PUBLISHED
OPINION
Case No.: 96-0613
Complete Title
of Case:
THOMAS KULEKOWSKIS and
SANDRA KULEKOWSKIS,
Individually and as Special
Administrator of the
ESTATE OF JEFFREY
KULEKOWSKIS, Deceased,
Plaintiffs,
v.
BANKERS LIFE AND CASUALTY
COMPANY,
Defendant-Respondent,
WPS HEALTH INSURANCE,
Defendant,
AMERICAN FAMILY INSURANCE,
Defendant-Appellant.
Submitted on Briefs: December 3, 1996
COURT COURT OF APPEALS OF WISCONSIN
Opinion Released: February 12, 1997
Opinion Filed: February 12, 1997
Source of APPEAL Appeal from a judgment
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Walworth
(If "Special", JUDGE: JOHN R. RACE
so indicate)
JUDGES: Snyder, P.J., Nettesheim and Anderson, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYS On behalf of the defendant-appellant, the cause was
submitted on the briefs of James J. Mathie of
Mitchell, Baxter, O'Meara & Mathie, S.C. of
Milwaukee.
Respondent
ATTORNEYS On behalf of the defendant-respondent, the cause
was submitted on the brief of Terrance L.
Kallenbach and David J. Nolden of Capwell and
Berthelsen of Racine.
COURT OF APPEALS
DECISION
DATED AND
RELEASED
February 12, 1997
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. 96-0613
STATE OF WISCONSIN IN COURT OF APPEALS
THOMAS KULEKOWSKIS and
SANDRA KULEKOWSKIS,
Individually and as Special
Administrator of the
ESTATE OF JEFFREY
KULEKOWSKIS, Deceased,
Plaintiffs,
v.
BANKERS LIFE AND CASUALTY
COMPANY,
Defendant-Respondent,
WPS HEALTH INSURANCE,
Defendant,
AMERICAN FAMILY INSURANCE,
Defendant-Appellant.
APPEAL from a judgment of the circuit court for Walworth County:
JOHN R. RACE, Judge. Affirmed.
Before Snyder, P.J., Nettesheim and Anderson, JJ.
SNYDER, P.J. American Family Insurance appeals from a
judgment requiring it, inter alia, to pay Bankers Life and Casualty Company on its
subrogation claim to recoup medical payments. American Family now raises the
following issues for our review: (1) that the trial court failed to follow the appropriate
procedure in making its determination; (2) that Bankers Life has not retained a
contractual right to seek subrogation in this case; (3) that Bankers Life does not have
a claim for equitable subrogation; (4) that the American Family policy specifically
excludes recovery by Bankers Life; and (5) that overriding American Family's
subrogation exclusion clause violates its freedom to contract. Because we conclude that
the second and fourth claims are determinative, we initially direct our attention to those.
American Family's claims all revolve around conflicting clauses in two
separate insurance contracts and question whether Bankers Life can exercise a right of
subrogation in light of contract language in the American Family policy which excludes
payment under its underinsured motorist (UIM) coverage to any "person or organization
claiming by right of subrogation." Because we conclude, under Wisconsin case law and
the language of the policies at issue, that the Bankers Life policy includes a right of
subrogation which overrides the American Family subrogation disallowance, we affirm.
The underlying action in this case arose out of a one-car accident which
killed the driver of the vehicle and a passenger, Jeffrey Kulekowskis. The driver's
insurance company paid its liability limits and was released.(1)
Jeffrey's parents, the Kulekowskises, were insured by American Family
under three separate automobile policies, each of which contained UIM coverage. The
Kulekowskises also carried health insurance through Bankers Life, which had paid
certain medical bills and expenses stemming from the accident. The Kulekowskises
brought a lawsuit, seeking recovery under their UIM coverage; Bankers Life, named
as a defendant by the Kulekowskises, cross-claimed against American Family to recover
the medical payments it had made on behalf of Jeffrey. Bankers Life and American
Family then filed cross-motions for summary judgment on the subrogation issue.
