                                                               2016 WI 59

                  SUPREME COURT              OF   WISCONSIN
CASE NO.:                 2014AP157
COMPLETE TITLE:           Dennis D. Dufour,
                                    Plaintiff-Appellant-Cross-Respondent,
                               v.
                          Progressive Classic Insurance Company and
                          Milwaukee Painters Local Union 781 Health Fund,
                                    Defendants,
                          Dairyland Insurance Company,
                                    Defendant-Respondent-Cross-Appellant-
                          Petitioner.

                             REVIEW OF A DECISION OF THE COURT OF APPEALS
                            (Reported at 364 Wis. 2d 757, 869 N.W.2d 169)
                                     (Ct. App. 2015 – Unpublished)

OPINION FILED:            July 6, 2016
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:            April 5, 2016

SOURCE OF APPEAL:
   COURT:                 Circuit
   COUNTY:                Dodge
   JUDGE:                 Brian A. Pfitzinger

JUSTICES:
   CONCURRED:
   CONCURRED/DISSENTED:   ABRAHAMSON, J. and BRADLEY, A. W., J. concur
   DISSENTED:             and dissent (Opinion filed).
  NOT PARTICIPATING:


ATTORNEYS:
       For        the     defendant-respondent-cross-appellant-petitioner,
there were briefs by Robert F. Johnson, Douglas M. Raines, and
von    Briesen      &     Roper,   S.C.,   Milwaukee   and   oral   argument   by
Douglas M. Raines.




       For the plaintiff-appellant-cross-respondent, there was a
brief by Jason F. Abraham, Kyra K. Plier, and Hupy and Abraham,
S.C., Milwaukee. Oral argument by Jason F. Abraham.
      There was an amicus curiae brief by Jesse B. Blocher and
Habush   Habush   &   Rottier    S.C.,     Waukesha,      on   behalf    of     the
Wisconsin Association for Justice. Oral argument by Jesse B.
Blocher.




      There was an amicus curiae brief by                 James A. Friedman,
Dustin B. Brown and Godfrey & Kahn, S.C., Madison on behalf of
the   Wisconsin   Insurance     Alliance    and     the    Property     Casualty
Insurers    Association   of    American.    Oral   argument     by     James    A.
Friedman.




                                     2
                                                                        2016 WI 59
                                                                NOTICE
                                                  This opinion is subject to further
                                                  editing and modification.   The final
                                                  version will appear in the bound
                                                  volume of the official reports.
No.   2014AP157
(L.C. No.    2011CV874)

STATE OF WISCONSIN                            :             IN SUPREME COURT

Dennis D. Dufour,

              Plaintiff-Appellant-Cross-Respondent,

      v.                                                             FILED
Progressive Classic Insurance Company and
Milwaukee Painters Local Union 781 Health Fund,                  JUL 6, 2016

              Defendants,                                          Diane M. Fremgen
                                                                Clerk of Supreme Court

Dairyland Insurance Company,

              Defendant-Respondent-Cross-Appellant-
              Petitioner.




      REVIEW of a decision of the Court of Appeals.                 Reversed.



      ¶1      PATIENCE    DRAKE   ROGGENSACK,        C.J.      We      review       an

unpublished decision of the court of appeals,1 affirming in part

and reversing in part the summary judgment granted by Dodge

County      Circuit   Court   relative   to   injuries      Dennis      D.    Dufour




      1
       Dufour v. Progressive Classic Ins. Co., No. 2014AP157,
unpublished slip op. (Wis. Ct. App. July 16, 2015).
                                                                                  No.     2014AP157



(Dufour) suffered in an accident for which Dufour was not at

fault.2

     ¶2        Dufour,       the    insured      of     Dairyland       Insurance         Company

(Dairyland), sustained bodily injury and property damage while

operating his motorcycle.               The tortfeasor's insurer paid Dufour

its bodily injury policy limit of $100,000, and Dairyland paid

Dufour $100,000 as its underinsured bodily injury policy limit.

The parties agree that Dufour's bodily injury damages were in

excess    of    $200,000.           Under       another    provision         of    Dairyland's

policy, it also paid Dufour $15,589.86 for 100% of the property

damage to his motorcycle.                  After paying Dufour all proceeds to

which he was entitled under the                         Dairyland       policy,         and after

Dufour    had       settled     with    the      tortfeasor's       insurer,            Dairyland

sought and obtained subrogation from the tortfeasor's insurer

for the property damages                that it          previously       paid to Dufour.

Dufour demanded Dairyland pay him the funds it obtained on its

subrogation         claim,    and    Dairyland          refused.        Dufour          then   sued

Dairyland for breach of contract and bad faith.
     ¶3        The central issue before us is whether Dairyland is

entitled       to    retain     funds      it    obtained        from    the      tortfeasor's

insurer    for       property       damages          Dairyland    paid       Dufour       because

Dufour's bodily injury damages exceed both policies' limits for

bodily injury.          More specifically, we must determine whether the

made whole doctrine applies to preclude Dairyland from retaining

     2
       The          Honorable      Brian        A.    Pfitzinger        of     Dodge       County
presided.


                                                 2
                                                                              No.        2014AP157



its   subrogation          award       in    this    instance.         We    also       consider

whether Dairyland acted in bad faith by refusing to turn over to

Dufour the funds it obtained as a result of its subrogation

claim.

