PUBLISHED OPINION
Case No.: 95-0932
†Petition for review filed
Complete Title
of Case:
MICHAEL IVES and TAMMY IVES,
Plaintiffs-Respondents,
RHINELANDER PAPER COMPANY
GROUP HEALTH PLAN FOR HOURLY
EMPLOYEES SPONSORED BY
RHINELANDER PAPER COMPANY,
INC.,†
Plaintiff-Appellant,
v.
COOPERTOOLS, a division of
Cooper Industries, Inc.;
ALIAS INSURANCE COMPANY NO.
1;
COOPER INDUSTRIES, INC.;
ALIAS INSURANCE COMPANY NO.
2;
BERNS ENTERPRISES, INC.,
d/b/a RHINELANDER HARDWARE;
THE AETNA CASUALTY &
SURETY
COMPANY; McGRAW-EDISON COMPANY;
and ALIAS INSURANCE COMPANY
NO. 4,
Defendants.
Oral Argument: September 29, 1995
COURT COURT
OF APPEALS OF WISCONSIN
Opinion Released: October 31, 1995
Opinion Filed: October
31, 1995
Source of APPEAL Appeal from an order
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Oneida
(If "Special", JUDGE: Robert E. Kinney
so indicate)
JUDGES: Cane, P.J., LaRocque and Myse, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSOn
behalf of plaintiff-appellant, the cause was submitted on the briefs of and
orally argued by Matthew E. Yde of Ruder, Ware & Michler, S.C.
of Wausau.
Respondent
ATTORNEYSOn
behalf of plaintiffs-respondents, the cause was submitted on the brief of and
orally argued by D. J. Weis of Habush, Habush, Davis &
Rottier, S.C. of Rhinelander.
COURT OF APPEALS DECISION DATED AND RELEASED OCTOBER 31, 1995 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-0932
STATE
OF WISCONSIN IN COURT OF
APPEALS
MICHAEL IVES and TAMMY
IVES,
Plaintiffs-Respondents,
RHINELANDER PAPER
COMPANY
GROUP HEALTH PLAN FOR
HOURLY
EMPLOYEES SPONSORED BY
RHINELANDER PAPER
COMPANY, INC.,
Plaintiff-Appellant,
v.
COOPERTOOLS, a
division of
Cooper Industries,
Inc.;
ALIAS INSURANCE
COMPANY NO. 1;
COOPER INDUSTRIES,
INC.;
ALIAS INSURANCE
COMPANY NO. 2;
BERNS ENTERPRISES,
INC.,
d/b/a RHINELANDER
HARDWARE;
THE AETNA CASUALTY
& SURETY
COMPANY; McGRAW-EDISON
COMPANY;
and ALIAS INSURANCE
COMPANY NO. 4,
Defendants.
APPEAL from an order of
the circuit court for Oneida County:
ROBERT E. KINNEY, Judge. Vacated
and cause remanded for further proceedings.
Before Cane, P.J.,
LaRocque and Myse, JJ.
LaROCQUE, J. Rhinelander Paper Company Group Health Plan
for Hourly Employees sponsored by Rhinelander Paper Company, Inc.
(Rhinelander), appeals an order denying its recoupment claim for medical
expenses paid to Michael Ives as a result of a hunting accident.[1] Rhinelander seeks reimbursement out of the
settlement proceeds of a negligence lawsuit between plaintiffs, Michael and
Tammy Ives, and several defendants. The
parties to this subrogation dispute submitted a stipulation to the court that
the plaintiffs received "full value" in their settlement for 17.42%
of their total damages discounted for "liability difficulties" and
the legal uncertainty of a defendant's successor corporate liability. At a Rimes hearing, the
circuit court ruled in the Iveses' favor, declaring that they had not been
"made whole." Rimes v.
State Farm Mut. Auto. Ins. Co., 106 Wis.2d 263, 316 N.W.2d 348 (1982).[2] We vacate the order and remand for a
determination of Michael's contributory negligence, if any.
At the Rimes
hearing the circuit court noted that plaintiffs obtained a settlement despite
unresolved issues of defendants' negligence in fact, legal problems of
successor corporate liability and the possibility that the injuries were the result
of a "pure accident," that is, the absence of negligence by
anyone. We believe that under
Wisconsin's Rimes-Garrity rules, an insurer may seek
reimbursement out of settlement proceeds only where that sum compensates the
insured for all damages less the percentage of the insured's contributory
negligence, if any. Garrity v.