The trial court granted summary judgment to Bankers Life, concluding
that the subrogation exclusion in the American Family policy "has been precluded by
the language in the [Bankers Life] plan." Following a trial on the issue of damages in
order to settle the Kulekowskises' UIM claim against American Family, the court
ordered that American Family pay the Bankers Life claim in the amount of $39,455.27,
plus costs.(2) It is from that portion of the
final judgment which American Family
appeals.
We review decisions on summary judgment de novo, applying the same
methodology as the trial court. See Armstrong v.
Milwaukee Mut. Ins. Co., 191
Wis.2d 562, 568, 530 N.W.2d 12, 15 (Ct. App. 1995), aff'd, 202 Wis.2d
258, 549
N.W.2d 723 (1996). That methodology, as set forth in § 802.08(2), Stats., has
been
recited often and we will not repeat it here. See
Armstrong, 191 Wis.2d at 568, 530
N.W.2d at 15. In addition to our review of the summary judgment determination, this
appeal also requires the interpretation of provisions in two insurance contracts.
Construction of an insurance contract is a question of law also subject to de novo
review. See Continental Cas. Co. v.
Homontowski, 181 Wis.2d 129, 133, 510
N.W.2d 743, 745 (Ct. App. 1993).
American Family argues that Bankers Life is not entitled to recover its
payments for Jeffrey's medical care because it has not retained a contractual right to
seek subrogation, nor does it have a claim for equitable subrogation. Furthermore,
American Family contends that the policy language of its UIM coverage specifically
excludes Bankers Life's claim for subrogation.
A right of subrogation may be statutory, contractual or arise through
equity. See Demmer v. American Family Mut. Ins.
Co., 200 Wis.2d 94, 98, 546
N.W.2d 169, 170 (Ct. App. 1996). We first address the question of whether Bankers
Life has a contractual right of subrogation, having concluded that this is the dispositive
question.(3) See
id. at 98, 546 N.W.2d at 170-71.
We then turn to a review of relevant portions of the conflicting insurance
policies. An insurance policy is to be construed as it would be understood by a
reasonable person in the position of the insured, and it is to be given its common and
ordinary meaning. See id. at 98, 546
N.W.2d at 171. The Bankers Life policy
contained the following pertinent language:
REIMBURSEMENT PROVISION
If a covered person is injured, and benefits are paid by this
Plan:
a. the Plan shall be immediately reimbursed by the
covered person for any damages collected, whether by
action at law, settlement or otherwise, to the extent that
the Plan has provided benefits to or on behalf of any such
covered person;
b. the Plan shall have a lien, to the extent of benefits
provided. Such a lien may be filed against the person
who's [sic] act caused the injury, the person's agent or a
court having jurisdiction in the matter;
and
c. the Plan requires the covered person to furnish such
information and assistance and to execute such documents
or other instruments as the Plan may require to facilitate
enforcement of the Plan's rights hereunder, and shall take
no action prejudicing such rights.
The American Family UIM coverage provision stated:
We will pay compensatory damages for bodily
injury
which an insured person is legally entitled to recover
from the owner or operator of an underinsured motor
vehicle.
The policy then defined "insured person" as:
a. You or a relative.
b. Anyone else occupying your insured car.
c. Anyone, other than a person or organization
claiming by right of assignment or subrogation, entitled to
recover damages due to bodily injury to you, a
relative
or another occupant of your insured car. [Emphasis in
italics added.]
Insurance contracts are subject to the same rules of construction as any
other contract. See Whirlpool Corp. v.
Ziebert, 197 Wis.2d 144, 152, 539 N.W.2d
883, 886 (1995). In construing policy provisions, the policy should be considered as
a whole. See Schaefer v. General Cas.
Co., 175 Wis.2d 80, 84, 498 N.W.2d 855, 856
(Ct. App. 1993). We therefore look at the language contained in the reimbursement
provision of the Bankers Life policy to determine whether it includes a right of
subrogation.
In paragraph (a), the Bankers Life policy states that it shall be reimbursed
"for any damages collected, whether by action at law, settlement or otherwise ...." It
goes on to state in paragraph (b) that "the Plan shall have a lien ... against the person
who's [sic] act caused the injury ... or a court having jurisdiction in the
matter."
(Emphasis added.) Finally, paragraph (c) contains the following broad subrogation
language: "the Plan requires the covered person to ... take no action prejudicing [its]
rights."