      ¶4     We    conclude        that       the    made    whole    doctrine         does    not

apply to preclude Dairyland from retaining the funds it received

from its subrogation claim because the equities favor Dairyland:

(1) Dairyland fully paid Dufour all he bargained for under his

Dairyland policy, which included the policy's limits for bodily

injury and 100% of Dufour's property damage; (2) Dufour had

priority in settling with the tortfeasor's insurer; and (3) if

Dairyland had not proceeded on its subrogation claim, Dufour

would      have    had      no     access       to    additional        funds          from    the

tortfeasor's insurer.               We further conclude that Dairyland did

not act in bad faith with respect to Dufour's demand for the

funds Dairyland obtained as subrogation for the property damages

it paid Dufour.            Accordingly, we reverse the court of appeals

decision in all respects.
                                       I.     BACKGROUND

        ¶5   On August 6, 2011, Dufour sustained bodily injury and

property      damage        in     a        motorcycle       accident       for        which    an

underinsured motorist was at fault.                         Dufour's Dairyland policy

included     a    bodily     injury         limit    of     $100,000    for       underinsured

motorists        and   a   separate          property       damage    limit       of    $40,000.

American     Standard        Insurance          Company       of     Wisconsin         (American

Standard) insured the tortfeasor, with a bodily injury limit of
$100,000.
                                                 3
                                                              No.     2014AP157



     ¶6     As a result of the accident, Dairyland paid Dufour

$100,000    as   its   underinsured    motorist   bodily     injury    policy

limit.     American Standard also paid Dufour $100,000 pursuant to

its bodily injury policy limit.           It is undisputed that Dufour's

bodily injuries arising out of the accident were in excess of

$200,000.    In addition to bodily injury proceeds, Dairyland paid

Dufour $15,589.86, which was agreed upon as the full amount of

property damage Dufour sustained.3

     ¶7     After   Dairyland   and   American    Standard    paid    Dufour,

Dairyland    sought    subrogation    from   American   Standard      for   the

property damages it paid to Dufour.           Dufour's Dairyland policy

included a subrogation clause that provided, "[a]fter we have

made payment under this policy and, where allowed by law, we

have the right to recover the payment from anyone who may be

held responsible."       American Standard paid Dairyland $15,559.86

on this subrogation claim.4

     ¶8     Dufour contacted Dairyland, requesting payment of the

funds it received on its subrogation claim, based on Wisconsin's
made whole doctrine.      His request stated in relevant part:

     Dennis Dufour[] is entitled to the full amount
     recovered for property damage by Dairyland Insurance
     from American [Standard].  Valley Forge Insurance Co.

     3
       Some portions of the record indicate that the settlement
was in the amount of $15,589.85.
     4
       The record is unclear as to why Dairyland received $30
less than the property damage amount that it paid to Dufour.
Both parties acknowledge this discrepancy, and it is unimportant
to our decision.


                                      4
                                                                      No.    2014AP157


    v. Home Mutual Insurance Co., 133 Wis. 2d 364, 396
    N.W.2d 348 ([Ct. App.] 1986) held that an insurer of
    an automobile accident victim was not entitled to
    subrogation for property damage paid to victim, when
    the insured is not fully compensated for his damages.
    This ruling follows longstanding law in Wisconsin
    regarding subrogation, see Garrity v. Rural Mutual
    Insurance Co., 77 Wis. 2d 537, 253 N.W.2d 512 (1977)
    and Rimes v. State Farm Mutual Automobile Insurance
    Co.,   106  Wis. 2d   263,  316   N.W.2d  348   (1982).
    Subrogation is to be allowed only when the insured is
    compensated in full by recovery from the tortfeasor.
Dufour's     December 2,     2011   letter      to    Dairyland.            Dairyland

responded to Dufour's request, disputing that he was entitled to

further payments from Dairyland:

    Mr. Dufour has been paid all limits to which he is
    entitled.    Mr. Dufour has no right to Dairyland
    Insurance's claim for subrogation related to property
    damage. Accordingly, we are denying your claim.
Dairyland's March 13, 2012 letter to Dufour.

    ¶9     Based    on     Dairyland's     refusal,         Dufour    amended     his

complaint,     alleging     that    Dairyland        breached    its        insurance

contract and acted in bad faith by unreasonably failing to turn

over the funds it received in subrogation.                    Relying on Valley
Forge, the circuit court granted Dufour's motion for summary

judgment with respect to turnover of the funds from Dairyland's

subrogation    claim.       However,     the   circuit       court    agreed     with

Dairyland with respect to bad faith, concluding that Dairyland

did not unreasonably withhold the funds.

    ¶10    Both    parties    appealed,        and    the     court    of     appeals

affirmed   the    circuit    court's     grant       of   Dufour's     motion     for

summary judgment because it concluded that Dufour had not been
made whole for his bodily injuries and, therefore, Dairyland was

                                       5
                                                                  No.   2014AP157



not entitled to retain the funds it obtained as subrogation.5

Further, the court of appeals held that Dairyland acted in bad

faith in light of its obligations under the made whole doctrine

and remanded for a determination of damages for Dufour's bad

faith claim.6

      ¶11    We granted Dairyland's petition for review.

                                  II.   DISCUSSION

                            A.    Standard of Review

      ¶12    We review grants of summary judgment independently,

applying the same methodology as the circuit court and the court

of appeals, while benefitting from their analyses.                 Preisler v.

Gen. Cas. Ins. Co., 2014 WI 135, ¶16, 360 Wis. 2d 129, 857

N.W.2d 136.        "The standards set forth in Wis. Stat. § 802.08 are

our guides."         Id.    Summary judgment "shall be rendered if the

pleadings,         depositions,     answers      to    interrogatories,       and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of law."
Wis. Stat. § 802.08(2) (2013-14).

