the defendant or her insurer because prior to the plaintiffs' lawsuit an arbitration panel found that the defendant was not negligent and need not pay American Family. The circuit court granted the defendant's motion, ruling that the plaintiffs were not entitled to the disputed $10,000 from the defendant.

¶ 5 The dispute before this court focuses on whether the circuit court erred in denying the plaintiffs a judgment of $10,000 against the defendant when the defendant did not pay the plaintiffs' insurer $10,000, a sum that represents the insurer's subrogation claim.

¶ 6 With regard to the plaintiffs' past medical expenses, the following are undisputed:

• The reasonable value of plaintiffs' past medical expenses was $12,157.14.

• The plaintiffs' insurer paid the plaintiffs $10,000 (the maximum under the policy) for no-fault medical expenses.

• The plaintiffs' insurer acquired a subrogation claim for $10,000 against the tortfeasor under the subrogation provision in the automobile insurance policy.

• Prior to trial, the plaintiffs' and the defendant's insurers arbitrated the plaintiffs' insurer's subrogation claim. The plaintiffs received no notice of the arbitration and did not participate in the arbitration.

• The arbitration panel determined that the defendant was not causally negligent and that the plaintiffs' insurer had no subrogation claim against the defendant.

• The jury determined that the defendant was 100% causally negligent.

• After trial, the defendant, upon order of the circuit court, paid the plaintiffs $2,157.14 ($12,157.14–$10,000) as reimbursement for medical expenses.

• Neither the defendant nor her insurer reimbursed the plaintiffs' insurer or the plaintiffs $10,000, the sum the plaintiffs' insurer paid the plaintiffs as reimbursement for medical expenses.

¶ 7 The plaintiffs argue that the defendant has paid $10,000 less than the full damages the defendant caused. The plaintiffs assert that the collateral source rule applies: the defendant should not benefit from the plaintiffs' insurance policy. The plaintiffs contend that American Family's subrogation claim should revert to them, not the defendant, upon application of the collateral source rule.

¶ 8 In contrast, the defendant's position is that the plaintiffs should not obtain a double recovery, that is, the plaintiffs should not recover an additional $10,000 to compensate them for $10,000 in medical expenses already paid to the plaintiffs by their insurer, American Family.

¶ 9 The circuit court denied the plaintiffs judgment for the $10,000 in question, relying on Paulson v. Allstate Ins. Co., 2003 WI 99, 263 Wis.2d 520, 665 N.W.2d 744. Similarly, the court of appeals, relying on Paulson, affirmed the circuit court's judgment that the plaintiff cannot recover the $10,000 in question from the defendant.

¶ 10 In Paulson, the court determined that under the facts of that case the injured party's recovery from the tortfeasor was not affected by the subrogated insurer's settlement of its subrogation claim with the tortfeasor for 70% of the full value.² The injured party could not recover the subrogated insurer's claim for 30%, which the subrogated insurer did not recover from the tortfeasor.³

¶ 11 The Paulson court evaluated the interaction of the made whole doctrine, the collateral source rule and subrogation rules.

¶ 12 The Paulson court declared that the made whole doctrine was not applicable to the facts of the case inasmuch as no assertion was made that there was an insufficient pool of money to pay damages.⁴ “The specter of an insurer competing with the insured for a limited amount of funds is simply not raised by the facts of this case.” ⁵

¶ 13 With regard to the collateral source rule and subrogation, the Paulson court concluded that subrogation trumped the collateral source rule under the facts of that case.⁶ To reach this conclusion, the court balanced three equitable considerations at play in the case: placing the full responsibility of the loss on the tortfeasor; discouraging double recovery for the injured party; and encouraging settlement agreements between parties. ⁷

¶ 14 The Paulson court declared that the settlement agreement relating to the subrogation claim did not reduce the recovery of the injured party. ⁸

¶ 15 The Paulson court rested its conclusion on the following:

• The injured party's insurer was not competing with the injured party for the same funds.⁹

• Settlement agreements are favored. “Refusing to recognize the [settlement agreement] would inform insurers that there is no point to settlement negotiations, because if the subrogated insurer agrees to take less than the face value of its claim, the plaintiffs will simply get the rest from the tortfeasor's insurer.” ¹⁰

• Allowing the injured party (who has already been fully compensated for the loss) to recover the subrogated claim would allow double recovery and discourage settlement negotiations.¹¹

¶ 16 The Paulson court concluded: “Where the plaintiff has recovered the reasonable value of his or her expenses and makes no allegation that the agreement [settling the subrogation claim] prevents such recovery, there is no reason to award the plaintiff the difference.” ¹²

¶ 17 The holding in Paulson was carefully limited to the facts of that case. “[W]e find that, under the limited circumstances presented by this case, Paulson is not entitled to the 30 percent difference between the amount Midwest paid for Paulson's car repairs and the amount it ultimately settled for in its agreement with Allstate.” ¹³

¶ 18 After comparing Paulson and the instant case, we conclude that in all significant respects the present case is indistinguishable from Paulson and that therefore the present case is governed by Paulson. Accordingly, we conclude that the collateral source rule does not, under the facts of the present case, entitle the plaintiffs to recover $10,000, the value of their insurer's subrogation claim. For the reasons set forth, we affirm the decision of the court of appeals.

I

¶ 19 The underlying facts are undisputed, and we shall set them forth in greater detail at this point. As we have stated, this case stems from a car accident. The accident occurred when the defendant had an epileptic seizure.

¶ 20 American Family Insurance Company, the plaintiffs' insurer, paid the plaintiffs $10,000 for medical expenses under the plaintiffs' auto insurance policy with American Family. Thus, American Family acquired a $10,000 subrogation claim in the plaintiffs' recovery from the defendant.

¶ 21 Prior to the commencement of the plaintiffs' personal injury action against the defendant, American Family entered into arbitration with the defendant's insurer in an attempt to collect its $10,000 subrogation claim. American Family lost at arbitration. The arbitration panel determined that the defendant's seizure was sudden and unexpected and therefore the defendant was not causally negligent. As a result of the binding arbitration, American Family could not recover its subrogation claim against the defendant.

¶ 22 The plaintiffs sued the defendant (and her insurer) for damages, including medical expenses, caused by the defendant's negligence. The plaintiffs correctly joined their insurer, American Family, as a party under Wis. Stat. § 803.03(2) (2009–10) ¹⁴ inasmuch as American Family had a subrogation claim in the plaintiffs' recovery from the defendant. American Family filed an answer and a cross-complaint asserting its subrogation claim.

¶ 23 The defendant notified American Family that American Family had divested its subrogation claim as a result of the arbitration proceedings. American Family agreed. American Family and the defendant stipulated to dismissing American Family and the circuit court dismissed American Family's...