The first paragraph states that if it has made any payment on behalf of its
insured, it shall be reimbursed for any damages collected. The policy
further specifies
that this right of reimbursement exists whether the insured collects through a lawsuit,
settlement or otherwise. This broad language plainly establishes Bankers
Life's right
to be reimbursed by its insured if damages are collected from any other liable party.
In the next paragraph, Bankers Life reserves for itself another option.
It states that it may file a lien against the wrongdoer, an agent or a court having
jurisdiction in the matter. This last statement, a disjunctive, plainly reserves
Bankers
Life's right to bring an action against any potentially liable party. See
Dailey v. Secura
Ins. Co., 164 Wis.2d 624, 629, 476 N.W.2d 299, 301 (Ct. App. 1991)
("'Any party
who may be liable' is not limited to wrongdoers.").
Finally, in the last paragraph of this section, the policy includes broad
language prohibiting its insured from taking any action to prejudice its rights. This is
"boiler plate" language inserted to protect the company's subrogation rights. Reading
this section of the policy as a whole, we conclude that by its plain language, Bankers
Life has reserved a right of subrogation against any liable party.
American Family, however, argues that the Bankers Life policy language
"reserves a subrogation claim only for 'damages collected' against the 'person whose
act caused the injury.'" It offers a statement from Employers Health v.
General
Casualty Co., 161 Wis.2d 937, 469 N.W.2d 172 (1991), which it
contends defines
damages as "pecuniary compensation from a negligent act of another" and then reasons
that because it was only obligated to pay its insured under the UIM endorsement, these
monies paid are not "damages collected." We are unpersuaded by this characterization
of the court's language in Employers Health or by
American Family's reasoning.
The policy at issue in Employers Health
contained the phrase "recover
damages from a responsible third party." Id. at 945,
469 N.W.2d at 175. Within that
context, the court construed the entire phrase and arrived at its determination that this
language did not confer a right of subrogation against another insurer. "Damages" was
gratuitously defined in reference to the following phrase, "a responsible third party."
See id. at 946, 469 N.W.2d at
175-76. We agree with the statement in Bankers Life's
brief that the definition in Employers Health specifies
"what may be recovered, but is
neutral as to who may be liable."
We are also unpersuaded given American Family's narrow reading of the
language of the Bankers Life policy. While American Family's construction focuses
on two phrases in the reimbursement section, it ignores other equally pertinent language
that is part of the same section. We find the overlooked language to be particularly
applicable to the subrogation issue under the facts presented here.
Having concluded that by its plain language the Bankers Life policy
reserved a right of subrogation, we must yet consider the impact of the subrogation
exclusion clause in the American Family policy. The subrogation exclusion clause in
American Family's policy is plain and unambiguous, and not reasonably susceptible to
more than one construction by a reasonable person in the position of the insured.
See
Continental Cas., 181 Wis.2d at 133, 510 N.W.2d at
745. The task before us is to
decide which policy language prevails. See WEA Ins.
Corp. v. Freiheit, 190 Wis.2d
111, 117, 527 N.W.2d 363, 365 (Ct. App. 1994).
In WEA Insurance, this court determined that
language which prohibited
the insured from impairing the insurer's subrogation rights at any time was
sufficient
to preserve an insurer's right of subrogation. See
id. at 120, 527 N.W.2d at 366-67.
This was true, irrespective of a conflicting uninsured motorist policy exclusion.
See id.
While the court acknowledged in that decision that the subrogation exclusion was in
direct conflict with the statute governing uninsured motorist coverage, § 632.32,
Stats., the court also determined that the subrogation exclusion was overcome by the
prohibition in the other policy which prevented the insured from impairing its
subrogation rights. See WEA Ins.,
190 Wis.2d at 119-20, 527 N.W.2d at 366-67.
In Demmer, 200 Wis.2d at 102, 546 N.W.2d
at 172, this reasoning was
extended and applied to a similar exclusion found within a UIM policy. This court
there determined that as in WEA Insurance, if the
insurer who is seeking subrogation
has a policy which "functionally recites" the preservation of its subrogation rights
without any time limitation, such language will prevail over subrogation exclusion
language in a conflicting policy. See
Demmer, 200 Wis.2d at 102-03, 546 N.W.2d at
172; see also WEA Ins., 190 Wis.2d
at 120, 527 N.W.2d at 367.
