WI Supreme Court upholds right to be made whole.

Byline: Tony Anderson

The state Supreme Court has shot down the notion that specific language in an insurance policy can make the insurer's subrogation rights superior to the insured person's right to be "made whole."

The court's June 21 decision in Ruckel v. Gassner, 00-2036, authored by Justice David T. Prosser, stated that, "an insured must be made whole before the insurer may exercise subrogation rights against its insured, even when unambiguous language in an insurance contract states otherwise."

The court's decision clarifies a question arising from two of the court's earlier decisions. The District IV Court of Appeals had certified the case to the high court noting a problem when trying to apply the Supreme Court's decisions in Garrity v. Rural Mut. Ins. Co., 77 Wis. 2d 537, 253 N.W.2d 512 (1977) and Rimes v. State Farm Mut. Auto Ins. Co., 106 Wis. 2d 263, 316 N.W.2d 348 (1982).

A statement within Garrity appeared to suggest that an insurer and insured could agree to give the insurer a superior subrogation right even though the insured had not been made whole, as long as the policy contained specific language to that effect. The more recent Rimes decision stated that no agreement could waive an insured person's right to be made whole before the insurance company's subrogation rights took effect.

Background

The current case arose when Justin Ruckel, 18, visited Troy Gassner's apartment, according to the court decision. Gassner recklessly handled a .44 caliber handgun, accidentally shooting Ruckel in the knee. Gassner was convicted of recklessly endangering a person's life by conduct that showed utter disregard for human life.

Although Gassner had no liability insurance, Ruckel was covered by his mother's insurance through the Mayville School District. The district maintained a self-funded group policy that was administered by Humana/Employers Health Insurance Company. Humana paid out $86,626 for Ruckel's medical expenses.

Ruckel sued Gassner for pain and suffering, past and future medical expenses, loss of income, permanent injury and punitive damages.

During the process Humana moved for a declaratory judgment, that it had a contractual right to repayment before Ruckel was made whole. The policy covering Ruckel contained a clause stating: "The Plan shall be repaid the full amount of the covered expenses it pays" and "[Humana's] right to repayment is, and shall be, prior and superior to the right of any other person or entity including...