Wisconsin Educ. Assoc. Ins. Trust v. Freber
| Decision Date | 19 June 1986 |
| Citation | 392 N.W.2d 129,132 Wis.2d 473 |
| Parties | NOTICE: UNPUBLISHED OPINION. RULE 809.23(3), RULES OF CIVIL PROCEDURE, PROVIDE THAT UNPUBLISHED OPINIONS ARE OF NO PRECEDENTIAL VALUE AND MAY NOT BE CITED EXCEPT IN LIMITED INSTANCES. PAYMOND O. PAUL and LOVICE V. PAUL, Plaintiffs, WISCONSIN EDUCATION ASSOCIATION INSURANCE TRUST, Plaintiff-Appellant, v. KATHLEEN M. FREBER and WEST AMERICAN INSURANCE COMPANY, Defendants-Respondents. 84-2366. |
| Court | Wisconsin Court of Appeals |
Appeal from an order of the circuit court for Dodge county: Joseph E. Schultz, Judge.
Before GARTZKE, P.J., DYKMAN, J. and EICH, J.
The Wisconsin Education Association Insurance Trust appeals from an order approving a settlement and dismissing an action brought by Raymond and Lovice Paul against Kathleen Freber and West American Insurance Company in which the Trust had intervened as a subrogated insurer. 1 The issues are: whether the Trust consented to the trial court's order, 2 and whether the trial court improperly determined that the trust had no subrogation claim because the settlement had not made the Pauls whole. We conclude the Trust did not consent to the order. We also conclude there was no evidence to support the court's finding that the Pauls were not fully compensated by the settlement. Therefore, we reverse the order of dismissal and remand.
Raymond Paul was injured in February, 1979, when his car was struck from the rear by a car driven by Kathleen Freber. West American was Freber's automobile liability insurance carrier. Paul's resulting hospital and medical expenses were paid by the Trust's health and accident benefit plan which contained a subrogation provision. 3
In January, 1982, the Pauls sued Freber and West American. The court granted the Trust's petition to intervene.
Settlement negotiations occurred just prior to trial. The Pauls sought $40,000. Freber and West American offered $14,000. The parties did not settle but agreed that the Trust would not participate in the trial. After jury selection and opening statements, counsel for the Trust left the court. During a recess prior to taking testimony, the Pauls and their attorney agreed to accept the settlement offer of $14,000. The Trust was not represented in these negotiations, or in subsequent proceedings.
The Pauls, Freber and West American stipulated to the probability that, were the issues tried, the verdict could have reached $35,000. They also agreed to a dismissal on the merits. On that basis, the court found that the $14,000 settlement would not fully compensate the Pauls and, therefore, the Trust was not entitled to subrogation. The action was dismissed on the merits, and the Trust appeals.
In an insurance context, subrogation 'deals with the right of the insurer to be put in the position of the insured in order to pursue recovery from third parties, legally responsible to the insured, for a loss paid by the insurer to the insured.' Cunningham v. Metropolitan Life Ins. Co., 121 Wis.2d 437, 444, 360 N.W.2d 33, 36 (1985). The function of subrogation is 'to place the loss ultimately on the wrongdoers . . . [and to prevent] the policy holder from receiving more than he or she bargained for from the contract of insurance.' Id. at 444-45, 360 N.W.2d at 36-7.
However, the right to subrogation may not be absolute in all cases. Freber and West American cite Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis.2d 263, 272, 316 N.W.2d 348, 353 (1982), for the proposition that an insurer
Section 803.03(2)(b), Stats., provides that a subrogated party 'may 1. participate in the prosecution of the action, 2. agree to have his or her interest represented by the party who caused the joinder, or 3. move for dismissal with or without prejudice.' If the first option is selected, 'the party joined shall have an equal voice with other claimants in such prosecution.' Id. If the second option is chosen, Id. We need not consider the third option under the facts of this case.
Freber and West American contend that the Trust's agreement not to participate in the trial constituted a consent to the order dismissing its claim. We disagree.
First, even if consent was intended, it did not meet the statutory standards imposed by sec. 803.03(2)(b), Stats. The agreement was not in writing, and was not filed with the court.
Second, the Trust left theproceeding only when trial began. Though settlements sometimes occur during trial, the Trust could have reasonably believed that this would not happen in its absence because the parties' settlement figures were far apart and the subrogation provision of its insurance contract provides that Paul could 'make no settlement or compromise with any party or take any action to prejudice the rights of the Trust, to the extent of benefits paid by the Trust.' The Trust had no reason to believe that Paul would breach the insurance contract and risk a suit for recovery of benefits already paid.
This is not a case where the Trust 'knew all about the settlement and the proceedings leading up to the order confirming it and refrained from objecting thereto . . ..' Estate of Bienenstok, 208 Wis. 676, 679, 242 N.W. 572, 573 (1932). We conclude that the Trust did not consent to the trial court's order dismissing its claim.
Settlement of litgation are greatly favored by Wisconsin courts. Radlein v. Industrial Fire & Cas. Ins. Co., 117 Wis.2d 605, 622, 345 N.W.2d 874, 883 (1984). The Pauls had the right to settle their claim without the Trust's approval. However, the court's order approving the settlement not only settled the Pauls' claim, it also dismissed the Trust's subrogation claim.
The court based that order upon its finding that 'the settlement at $14,000 will not fully compensate Mr. Paul . . ..' This finding was grounded upon the Pauls', Freber's and West American's stipulation that a jury verdict in this case could approach $35,000.
The Trust was not a party to the stipulation and was not bound by the trial court's finding that the settlement would not fully compensate the Pauls. Sec. 807.05, Stats. 4 The Trust's claim should not have been foreclosed by a stipulation of adversely interested parties in which it did not participate. 5
Even if the stipulation could bind the Trust, there is no evidence regarding the Pauls' actual damages. The record contains no medical bills or wage statements, and no testimony as to lost earning capacity. The attorneys for the Pauls and Freber suggest that actual damages can be determined from their joint estimate of a possible jury verdict. However, 'findings of fact cannot be based upon...
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