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Petta v. ABC Insurance Co.2/24/2005
cluding that John and Rachelle have no ownership interest in any recovery for these claims does not answer whether Travco can invade John and Rachelle's lump-sum settlement to recoup the payments it made. Travco has a subrogated interest in those claims. As such, if Travco is entitled to recovery from the settlement, that recovery must stem from subrogation. We now turn attention to that concept.
C.
. It has long been recognized that subrogation rests upon principles of equity. Equity generally grants that "one (other than a volunteer) who pays for the wrong of another should be permitted to look to the wrongdoer to the extent he [or she] has paid, and be subject to the defenses of the wrongdoer." Ruckel, 253 Wis. 2d 280, . However, the purpose of subrogation is to prevent an injured party from being unjustly enriched by obtaining double payment. Garrity v. Rural Mut. Ins. Co., 77 Wis. 2d 537, 541, 253 N.W.2d 512 (1977). Thus, subrogation ordinarily does not arise until the underlying debt or loss has been fully paid. Ruckel, 253 Wis. 2d 280, ; Rimes, 106 Wis. 2d at 271; Garrity, 77 Wis. 2d at 541. This "antisubrogation rule" is commonly known as the Rimes made-whole doctrine. See Ruckel, 253 Wis. 2d 280, .
. In Rimes, this court held that "one who claims subrogation rights, whether under the aegis of either legal or conventional subrogation, is barred from any recovery unless the insured is made whole." Rimes, 106 Wis. 2d at 272. The Rimes court reaffirmed the principle that a cause of action against a tortfeasor is indivisible. Id. at 275. "Accordingly, it is only when there has been full compensation for all the damage elements of the entire cause of action that the insured is made whole." Id. That is, the made-whole doctrine established a rule of priority, such that "only where an injured party has received an award by judgment or otherwise which pays all of his elements of damages, including those for which he has already been indemnified by an insurer, is there any occasion for subrogation." Id.
. This court amplified Rimes in Schulte. In Schulte, this court recognized that "settling plaintiffs and subrogated insurers usually compete in a practical sense for limited settlement funds." Schulte, 176 Wis. 2d at 633. The reality of settlements, this court stated, was an equitable factor that could not be ignored. Id. Coupled with a policy recognition that "the injured party should have the right to settle on its own terms," id. at 634, this court outlined the settlement procedure plaintiffs were to utilize to determine how a settlement impacted an insurer's subrogation rights. Id. at 637. That procedure requires the plaintiff to (1) settle with the tortfeasor without resolving the subrogated insurer's claim; (2) request a Rimes hearing to determine if the settlement made the insured whole; and (3) provide the insurer an opportunity to participate in that hearing. Id. If the circuit court determines that the settlement did not make the settling plaintiff whole, then the insurer's subrogation rights are extinguished. Id.
. Even though Rimes and Schulte used terminology including "settling plaintiff" and "injured party," we acknowledge that those terms were used interchangeably with "insured." Nonetheless, John and Rachelle contend equity requires extending these principles to wrongful death plaintiffs, while Travco clings to the insurer/insured relationship as vital to the application of the made-whole doctrine. We agree with John and Rachelle for the following reasons.
. First, the Rimes doctrine is essentially one of priority, as it determines who gets paid first among competing claims. In this case, wrongful death plaintiffs' claim
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