      ¶13    Our review requires us to determine the applicability

of   the    made    whole   doctrine    to    funds   Dairyland   recovered   in

subrogation from American Standard.              This is a question of law




      5
          Dufour, unpublished slip op., ¶26.
      6
          Id., ¶36.


                                          6
                                                                                     No.     2014AP157



that we review independently.                        Muller v. Society Ins., 2008 WI

50, ¶20, 309 Wis. 2d 410, 750 N.W.2d 1.

                                           B.    Subrogation

       ¶14    Dairyland's              insurance         policy     expressly              provides:

"[a]fter      we    have       made        payment      under    this     policy       and,    where

allowed by law, we have the right to recover the payment from

anyone who may be held responsible."                            Accordingly, we determine

whether,      because          Dufour       was    not    made     whole       for    his     bodily

injury,      Dairyland          is     precluded        by   law   from        retaining       funds

American Standard paid to it as subrogation for the property

damages Dairyland paid to Dufour.                               Prior to undertaking our

discussion         of     the        made       whole    doctrine's        applicability           to

Dufour's      claim,          we     first       address     the    law        of    subrogation,

generally.

                         1.    General subrogation principles

       ¶15    Subrogation             is    the    "substitution          of    one        party   for

another whose debt the party pays, entitling the paying party to

rights, remedies, or securities that would otherwise belong to
the debtor."             Black's Law Dictionary 1563-64 (9th ed. 2009).

Contractual        subrogation             and    equitable       subrogation          both    exist

under Wisconsin law.7                 Jindra v. Diederich Flooring, 181 Wis. 2d

579,       601,    511        N.W.2d       855    (1994).          With        either       type   of


       7
       Contractual   subrogation   has  been   referred   to   as
"conventional subrogation."    Jindra v. Diederich Flooring, 181
Wis. 2d 579, 601, 511 N.W.2d 855 (1994). Equitable subrogation
has been referred to as "common law subrogation."      Garrity v.
Rural Mut. Ins. Co., 77 Wis. 2d 537, 541, 253 N.W.2d 512 (1977).


                                                    7
                                                                            No.   2014AP157



subrogation, equities affect the asserted right to subrogation

when it is presented by an insurance company.                        Garrity v. Rural

Mut. Ins. Co., 77 Wis. 2d 537, 540-41, 253 N.W.2d 512 (1977).

Recently,    we    summarized     subrogation       in     an    insurance        context

where we applied equitable principles to a contractual right of

subrogation:

      [S]ubrogation is a purely derivative right that
      permits   an  insurer   who   has been  contractually
      obligated to satisfy a loss created by a third party
      to step into the shoes of its insured and to pursue
      recovery from the responsible wrongdoer. . . .    The
      doctrine of subrogation enables an insurer that has
      paid an insured's loss pursuant to a policy of
      property insurance to recoup that payment from the
      party responsible for the loss.
Muller, 309 Wis. 2d 410, ¶22 (internal citations omitted).8

      ¶16    Subrogation    avoids        unjust     enrichment              because     it

precludes     double    payment     for       the   same        loss.         Id.,     ¶29.

Moreover, "[s]ubrogation rests upon the equitable principle 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

has   paid   and   be   subject    to   the     defenses        of    the    wrongdoer."
Garrity, 77 Wis. 2d at 541.               Therefore, subrogation balances

equities     between     parties    by        precluding        the     insured        from

recovering twice for the same loss while compelling payment by



      8
       Mullers' contract with Society contained a subrogation
clause with language providing for recoupment of payment by
Society.   Muller v. Society Ins., 2008 WI 50, ¶71, 309 Wis. 2d
410, 750 N.W.2d 1.


                                          8
                                                                             No.    2014AP157



the   tortfeasor        who    caused     the      harm     in    the     first    instance.

Muller, 309 Wis. 2d 410, ¶24.

      ¶17   Further,          we    repeatedly       have        emphasized       the    fact-

specific and equitable nature of subrogation.                             See, e.g., id.,

¶26   (recognizing        that      subrogation        is    "heavily       influenced      by

particular facts"); Vogt v. Schroeder, 129 Wis. 2d 3, 12, 383

N.W.2d 876 (1986) (stating that "subrogation is an equitable

doctrine and depends upon a just resolution of a dispute under a

particular       set     of        facts");        Rimes,    106        Wis. 2d     at     271

(acknowledging          that       "subrogation        is    based        upon     equitable

principles").

      ¶18   We    have        identified       three      non-exhaustive,          equitable

principles that may affect subrogation:                       "(1) ensuring that the

plaintiff is fully compensated for loss; (2) preventing unjust

enrichment;      and     (3)        ensuring       that     the    wrongdoer        is   held

responsible for his conduct and not allowed to go scot-free by

failing to respond to damages while another, the plaintiff's

insurer, is required to do so."                      Muller, 309 Wis. 2d 410, ¶60
(citing Vogt, 129 Wis. 2d at 13).                      We now turn to discuss the

made whole doctrine both generally and in some detail.

                               2.    Made whole doctrine

                              a.    made whole, generally

      ¶19   Ensuring that the insured is fully compensated for his

loss is the essence of the made whole doctrine.                           Namely, "equity

provides that subrogation ordinarily does not arise until the

underlying       debt     or       loss   has      been     paid     in     full.        This
'antisubrogation rule' is known as the made whole doctrine."
                                               9
                                                                               No.    2014AP157



Id., ¶25 (citations omitted).                 The made whole doctrine attempts

to "[b]alanc[e] the insurer's right to recoup benefits it has

paid against an insured's right to obtain full compensation."

Id.

