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Petta v. ABC Insurance Co.2/24/2005
e plaintiffs were not made whole and Wis. Stat. ยง 895.04 (2001-02) allows the plaintiffs to assert and satisfy certain claims in which Travco has a subrogated interest that properly belong to the estate and could have been recovered as part of a survival action.
. Subrogation occurs when a subrogee "steps into the shoes of the subrogor to the extent it has made payment as a result of actionable event." Wilmont v. Racine County, 136 Wis. 2d 57, 63, 400 N.W.2d 917 (1987)(emphasis added). Thus, " ayment is the sine qua non for subrogation." Muchow v. Goding, 198 Wis. 2d 609, 626, 544 N.W.2d 218 (Ct. App. 1995). Without payment by one party on behalf of another, no subrogation relationship exists between the two and no subrogation rights arise. Id. If a subrogation relationship exits, the subrogee does not possess an independent claim against the tortfeasor (whose injury of the subrogor necessitated payment); rather, it owns part of the liability of the tortfeasor separate from that part owned by the subrogor. Wilmont, 136 Wis. 2d at 63-64.
. As the subrogee and subrogor each own part of the claim against a tortfeasor, they often are forced to compete for a limited pool of money. When this occurs, the made-whole doctrine establishes an equitable rule of priority that prevents the subrogee from asserting its right of subrogation until its subrogor has been made whole for all damages suffered. Paulson v. Allstate Ins. Co., 2003 WI 99, -26, 263 Wis. 2d 520, 649 N.W.2d 645. Thus, "the subrogee has no right to share in the fund recovered from the tort-feasor until the subrogor is made whole." Garrity v. Rural Mut. Auto. Ins. Co., 77 Wis. 2d 537, 547, 253 N.W.2d 512 (1977). Where there is a settlement between the tortfeasor and the subrogor, the subrogor may request a hearing in which the circuit court determines whether the subrogor has been made whole by the settlement amount. Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 263, 278-79, 316 N.W.2d 348 (1982).
. In order to foster settlements, allow an injured parties to settle on their own terms, and ensure that subrogees participate in a Rimes hearing, this court approved the use of a settlement agreement whereby the tortfeasor settles with the plaintiff and the plaintiff grants the tortfeasor a full release and further agrees to indemnify the tortfeasor for any claim made by its subrogee. Schulte v. Frazin, 176 Wis. 2d 622, 633-35, 500 N.W.2d 305 (1993). Such an agreement calls for application of the made-whole doctrine because it "indirectly creates the prospect that the insurer will be competing with its own insured." Id. at 633-34.
. I wish to emphasize that the Schulte settlement procedure is a means of ensuring application of the made-whole doctrine, which itself limits pre-existing subrogation rights. Neither Schulte nor the made-whole doctrine as set forth in Garrity and Rimes create subrogation rights in the first instance. As such, their application is dependent upon the existence of a subrogation relationship between two parties, which, in turn, is dependent upon one party indemnifying the other for a loss. That is, the made-whole doctrine applies only where a subrogee and subrogor compete for a limited pool of money. Paulson, 263 Wis. 2d 520, -28.
. I reiterate these basic tenets of the law of subrogation in response to the court of appeals' concern that operation of the made-whole rule in this case could result in a single plaintiff being able to extinguish the rights of other plaintiffs or insurers in a multi-plaintiff action against a common tortfeasor. See majority op., . Such a result should never occur under a proper application of established subrogation principles.
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