Rural Mut. Ins. Co., 77 Wis.2d 537, 253 N.W.2d 512 (1977). Other factors that reduce a settlement to
less than full payment of all damages, including the possibility of no negligence
by the defendant, or the possibility of rulings on matters of fact or law
adverse to the plaintiffs' claim are irrelevant. We therefore conclude that a settlement discounted for factors
other than plaintiffs' contributory negligence does not make the insured
whole. However, we must remand in light
of the absence of a finding of Michael's contributory negligence, if any. Further, because the issue may arise on
remand, we also conclude that the § 895.045, Stats.,
bar to recovery in negligence actions has no application to the equitable
resolution of a subrogation dispute.[3]
Michael Ives sustained
severe injuries when he fell out of a tree as a result of the collapse of his
deer stand. Rhinelander paid $132,292
in medical expenses and sickness benefits Michael incurred because of the
accident. Michael and Tammy Ives sued
the manufacturer and seller of a double-end snap cap Michael used to hold his
deer stand in place, and the insurers of the manufacturer and seller. The Iveses contended that the double-end
snap cap failed, causing the deer stand to collapse and Michael to fall to the
ground. Rhinelander was added as a
plaintiff pursuant to its payment of medical expenses for treatment of
Michael's injuries.
Approximately one week
before trial, the Iveses entered into a settlement with the defendants in which
the defendants paid $261,250 to fully settle the claim. The Iveses requested a Rimes
hearing to determine their potential liability to Rhinelander out of the
settlement proceeds. For purposes of
the Rimes hearing, the Iveses and Rhinelander submitted to the
court a written stipulation to the following facts:
1. Plaintiffs'
total damages as a result of injuries to Plaintiff MICHAEL IVES following his
fall from a deer stand on or about November 10, 1989, are 1.5 million dollars.
2. That the
defendants' payment of $261,250.00 in full settlement of all personal injury
and property damage claims arising out of Plaintiff MICHAEL IVES' fall from a
deer stand on or about November 10, 1989, is full-value for the Plaintiffs'
claims based on the following factors:
a. Liability
difficulties; and
b. Uncertainty of
successor corporate liability on the Coopertools defendants.
3. That due to
liability problems and the uncertainty of successor corporate liability, the
Plaintiffs accepted 17.42 percent of their total damages arising out of the
November 10, 1989, accident.
4. That
Plaintiffs' decision to accept 17.42 percent of their total damages was not
based on insufficient insurance coverage or the unavailability of funds on the
part of the defendants to satisfy a 1.5 million dollar judgment.
5. That
Rhinelander has paid medical expenses ($128,487.40) and accident and sickness
benefits ($3,804.60) relating to this accident in the amount of $132,292.00.
On
the basis of the stipulation, the circuit court decided that Rhinelander was
not entitled to subrogation. The court
reasoned that the discounted settlement did not pay the Iveses for their entire
actual loss, and that the equities of the case favored the Iveses because
Rhinelander itself failed to initiate suit against the manufacturers.
The application of the
"made whole" doctrine of Rimes to stipulated facts is a
question of law that we review de novo.
See Oakley v. Fireman's Fund, 162 Wis.2d 821, 826,
470 N.W.2d 882, 884 (1991). Rhinelander
is not entitled to subrogation unless the Iveses have been made whole for their
loss. See Rimes,
106 Wis.2d at 271-72, 316 N.W.2d at 353.
The stipulation and statements at the Rimes hearing
indicate three types of liability issues for which the settling parties
discounted the settlement: contributory
negligence, uncertain successor corporate liability and the possibility the
fall was a pure accident. Of these
three issues, Wisconsin courts have only addressed whether a settlement
discounted for contributory negligence makes a party whole. See Sorge v. National Car
Rental System, 182 Wis.2d 52, 512 N.W.2d 505 (1994). In Sorge, our supreme court
held that an insured was made whole by a settlement that compensated the
insured for all losses except those attributable to the insured's
negligence. Id. at 62,
512 N.W.2d at 509.
Whether
an insured is made whole by receiving a settlement discounted for liability
problems other than contributory negligence is an issue of first
impression. Subrogation arises under
the principles of equity, and its purpose is to prevent double recovery by the
insured. Rimes, 106
Wis.2d at 272, 316 N.W.2d at 353.
We decline to extend the
requirements of a Rimes hearing to include considerations such as
the difficulty of proof of liability, including questions of law that may
adversely affect a particular claim.
These factors are among a profusion of considerations that impact the
ultimate settlement of any lawsuit.
They are "neutral factors" in the sense that they are
unrelated to plaintiffs' fault, and are unnecessary to a resolution of a fair
distribution of settlement proceeds between the insureds and the insurer.
Although we exclude
factors other than the insured's own negligence from the Rimes
determination, we must remand in light of the absence of a determination of
Michael Ives' contributory negligence, if any.