       ¶20    Our decisions demonstrate that the made whole doctrine

is but one consideration in determining whether an insurer is

entitled to subrogation.                 Vogt, 129 Wis. 2d at 13 (recognizing

"distinct      and    separate          equitable     polic[ies]"         in    considering

subrogation); Muller, 309 Wis. 2d 410, ¶60 ("[T]he made whole

doctrine is not applicable in all situations, and thus the test

of 'wholeness' stated in Rimes is not the sole criterion for

determining         whether        an    insurer    may     pursue     its      subrogation

interest").           Stated        otherwise,      an     insurer     is       not    always

precluded      from    retaining          funds    obtained       as   subrogation          for

payments the insurer previously made simply because the insured

has    not    been    fully       compensated      for     the    loss.        Rather,      the

specific      facts    and     equities       dictate      whether     the      made    whole

doctrine will apply to prevent an insurer from retaining funds
received for its subrogation claim.

                             b.     made whole, in detail

       ¶21    Because Garrity and Rimes are the foundation of the

made whole doctrine, it is important to understand what they say

and    why,    as    well     as    to    recognize       the    issues    they       did   not

address.       The made whole doctrine embodies the principle that,

"[o]rdinarily, subrogation does not arise until the debt [to the

injured party] has been fully paid."                        Garrity, 77 Wis. 2d at
541.    We explained in Garrity that the insurer "has no share in
                                              10
                                                                        No.     2014AP157



the recovery from the tort-feasor if the total amount recovered

by the insured from the insurer does not cover his loss."                              Id.

at 544.    In Rimes, we also said:

    The purpose of subrogation is to prevent a double
    recovery by the insured. Under circumstances where an
    insured has received full damages from the tortfeasor
    and has also been paid for a portion of those damages
    by the insurer, he receives double payment——he has
    been made more than whole.         Only under those
    circumstances is the insurer, under principles of
    equity, entitled to subrogation.
Rimes, 106 Wis. 2d at 272.

    ¶22     Subsequent       to   our   initial       setting    out    of     the    made

whole    doctrine,     we    recognized        that   both      Garrity       and    Rimes

presented    the    same     factual     scenario      where     equity       drove   our

conclusion that the made whole doctrine applied.                   We explained:

    The circumstances in each of those cases were
    substantially the same, and therefore the subrogation
    problem posed in each was subject to resolution by
    applying the same equitable principle to the facts——
    that the insured had a right to be made whole, but no
    more than whole.      Hence, the insurer was to be
    subrogated only if further recovery would do more than
    make the insured whole.
Vogt, 129 Wis. 2d at 13.

    ¶23     It   is   important     to    note      that   in    both     Garrity      and

Rimes,     the     insurer    attempted        to     exercise     its        claim    of

subrogation against funds that otherwise would have gone to its

insured.    Id. at 14.       Therefore, if the insurer had prevailed on

its subrogation claim, the insured would not have been paid all

that he had contracted to receive under his own policy.                               The
issue in Garrity and Rimes may be summarized as one of priority:


                                          11
                                                                              No.     2014AP157



there was a limited pool of funds available, and the issue was

whether the insurer or the insured enjoyed priority to those

funds for which they were competing.                  Id. at 14-15.

       ¶24    For example, in Garrity, the insureds' barn sustained

damages due to a negligently operated truck, and the insureds

sought proceeds under both their own policy and the tortfeasor's

policy.9      Garrity, 77 Wis. 2d at 539.                 The insureds recovered the

policy       limit    under     their      own     policy,       $67,227.12;         however,

damages       to     the     barn   were     in     excess       of       $100,000.          Id.

Accordingly,         the     insureds   also       required       proceeds         under     the

tortfeasor's         insurance      policy,       which    had        a   policy     limit   of

$25,000, as they attempted to cover their loss.                            Id. at 543.

       ¶25    The insurer asserted a subrogation claim against the

tortfeasor's         policy    limit    of    $25,000       to    recoup      part     of    the

$67,227.12 that it had paid to its insureds.                                Id. at 540-41.

Consequently, permitting the insurer's subrogation claim would

have       reduced     the     insureds'         recovery        by       $25,000,    thereby

increasing the amount by which the insureds were not made whole.
See Vogt, 129 Wis. 2d at 14-15.                   In concluding that the insureds

maintained priority to the tortfeasor's $25,000 policy limit for

which the insurer was competing, we stated that, "where either

the insurer or the insured must to some extent go unpaid, the

loss should be borne by the insurer for that is a risk the

insured has paid it to assume."                  Garrity, 77 Wis. 2d at 542.

       9
       Both the insured and the tortfeasor maintained insurance
policies with the same insurance company.


                                             12
                                                                    No.    2014AP157



     ¶26    Rimes        involved     an   automobile    accident     where     the

insured sustained damages in excess of $300,000.                      Rimes, 106

Wis. 2d at 264-65.             The insured received $9,649.90 from its

insurer, State Farm Automobile Insurance Company, under medical-

pay policy provisions in two State Farm policies, each with a

$5,000    limit.         Id.   at   265-66.        Subsequently,    the     insured

stipulated    to     a     $125,000     settlement     with   the   tortfeasors'

insurers,    which       amount     included      $9,649.90   for   medical-pay.

Rimes was paid all but $9,649.90, which amount was paid into

court subject to State Farms' subrogation claim.                Id. at 267.

     ¶27    The     circuit     court      held   a   mini-trial    on     damages,

finding Rimes' total damages were $300,433.54, of which past

medical expenses were $26,560.70.10               Id. at 268-69.     In applying

the made whole doctrine to preclude the insurer from accessing

funds for which it was competing with its own insured, we stated

that, "[u]nder Wisconsin law[,] the test of wholeness depends

upon whether the insured has been completely compensated for all

the elements of damages, not merely those damages for which the
insurer has indemnified the insured."                 Id. at 275.         In Rimes,

the insured was not made whole for either medical-pay damages or

for personal injury damages.                Therefore, the insured was not

required to disgorge amounts for which he was indemnified by his

insurer.    Id. at 276.


