COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION
Case No.: 00-0455 |
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Complete Title of Case: |
†Petition for Review filed. |
Scott
K. Reed and Julie Reed,
Plaintiffs-Respondents, v. Brenda
L. Bradley and American Family Mutual Insurance
Company,
Defendants-Appellants,† State
Farm Mutual Automobile Insurance Company, Defendant. |
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Opinion Filed: July 27, 2000 Submitted on Briefs: June 12, 2000 |
JUDGES: Eich, C.J., Vergeront and Roggensack, JJ. |
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Appellant ATTORNEYS: On
behalf of the defendants-appellants, the cause was submitted on the briefs of
David J. Pliner of Corneille
Law Group, L.L.C., of Madison. Respondent ATTORNEYS: On
behalf of the plaintiffs-respondents, the cause was submitted on the brief of
C.M. Bye of Bye, Goff & Rohde, Ltd., of River Falls. |
COURT OF APPEALS
DECISION
DATED AND FILED
July 27, 2000
Cornelia G. Clark
Clerk, Court of Appeals
of Wisconsin
2000 WI App 165
NOTICE
This opinion is subject to
further editing. If published, the official version will appear in the bound
volume of the Official Reports.
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See Wis. Stat. § 808.10 and Rule 809.62.
STATE OF WISCONSIN IN COURT OF APPEALS
Scott
K. Reed and Julie Reed,
Plaintiffs-Respondents,
v.
Brenda
L. Bradley and American Family Mutual
Insurance
Company,
Defendants-Appellants,
State
Farm Mutual Automobile Insurance Company,
Defendant.
APPEAL from a judgment of the circuit court for Monroe County: steven L. Abott, Judge. Affirmed.
Before Eich, Vergeront and Roggensack, JJ.
¶1 EICH, J. Scott and
Julie Reed were injured in an automobile accident. Their medical expenses, which were stipulated to be $2,978, were
paid by their insurer, State Farm Mutual Automobile Insurance Company.[1] Prior to trial, the other driver’s insurer,
American Family Mutual Insurance Company, negotiated a settlement with State
Farm in which State Farm accepted payment of 75% of the stipulated medical
expenses, or $2,246, in exchange for assignment of its subrogation claim.
¶2 Liability
and the amount of health care expenses were stipulated, leaving only pain,
suffering and disability, and future health care expenses, for trial. The jury returned a verdict of $22,978,
which included stipulated past health care expenses of $2,978. The Reeds agreed that American Family was
entitled to a credit against the verdict for the $2,246 it had paid to State
Farm. They maintained, however, that
the difference between that and the medical-expense award of $2,978—some
$731—should revert to them. The trial
court found in the Reeds’ favor and American Family appeals, arguing that we
should reverse because: (1) the Reeds were unjustly enriched by the
court’s ruling, effectively receiving a double recovery; and (2) the
ruling runs counter to established public policy favoring settlements. We disagree and affirm the judgment.
¶3 The Reeds
contend—and we agree—that the rationale of the collateral source rule—which
provides that “a plaintiff is entitled to recover the reasonable and customary
charges for past medical expenses without regard to the payment of those
expenses or the amount of such payment by a third party,” Ellsworth v.
Schelbrock, 229 Wis. 2d 542, 553, 600 N.W.2d 247 (Ct. App. 1999)—is
applicable here. The reasoning
underlying the rule is that the recovery of medical costs has a penal effect on
a tortfeasor, who should not receive the advantage of “gratuities from third
parties.” Thoreson v. Milwaukee
& Suburban Transp. Co., 56 Wis. 2d
231, 243, 201 N.W.2d 745 (1972). And
the Reeds maintain that, as in Ellsworth, the trial court’s
decision in this case ensures that the defendant and her insurer “will not be
subject to answer twice in damages.
[They] will, however, be responsible for the full amount of the value of
the services rendered.” Ellsworth,
229 Wis. 2d at 554.
¶4 There is no
question that a plaintiff who has been injured by another person’s tortious
conduct is entitled to recover the reasonable value of his or her medical costs
occasioned by the injury. Thoreson,
56 Wis. 2d at 243. And the test is
the value of those costs, not the actual charge. See id. In
our view, State Farm’s agreement to settle its limited subrogation claim for
less than its face value is analogous to the situation where a health care
provider sets an injured plaintiff’s broken bone for less than the reasonable
cost. While some may view a verdict for
the plaintiff for the reasonable cost of such a procedure as a double recovery,
under the collateral source rule it does not amount to unjust enrichment.
¶5 Applying
these principles to the case at hand, we believe the trial court came to the
reasonable and legally sound conclusion that, as between the parties, the Reeds
were entitled to the benefit of the insurers’ bargain by virtue of having paid
premiums for health care coverage over time.
And American Family, as the defendant’s insurer, has already been paid a
premium for the risk it assumed.
¶6 As to
American Family’s argument that affirming the circuit court’s judgment would
run counter to established public policy favoring settlements, we
disagree. The agreement between State
Farm and American Family did not constitute a settlement of the action, or any
major portion of it. Rather, it was an
agreement between the defendant’s insurer and the holder of a limited
subrogated interest to settle that limited claim for 75% of its face
value. The agreement did not abrogate
the necessity for a trial, or curtail the proceedings in any meaningful
way. Additionally, as the trial court
noted, where, as here, there is only a partial settlement, the subrogated
insurer receives the benefit of being released from the lawsuit and all of the
concomitant expenses.
By
the Court.—Judgment affirmed.