Docstoc

Rimes V State Farm Mutual Automobile Insurance Company

Document Sample
Rimes V State Farm Mutual Automobile Insurance Company Powered By Docstoc
					                 THE RULE OF PETTA:
          SUBROGATION AND WRONGFUL DEATH

                          D. James Weis
                 HABUSH HABUSH & ROTTIER S.C.
                      126 E. Davenport Street
                      Rhinelander, WI 54501
                           715-365-1900

                                   Presented To:

                         STATE BAR OF WISCONSIN
                           ANNUAL CONVENTION
                            Midwest Airlines Center
                            Milwaukee, Wisconsin

                                 Litigation Section
                                    May 4, 2005

I.   PETTA v. ABC INSURANCE COMPANY, 2005 WI 18, ___ Wis. 2d ___, ___
     N.W.2d ___, reversing 2003 WI App 241, 268 Wis. 2d 153, 672 N.W.2d 146.

     The “made whole” doctrine recognized in Rimes v. State Farm Mutual
     Automobile Insurance Co., 106 Wis. 2d 263, 316 N.W.2d 348 (1982) applies in a
     wrongful death action.

     The settlement procedure approved in Schulte v. Frazin, 176 Wis. 2d 622, 500
     N.W.2d 305 (1993) applies in a wrongful death action.

     A.     FACTS AND PROCEDURAL HISTORY.

            Petta is a wrongful death action. Dayle Petta was killed in an auto
            accident, which also totally destroyed her car. She died while unmarried,
            survived by her two adult children -- the Pettas -- who were the wrongful
            death plaintiffs in the case. No estate was opened.

            Dayle Petta was divorced, but she lived with her ex-husband at the time of
            her death. Dayle Petta had auto insurance through Travco. The policy
            insured both Dayle Petta and her ex-husband. Travco paid benefits under
            its policy to "its insured" for the value of the wrecked car, and for Dayle
            Petta's final medical and funeral expenses under its medical payments




                                     Weis - 1
provision. These payments were not made to her children, as they were
not insureds under the Travco policy.

The children brought a wrongful death action against the driver of the
other car, his employer, and his insurers, also naming Travco as a nominal
defendant with regard to its potential subrogation rights. Travco cross-
claimed against the defendants, asserting a subrogation claim in excess of
$14,000.

In short order, the children settled with the defendants for their insurance
policy limits of $250,000, plus an additional $30,000 paid by the other
driver personally. In making the settlement, the children intentionally and
specifically followed the settlement procedure set forth in Schulte v.
Frazin, 176 Wis. 2d 622, 500 N.W.2d 305 (1993), specifically agreeing to
indemnify the defendants against any potential subrogation claim of
Travco.

Travco agreed in writing that this $280,000 settlement did not make the
children whole for their damages in the wrongful death claim.
Nevertheless, Travco asserted that it was entitled to full reimbursement of
its subrogation lien, on the grounds that the "made whole" rule of Rimes v.
State Farm Mutual Automobile Insurance Company, 106 Wis. 2d 263, 316
N.W.2d 348 (1982) did not apply in a wrongful death action. The essence
of Travco's argument was that Rimes and Schulte applied only between
the insurer and the insured. According to Travco, since the children were
not the insureds of Travco, neither Rimes nor Schulte applied to the case,
and Travco was entitled to recover its entire subrogation lien. It was
Travco's position that it was entitled to this recovery from the tortfeasor
and their insurers, but that because of the Schulte indemnity agreement,
the Pettas had to pay it.

In addition, Travco refused to seek a Rimes hearing on the issue. So, the
Pettas brought a motion for a Rimes hearing, seeking an official ruling that
they had not been "made whole," and asking for an order extinguishing the
subrogation rights of Travco. The trial court granted the Pettas motion.

Travco appealed. The Court of Appeals reversed the trial court.
Specifically, the Court of Appeals ruled:

       *       That the "made whole doctrine" of Rimes v. State Farm
               Mutual Automobile Insurance Company, 106 Wis. 2d 263,
               316 N.W.2d 348 (1982) does not apply in a wrongful death
               action in Wisconsin, because it applies only to the benefit
               of "insureds." Petta, 2003 WI App 241, ¶ 1.



                          Weis - 2
            *       That the settlement procedure approved in Schulte v.
                    Frazin, 176 Wis. 2d 622, 500 N.W.2d 305 (1993), does not
                    apply in a wrongful death action in Wisconsin, because this
                    procedure also applies only to the benefit of "insureds."
                    Petta, 2003 WI App 241, ¶ 15.

            *       That, although the Pettas own the claim for medical and
                    funeral expenses and pecuniary injury in this wrongful
                    death action, this ownership is not exclusive, and Travco is
                    entitled to retain the proceeds of these claims. Petta, 2003
                    WI App 241, ¶¶ 9-12.

            *       Finally, the Court of Appeals discussed the issue of
                    whether "pecuniary injury" under Wis. Stat. section
                    895.04(4) includes the monetary value of Dayle Petta's
                    wrecked accident vehicle, but declined to answer this
                    question. Petta, 2003 WI App 241, ¶¶ 10-12.

     The Pettas petitioned the Wisconsin Supreme Court for review of the
     Court of Appeals' decision. The Supreme Court granted the petition, and
     reversed the Court of Appeals.