     10
       This type of evidentiary hearing on damages has become
known as a Rimes hearing or a made whole hearing.    Schulte v.
Frazin, 176 Wis. 2d 622, 627, 500 N.W.2d 305 (1993).


                                           13
                                                                                         No.           2014AP157



       ¶28    We subsequently clarified that the broad statements

from    Garrity         and    Rimes          were      to     be     applied          only       when      the

application of the made whole doctrine would yield an equitable

result.       Vogt, 129 Wis. 2d at 12.                             For example, in Vogt, the

insured, who was the injured party in an automobile accident,

suffered      damages          in     excess            of    the     tortfeasor's                insurance

policy's      $15,000          limit          of     liability.                 Id.     at        7.        The

tortfeasor's insurer offered to settle with the insured-injured

party for its $15,000 policy limit in exchange for a release of

the tortfeasor and the tortfeasor's insurer from any further

liability.          Id.       at    8.        Because          the    insured-injured                  party's

damages exceeded the tortfeasor's $15,000 limit of liability,

the insured also was entitled to recover under his own policy's

$50,000      underinsured            motorist           coverage.               Id.      The       insured-

injured party's insurer refused to approve the settlement and

release without preserving its right to subrogation, and the

matter came before the circuit court for resolution.                                          Id.

       ¶29    We    explained            in    Vogt       that       our    central          inquiry        was
"[w]hether         an   automobile            insurer         which        by    the    terms          of   its

contract pays its own insured under the underinsured motorist

coverage has a right of subrogation against the tortfeasor . . .

once a payment has been made to its own insured."                                       Id. at 15-16.

In    answering         this       question        in        the    affirmative,             we     noted     a

"distinct and separate equitable [principle]" that is important

when considering how the made whole doctrine is to function.

Id.    at    13.        Specifically,              we     concluded         that       the    tortfeasor


                                                     14
                                                                                No.     2014AP157



should be held "responsible for his conduct and not [] allowed

to go scot-free by failing to respond in damages."                              Id.

       ¶30    Notably, the issue in Vogt was not the same as the

issue of priority that was presented in Garrity and Rimes where

subrogation would have operated to reduce the insured's recovery

to which he was entitled under his own policy.                              See id. at 15.

Rather,      in    Vogt,   there    was        no    competition,         and    the    insured

maintained priority to all proceeds to which he was entitled

under the tortfeasor's policy limit, as well as under his own

policy.      Id. at 17-18.         In such a situation, it would have been

inequitable to allow the insured unilaterally to prevent his

insurer      from    seeking       subrogation             from    the    tortfeasor,        and

thereby      hold   the    tortfeasor          accountable         if    subrogation        would

have no discernible effect on the insured's recovery.                                   See id.

at 17-19.          Consequently, we declined to apply the made whole

doctrine to prevent the insurer from seeking subrogation from

the tortfeasor.        Id. at 19.

       ¶31    In     Mutual     Service,             we      further       explained         the
independent nature of subrogation claims and their connection to

the made whole doctrine.             We clarified that an insurer who pays

a claim to its insured for which a tortfeasor is responsible has

a derivative, but separate claim against the tortfeasor and the

tortfeasor's         insurer.            "In        such     a     situation,          we   have

characterized the interests of the insurer and the insured as

each    owning      separately       a     part       of     the    claim       against      the

tortfeasor."        Mut. Serv. Cas. Co. v. Am. Family Ins. Grp., 140
Wis. 2d 555, 561, 410 N.W.2d 582 (1987).
                                               15
                                                                           No.    2014AP157



       ¶32   In   Mutual     Service,     we     held       that    when    an     insurer

maintains a separate subrogation claim against the tortfeasor,

the made whole doctrine as articulated in Garrity and Rimes is

inapplicable if the claim is              "brought by a subrogated insurer

against the tortfeasor or the tortfeasor's insurer where the

subrogated      insurer's    insured     has     previously        settled       with   the

tortfeasor."      Id. at 563-64.         As with Vogt, we did not apply the

made    whole     doctrine      to    preclude        the    insurer's       claim      for

subrogation.          See id.        It is important to note that in the

absence of the insurer's success on its subrogation claim, there

would not have been any funds that the insured could seek to

collect after having recovered under her own policy as well as

under the settlement agreement with the tortfeasor.                              See id.;

see also Vogt, 129 Wis. 2d at 17-19.

       ¶33   In Schulte v. Frazen, 176 Wis. 2d 622, 500 N.W.2d 305

(1993), a medical malpractice action, we examined a settlement

that   permitted       Schulte,      through    an     indemnification           agreement

among Schulte, the tortfeasor and the tortfeasor's insurer, to
unilaterally defeat the insurer's subrogation claim against the

tortfeasor      and    his   insurer.          Id.    at    625.      There,       Schulte

received $90,000 in medical payments from her insurer, Compcare

Health Services Insurance Corporation.                     Id. at 625-26.         Schulte

then settled with the tortfeasor and the tortfeasor's insurer

for $2,460,000.        Id. at 626.       As part of the settlement, Schulte

agreed to indemnify the tortfeasor and the tortfeasor's insurer

for    any   further     liability       they        incurred      from    the    medical
malpractice.      Id. at 626-27.
                                          16
                                                                No.   2014AP157



      ¶34   Schulte   then     moved        to   extinguish         Compcare's

subrogation lien and requested a Rimes hearing.               Id.   Because of

the indemnification agreement, Compcare, who was not consulted

prior to Schulte's settlement, found itself in competition with

Schulte over the funds she had received.               Id. at 633-34 ("[A]n

indemnification agreement indirectly creates the prospect that

the insurer will be competing with its own insured.").