In the Bankers Life policy, an insured is required to "take no action
prejudicing such rights." This language recites no time limitation, and we conclude that
it is analogous to the language we upheld in WEA
Insurance and Demmer. The
Bankers Life policy has secured its subrogation rights as against the American Family
policy.
However, American Family contends that this analysis ignores the time-limiting
language it reads in the Bankers Life policy, where the section which includes
the paragraph prohibiting any interference with the company's subrogation rights begins
with the clause "[i]f a covered person is injured, and benefits are paid by this Plan."
American Family argues that this is a time limitation which parallels the time limitation
which we construed as disallowing a subrogation claim, and therefore requires our
decision to follow the reasoning of that case. Cf.
Continental Cas., 181 Wis.2d at 134-35, 510 N.W.2d
at 745-46.
The precise language we focused on in the Continental
Casualty case
was: "[Our insured] must do everything necessary to secure our rights and must do
nothing after 'loss' to impair them." Id. at
131, 510 N.W.2d at 744 (emphasis added).
The insured in that case had signed an agreement with a demolition company which
included a waiver-of-subrogation clause. See
id. After this separate contract was
executed and work began, the building was damaged in a fire caused by the demolition
company's negligence. After paying its insured, Continental Casualty attempted to
subrogate a claim against the demolition company's insurer. Focusing on the above-quoted
language, we held that when placed in opposition to the waiver-of-subrogation
clause, the Continental Casualty policy had failed to protect its subrogation rights in this
instance. See id. at 135, 510 N.W.2d
at 746.
American Family's argument now asks that we apply the rationale of
Continental Casualty to the Bankers Life policy and
construe its language protecting
its subrogation rights as a time-limited provision. We decline to do so. The fact that
the reimbursement section begins with a statement that it is applicable "[i]f a covered
person is injured, and benefits are paid by this Plan" does not operate as a time bar
negating the broad reach of the subsequent subrogation clause. We conclude that the
reasoning of WEA Insurance and
Demmer is instructive, and we construe the Bankers
Life language as analogous.
American Family also argues that Bankers Life has no claim for equitable
subrogation. In light of the foregoing, this issue is moot and will not be addressed.
See
State ex rel. Wis. Envt'l Decade v. Joint Comm., 73
Wis.2d 234, 236, 243 N.W.2d
497, 498 (1976).
As a final issue, American Family claims that the analysis that the
Bankers Life policy language prevails over its subrogation exclusion language "violates
its freedom to contract." American Family claims that "[t]o arbitrarily and capriciously
give effect to the terms of the Bankers Life policy while disregarding the terms of the
American Family policy violates American Family's constitutional right to contract."
We do not address this argument on several grounds. First, this argument
was not raised to the trial court, and therefore is waived. See
Wirth v. Ehly, 93 Wis.2d
433, 443-44, 287 N.W.2d 140, 145-46 (1980). Second, as should be apparent from the
foregoing analysis, the law in Wisconsin does not "arbitrarily and capriciously" give
effect to one insurer's policy in contravention of another. After examining the
conflicting policies in the instant case, we conclude that the subrogation rights outlined
in the Bankers Life policy must prevail.
By the Court.--Judgment affirmed.
1. The limits paid were $50,000 for liability and
$5000 for medical expenses.
2. Although the court granted the summary judgment
motion, Bankers Life was required to
await the outcome of the trial in order to determine whether its insured was made whole.
3. In its first issue, American Family disputes the
trial court's analysis, claiming that it
"engaged in a comparison of the insurance policies without first determining that Bankers
Life
was even entitled to subrogation." We find no error in the trial court's approach. While
Bankers Life claims a contractual right of subrogation, were we to find that no contractual
right existed, we would then be required to examine whether an equitable right of
subrogation
existed. Cf. Demmer v. American Family Mut. Ins.
Co., 200 Wis.2d 94, 98, 546 N.W.2d
169, 170-71 (Ct. App. 1996). This is the same analysis which the trial court employed.
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