B.   THE SUPREME COURT’S DECISION.

     First, the Supreme Court ruled that the Rimes doctrine is essentially one of
     priority, as it determines who gets paid first among competing claims. The
     Pettas’ claims take priority over Travco’s subrogation claim:

            *       Because the Pettas were statutorily entitled to manage the
                    estate’s claim for property damage arising from the
                    wrecked car, and make claims for Dayle Petta’s medical
                    and funeral expenses as part of their wrongful death action,
                    and

            *       Because these claims are indivisible and inseparable from
                    the Pettas’ claims for their own losses of pecuniary injury
                    and loss of society and companionship.

     Petta, 2005 WI 18, ¶¶ 31-32.

     Second, the Supreme Court ruled that there is no conceptual difference
     between a personal injury case involving a subrogated insurer and a




                               Weis - 3
     wrongful death case involving a subrogated insurer. Petta, 2005 WI 18, ¶
     33.

     Third, the Supreme Court ruled that equitable considerations control in
     subrogation situations and that in a wrongful death case, the equitable
     balance still tips in favor of the wrongful death plaintiff’s right to obtain
     full recovery. Petta, 2005 WI 18, ¶ 34.

     Fourth, the Supreme Court ruled that wrongful death plaintiffs and
     subrogated insurers are in competition for limited funds. Petta, 2005 WI
     18, ¶ 35.

     Fifth, the Supreme Court ruled that if Rimes did not apply in a wrongful
     death action, the state’s policy of encouraging settlement would suffer in
     wrongful death actions. Petta, 2005 WI 18, ¶ 36.

     For these reasons, the Supreme Court concluded that the Rimes “made
     whole” doctrine and the Schulte settlement procedure apply to wrongful
     death plaintiffs. Petta, 2005 WI 18, ¶ 37.

     And, under the facts of this specific case, because Travco had stipulated
     that the Pettas had not been made whole by the settlement with the
     tortfeasors, Travco’s subrogation rights “are consequently extinguished.”
     Petta, 2005 WI 18, ¶ 37.

C.   OTHER INTERESTING ASPECTS OF PETTA.

     Claim for the wrecked car: The Pettas argued that they were entitled to
     recover the value of Dayle Petta’s wrecked car as a “loss of inheritance”
     which qualified as a pecuniary injury under Wis. Stat. section 895.04(4).
     The Supreme Court did not agree with this argument.

     However, the Supreme Court decided that the accident that caused Dayle
     Petta’s death and also wrecked her car created a cause of action for
     property damage in favor of Dayle Petta’s estate. Since no estate was ever
     opened for Dayle Petta, and since Wis. Stat. section 895.04(6) empowers
     the Pettas to control the settlement of any claims the estate had against the
     tortfeasor, the Pettas could and did “waive and satisfy” that cause of action
     when they made their full settlement with the tortfeasor. Petta, 2005 WI
     18, ¶ 21.

     Claim for medical and funeral expenses: Wis. Stat. section 895.04(5)
     allows a relative of the deceased to make a claim for medical expenses and
     funeral expenses, and this claim is not contingent upon the relative



                                Weis - 4
having paid these expenses. And, Wis. Stat. section 895.04(2) gives the
wrongful death beneficiaries the right to recover for these claims. Since
the Pettas are these wrongful death beneficiaries, they can sue and recover
for the medical and funeral expenses, even though they did not pay for
them. Petta, 2005 WI 18, ¶¶ 23-24.

Ownership of the recovery for these claims: Because the Pettas did not
pay for the medical expenses, funeral expenses, and property damage
expenses, they have no ownership rights to any proceeds on the claims for
these expenses. However, that does not mean that Travco had any
ownership rights in the proceeds either. Petta, 2005 WI 18, ¶ 26.

Due to the action of the wrongful death statute, the Pettas are statutorily
entitled to bring these claims, along with their own wrongful death claims
for their own losses of pecuniary injury and loss of society and
companionship. And, under Rimes, a claim against a tortfeasor is
indivisible. Therefore, the claims for medical expenses, funeral expenses,
and property damage are inseparable from the Pettas’ own claims. Petta,
2005 WI 18, ¶ 31.

Because the Pettas settled their entire action with a lump-sum settlement
under the Schulte procedure, and because the Rimes “made whole”
doctrine applies, and because Travco stipulated that the settlement did not
make the Pettas whole, Travco’s subrogation rights in these claims were
extinguished, and the Pettas were able to retain the proceeds of these
claims. Petta, 2005 WI 18, ¶¶ 31-37.

Multiple plaintiff fact situations: The Court of Appeals expressed
concern that if Rimes and Schulte applied in wrongful death actions, it
“would set a dangerous precedent. If there were multiple plaintiffs against
a common tortfeasor based on a single incident, the plaintiffs could `race’
to settlement. The first to settle and indemnify the tortfeasor could show
that he or she was not made whole, and if Rimes applied, extinguish not
only subrogation claims but also the other plaintiffs’ claims. This takes
Rimes to a place it was never intended to go.” Petta, 2003 WI App 241,
¶16.

The Supreme Court did not share this concern, stating: “Our conclusion
today addresses only the extension of Rimes to wrongful death actions that
involve a subrogated insurer. To whatever extent that our reasoning can
be construed as applying to multiple plaintiff litigation, we come full
circle from where this part of the discussion began: subrogation and its
antisubrogation counterpart are fundamentally equitable concepts. Thus,
equity is the bulwark against the horribles that Travco and the court of



                          Weis - 5
appeals fear. Outside of situations where a person has a competing claim
with a subrogated insurer, the equities will vary dramatically.” Petta, 2005
WI 18, ¶ 38.




                          Weis - 6

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:92
posted:7/27/2011
language:English
pages:6
Description: Rimes V State Farm Mutual Automobile Insurance Company document sample