      ¶35   At the Rimes hearing, the circuit court found that

Schulte's   damages   were   between      $2,950,000    and   $4,790,000    and

therefore, Schulte had not been made whole by the settlement.

Id. at 627.    If Compcare prevailed on its subrogation claim that

arose from the $90,000 it paid Schulte in medical-pay, Schulte

would have been required to indemnify the tortfeasor for that

amount.     See id.    Therefore, the recovery to which she was

entitled under her own insurance policy would have been reduced

by $90,000, for which coverage Schulte had paid a premium.                  See

id.   Consequently, we concluded that the circuit court correctly

applied the made whole doctrine when it extinguished Compcare's
subrogation claim due to the indemnification agreement.                Id. at

633-35.

      ¶36   Most recently, we considered the applicability of the

made whole doctrine in Muller, where the pool of money available

was sufficient to fully satisfy the injured parties' losses and

the subrogation claim of their insurer.            The Mullers' property

was destroyed by a fire, resulting in damages of $697,981.58.

Muller, 309 Wis. 2d 410,       ¶5.        The Mullers' insurer, Society
Insurance, paid them $407,378.88, Society's policy limit.                  This
                                     17
                                                                   No.     2014AP157



payment left the Mullers uncompensated by $290,602.70.                    Id., ¶6.

The tortfeasor was          insured under a United Fire and Casualty

policy with a liability limit of $1,000,000.                 Id., ¶5.

       ¶37    Although the tortfeasor's United policy was sufficient

to cover the remaining loss, the insureds voluntarily settled

with the tortfeasor for $120,000.                 Id., ¶11.      The settlement

agreement      contained     no     indemnification     obligation        for    the

Mullers.       Id., ¶12.         Subsequently, Society and United settled

Society's subrogation claim for $190,000.              Id.     The Mullers then

argued that they were entitled to receive the remainder of their

loss from those funds, as they had not yet been made whole.

Id., ¶13.

       ¶38    We set forth the issue as follows:

       [W]hether an insurer may retain in full a subrogation
       settlement with a tortfeasor and a tortfeasor's
       insurer after its insureds have settled with the
       tortfeasor and the tortfeasor's insurer for an amount
       less than necessary to make the insureds "whole," even
       though the tortfeasor's insurance policy limits were
       sufficient to cover all claims, including those of
       both the insureds and the insurer.
Id., ¶2.       Given the equities created by the facts of the case,

we    did    not   apply   the    made   whole   doctrine,    which     would   have

deprived the insurer of its subrogation rights.                       Instead, we

held that Society had fulfilled all of its obligations under its

insurance policy by paying the Mullers' policy limits, by not

competing with the Mullers for a limited pool of funds and had

done nothing to otherwise reduce the Mullers' recovery.                         Id.,
¶4.


                                          18
                                                                           No.     2014AP157



       ¶39        Additionally, we acknowledged that an insurer has a

separate      subrogation         claim    against      the   tortfeasor,        which    the

insurer was entitled to pursue as long as it recognized the

priority of the insureds to available funds, which Society did.

Id., ¶72.

       ¶40        Even though the Mullers were not made whole,11 they

received all benefits under their own insurance policy for which

they bargained and all benefits from their settlement agreement

with the tortfeasor.                Id., ¶70.           Had Society chosen not to

pursue its subrogation claim, the Mullers would not have had

access       to    any   additional       monies    after     collecting     under       both

their       policy      with   Society     and    the   settlement       agreement       with

United.       Id., ¶86.          Therefore, we concluded that it would have

been inequitable to allow the Mullers to prevent their insurer,

Society, from retaining funds received on its subrogation claim

and "would discourage subrogees from pursuing their subrogation

rights."          Id.

       ¶41        We now consider the court of appeals' Valley Forge
decision, upon which both the circuit court and court of appeals

relied when denying Dairyland's retention of funds it recovered

in    subrogation         from    the     tortfeasor's        insurer.      There,        the

insured, Samuel McIlrath, was injured in an automobile accident

and   also        sustained      property    damage      to   his   vehicle.        Valley

Forge, 133 Wis. 2d at 366.                  McIlrath maintained a Valley Forge

       11
       There was no Rimes hearing, but the parties agreed that
Mullers were not made whole by the payments they received.


                                             19
                                                                            No.     2014AP157



automobile insurance policy with collision coverage, under which

Valley    Forge    paid     approximately         $6,000   for      property       damages.

Id. at 366-67.          The tortfeasor, Joseph E. Ropson, maintained an

insurance      policy     with    Home      Mutual,    which      provided        separate

policy limits for bodily injury and property damage.                                 Id. at

366.

       ¶42     Pursuant to the settlement agreement, Home Mutual paid

McIlrath and two passengers who were injured its bodily injury

policy    limits,       with    McIlrath      receiving    $25,000.           Id.        Home

Mutual also paid McIlrath $6,000 in property damage.                                 Id. at

366-67.      It was undisputed that McIlrath's bodily injury damages

exceeded $25,000 and that he was paid twice for his property

damage, once by Valley Forge and once by Home Mutual.                                Id. at

367,    369.       Further,      the       property    damage       payment       was    made

directly     to   McIlrath,       rather      than    to   Valley      Forge,       at   the

direction of McIlrath's attorney.                 The settlement agreement also

required McIlrath to indemnify Home Mutual from any claims made

against it or the tortfeasor by Valley Forge.                       Id. at 367.          This
placed Valley Forge's subrogation claim in direct competition

with the recovery of its insured.                    See Schulte, 176 Wis. 2d at

633-34.