Plaintiffs maintain that Sorge only includes the
plaintiff's contributory negligence in the made-whole determination where the
plaintiff has stipulated to a precise percentage of fault. We do not read Sorge so
narrowly. Sorge holds in
no uncertain terms that a settlement agreement that compensates an injured
party for all of her losses less the amount corresponding to her contributory
negligence is made whole. Id.
at 62, 512 N.W.2d at 509.
Because the stipulation
in this case did not determine Michael's contributory negligence, if any, we remand
for that determination. We conclude
that the statutory ban on negligence claims where the plaintiff is more than
50% at fault, § 895.045, Stats.,
has no application to the resolution of the subrogation issue in this case.
In matters of equity,
including subrogation claims, our duty is to do complete justice between the
parties to the action. State v.
Excel Mgmt. Servs., 111 Wis.2d 479, 491, 331 N.W.2d 312, 318
(1983). We need not limit our analysis,
however, to considerations as abstract as a general appeal to equity or
justice. The Wisconsin Supreme Court
has declined to apply the bar for contributory negligence in other analogous
equity cases. Bielski v. Schulze,
16 Wis.2d 1, 114 N.W.2d 105 (1962), a landmark better remembered because it
abolished the doctrine of gross negligence in Wisconsin, also changed the law
of contribution between joint tortfeasors so as to apportion the amount of
contribution in relation to their relative negligence. Id. at 6-14, 114 N.W.2d at
107-111. Noting that contribution is an
equitable doctrine based upon natural justice, Bielski held that
§ 331.045, Stats. (renumbered §
895.045, Stats.), had no
application to the doctrine of contribution; it then concluded that the right
of one tortfeasor to contribution is not barred because his negligence may be
equal to or greater than the negligence of his co-tortfeasor. Id. at 6, 114 N.W.2d at
107-08.[4] It is undisputed that like contribution,
subrogation is an equitable doctrine based upon natural justice and
equity.
To reach an equitable
result in subrogation cases, we conclude that an insured who is greater than
50% contributorily negligent is made whole if the insured receives his or her
total damages discounted by the percentage of contributory negligence, even
if that percentage is greater than 50%.
In other words, if the insured is 70% contributorily negligent, a
settlement of 30% or more of total damages makes the insured whole. The settlement in this case would make the
Iveses whole if Michael was 82.58% or greater contributorily negligent.[5]
The Iveses assert that
remand on the issue of contributory negligence is unnecessary because the
circuit court found that Michael's contributory negligence did not exceed
50%. The Iveses contend that the
following statement by the circuit court constituted the finding: "So, for the reasons stated, I'm going
to find that Mr. Ives has not been made whole. I cannot assume that his contributory negligence would have
exceeded that of the manufacturer or the seller, and I don't assume that."
We first note that the
parties' stipulation fails to establish the percentage of Michael's
negligence. This statement is the only
reference to contributory negligence in the court's reasoning for its
decision. The statement was no doubt a
recognition that the stipulation was not precise with respect to contributory
negligence, not a finding on that issue.
We remand the case to
determine Michael's percentage of contributory negligence. The settlement would make the Iveses whole
if Michael was 82.58% or greater contributorily negligent. Rhinelander has a right of priority in any
money collected over the amount of the Iveses' total damages discounted for the
percentage of Michael's contributory negligence up to the amount of benefits
paid.
By the Court.—Vacated
and cause remanded for further proceedings.
[1] Although the appeal record does not include the Rhinelander insurance contract, an insurer can claim subrogation rights through either a contractual provision or through equity. Garrity v. Rural Mut. Ins. Co., 77 Wis.2d 537, 543, 253 N.W.2d 512, 515 (1977).
[2] Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis.2d 263, 316 N.W.2d 348 (1982). In a Rimes hearing, the circuit court holds a post-settlement trial to determine whether the settlement made the insured whole.
[3]
Section 895.045, Stats.,
provides:
Contributory negligence. Contributory negligence shall not bar recovery in an action by any person or the person's legal representative to recover damages for negligence resulting in death or in injury to person or property, if such negligence was not greater than the negligence of the person against whom recovery is sought, but any damages allowed shall be diminished in the proportion to the amount of negligence attributable to the person recovering.
[4] Writing in Lawver v. Park Falls, 35 Wis.2d 308, 316, 151 N.W.2d 68, 72 (1967) (Hallows, J., concurring), the late Justice Harold Hallows invited the legislature to change the contributory negligence statute: "In justice, there is no reason why a plaintiff who is 52 percent negligent should not recover 48 percent of the amount of his damages. There is nothing magic about being equally at fault so that one should lose all and the other win all."