       ¶43     Valley Forge sued Home Mutual, its insured, Ropson,

and    McIlrath,        asserting      a    subrogation      claim     based        on   its

previous       $6,000     property     damage      payment     to    McIlrath.           The

subrogation       claim    of    Valley      Forge     against       Home     Mutual     and

Ropson, if successful, would have taken $6,000 from McIlrath due
to    McIlrath's    indemnification           obligation     to      Home     Mutual     and
                                             20
                                                           No.        2014AP157



Ropson under the settlement agreement.         This would have caused

McIlrath's    first-party   claim   against   Valley   Forge     to    become

unfunded.12

     ¶44   Rejecting the insurer's claim to recoup the subrogated

property damage funds from its own insured through the operation

of the indemnification provision in the settlement agreement,

the court of appeals over simplified the issue as whether the

insurer or the insured should go unpaid, and concluded that "the

loss should be borne by the insurer for that is a risk the

insured has paid it to assume."          Valley Forge, 133 Wis. 2d at

369-70 (quoting Garrity, 77 Wis. 2d at 542).           In so doing, the

court of appeals overlooked the equities affecting Valley Forge

and whether McIlrath was entitled to pursue subrogated property

damage funds from Home Mutual in the first instance because he

had been fully paid for that claim by Valley Forge.13




     12
       A first-party claim in an insurance context is a claim
made by the insured on his contract of insurance with his
insurer, as distinguished from the situation in which a third
party sues an insurer. Brethorst v. Allstate Prop. & Cas. Ins.
Co., 2011 WI 41, ¶¶23-24, 334 Wis. 2d 23, 798 N.W.2d 467.
     13
       As we have explained, one cause of action may arise out
of an automobile accident, but it can contain two claims:    one
for property damage and one for personal injury. Borde v. Hake,
44 Wis. 2d 22, 29, 170 N.W.2d 768 (1969).      Subsequent to the
insurer's payment of the insured's property damage, the insurer
and its insured have common ownership of that claim. Id. at 28;
see also Heifetz v. Johnson, 61 Wis. 2d 111, 122, 211 N.W.2d 834
(1973) (withdrawing dicta from Borde relative to statute of
limitations effect of failing to name subrogated insurer).


                                    21
                                                                          No.    2014AP157



       ¶45   Moreover, the court of appeals missed the import of

the    indemnity    provision         in    the     settlement      agreement     to    the

equities that related to the insurer, even though in Vogt we

pointed out similar equitable issues to that which an indemnity

agreement can raise.            Instead of paying heed to what we had said

about the equities that affect subrogation, the court of appeals

dismissed our decision in Vogt as "inapposite" to the issues

presented in Valley Forge.              Id. at 369.

       ¶46   By so doing, the court of appeals failed to consider

the    equitable    bases       upon    which       we   refused    to    enforce      full

releases     of   the   tortfeasor          and    his    insurer    required     by   the

settlement offer in Vogt and how those equities would have been

implicated    as    the       court    of     appeals     considered     the    indemnity

provision of the settlement agreement in Valley Forge.                              As we

carefully     explained        in     Vogt,    when      the   insured    has   received

payment under his own policy and an opportunity to settle with

the tortfeasor and the tortfeasor's insurer, "a just result"

puts the ultimate burden on the tortfeasor, not on the insurer
who has paid a first-party claim in full under its contract with

its insured.       Vogt, 129 Wis. 2d at 19.

       ¶47   More specifically, in                 Vogt, we examined contentions

that    related    to     a    settlement          agreement    that     required      full

releases of the tortfeasor and his insurer by the injured party:

(1) payment to the injured party of $15,000, the tortfeasor's

policy limits; (2) release of the tortfeasor from any obligation

for damages he caused; and (3) termination of the insurer's
subrogation rights.             Id. at 8.           After balancing the equities
                                              22
                                                                               No.    2014AP157



among       the     parties,        we     did    not     terminate       the        insurer's

subrogation claim.             Rather, we offered the insurer the choice of

paying      its    insured's        first-party         claim    from    the    $50,000     of

underinsured motorist coverage14 and then pursuing the tortfeasor

for payment in subrogation or paying its insured's first-party

claim and accepting the settlement if the insurer determined

that    the   tortfeasor           was    not    collectable      and,    therefore,       not

worth pursuing.             Id. at 26.

       ¶48    Given the record before us, we were unsure whether the

tortfeasor was collectable; therefore, we remanded the matter to

the circuit court to give the insurer sufficient time to decide

how it would proceed.               Id.    Importantly, the balance we effected

did not put the insurer in competition with its own insured and

permitted the insurer to hold the tortfeasor responsible for the

damages he had caused.

                  3.     Application:       made whole or subrogation

       ¶49    We conclude that, given the facts presented in the

instant case, the made whole doctrine does not apply to preclude
Dairyland         from      retaining     funds       obtained    in    subrogation       even

though Dufour has not recovered all of his bodily injury damages

flowing from the accident.                  First, Dairyland fully paid Dufour

its bodily injury policy limit of $100,000 as well as 100% of

the     damage         to    his    motorcycle         under     its     property      damage


       14
       "There is nothing in the record to show the total amount
of damages to which Vogt may be entitled."   Vogt v. Schroeder,
129 Wis. 2d 3, 7, 383 N.W.2d 876 (1986).


                                                 23
                                                                          No.     2014AP157



provision.           As with Muller, these proceeds constituted every

dollar    to     which     Dufour    was    entitled    under      his     contract       of

insurance with Dairyland.               See Muller, 309 Wis. 2d 410, ¶70.

Had   Dufour      wished     to    insure    himself    against       greater      bodily

injury losses, he could have paid a higher premium for higher

policy limits.

       ¶50     Second, Dufour also had priority in recovering from

the tortfeasor's policy, as required by Garrity, wherein he was

paid the policy limit of $100,000 for bodily injury.                             Garrity,

77 Wis. 2d at 542-43.             Dairyland permitted Dufour to recover all

benefits to which he was entitled under both policies before it

pursued its separate subrogation claim against the tortfeasor's

insurer.        Third, by waiting until Dufour recovered all available

proceeds under both insurance policies, Dairyland was not in

competition with Dufour for a limited pool of funds.                            As Dufour

acknowledges, but for Dairyland's subrogation action against the

tortfeasor's         insurer,      Dufour    would     have   no      access      to     any

additional funds from either insurer.                    Consequently, allowing
Dairyland       to    seek   and    obtain    subrogation       had      no     effect   on

Dufour's recovery.           Muller, 309 Wis. 2d 410, ¶4.

       ¶51     Therefore,     the    equities      presented       favor      Dairyland,

which     has     wholly     fulfilled       its   contractual        obligations         to

Dufour.       Dufour purchased two types of insurance coverage that

are relevant here:            bodily injury and property damage.                       Each

coverage type gave rise to a separate premium, a separate policy

limit and a separate description of the kind of damage for which
it    would     indemnify     Dufour.         He   exhausted       his    underinsured
                                            24
                                                                     No.   2014AP157



motorist bodily injury policy limit and now is attempting to tap

into his property damage policy limit in order to satisfy his

remaining         bodily    injury    losses.        We    decline    to   rewrite

Dairyland's policy to provide for lump sum coverage where such

coverage was not contemplated by the parties.                        Brethorst v.

Allstate Prop. & Cas. Ins. Co., 2011 WI 41, ¶68, 334 Wis. 2d 23,

798 N.W.2d 467 (declining to rewrite insurance policy "to bind

an insurer to a risk which it did not contemplate and for which

it was not paid"); Maxwell v. Hartford Union High Sch. Dist.,

2012        WI   58,     ¶¶34-35,    341   Wis. 2d    238,     814    N.W.2d     484

(emphasizing importance of both insurers and insureds receiving

the    benefit      of   their   bargain   as   premiums     are   based   on   risk

assessment).           Although we are sympathetic to Dufour's personal

injuries for which he was not made whole, preventing an insurer

from pursuing its subrogation claim for property damage payments

under circumstances such as presented herein would not solve the

problem of underinsurance for personal injuries.15

       ¶52       Finally, although we have serious concerns about the
court of appeals decision in Valley Forge and caution against

its use, given our discussions in Vogt, subsequent cases and

herein, we do not overrule Valley Forge.                  The holding in Valley

Forge requires a settlement agreement whereby the injured party

becomes obligated to indemnify the tortfeasor and its insurer


       15
        Insurers would not proceed on their subrogation claims
were they not able to retain the funds awarded from those
claims.


                                           25
                                                                           No.    2014AP157



for   any     award     the        injured        party's     insurer       obtains      in

subrogation.       Such       an    agreement       sets    up    the   potential        for

competition for a limited pool of funds between the insurer and

its insured.       Schulte, 176 Wis. 2d at 633-34.                         There is no

indemnification agreement here, no potential competition for a

limited pool of funds and no potential to apply Valley Forge.

                                    C.   Bad Faith

      ¶53   A bad faith claim is a separate and distinct cause of

action from an insured claiming that the insurer breached its

insurance contract.           Brethorst, 334 Wis. 2d 23, ¶23.                    Bad faith

sounds in tort, not in contract, and it constitutes "a separate

intentional wrong, which results from a breach of duty imposed

as a consequence of the relationship established by contract."

Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 687, 271 N.W.2d 368

(1978).

      ¶54   In order to prevail on a bad faith claim, an insured

must establish three elements.                Brethorst, 334 Wis. 2d 23, ¶¶49,

65 (citing Weiss v. United Fire & Cas. Co., 197 Wis. 2d 365,
377, 541 N.W.2d         753 (1995) and Benke v. Mukwonago-Vernon Mut.

Ins. Co., 110 Wis. 2d 356, 362, 329 N.W.2d 243 (Ct. App. 1982)).

The insured must show all of the following:                        First, "that there

is no reasonable basis for the insurer to deny the insured's

claim for benefits under the policy."                       Id.    Second, "that the

insurer     knew   of    or    recklessly          disregarded       the    lack    of     a

reasonable basis to deny the claim."                   Id.        Third, "some breach

of contract by an insurer is a fundamental prerequisite for a


                                             26
                                                                                No.    2014AP157



first-party bad faith claim against the insurer by the insured."

Id., ¶65.

    ¶55     As    we     have    explained          above,     Dairyland        paid     Dufour

every    dollar     to    which        he    was        entitled     under      its     policy.

Therefore,       Dairyland      did     not       breach     its     insurance        contract.

That Dairyland sought and obtained subrogation for payments it

made to Dufour is not in contravention of the parties' contract.

Quite to the contrary, Dairyland's policy specifically provided,

"[a]fter    we    have    made     payment         under     this     policy      and,       where

allowed by law, we have the right to recover the payment from

anyone   who      may    be     held    responsible."                As    insurer      of    the

tortfeasor,      American       Standard          was    a   person       who   may    be     held

responsible      for     the    tortfeasor's            negligence        and   it    was     from

American       Standard         that        Dairyland          obtained         subrogation.

Accordingly, we conclude that Dairyland did not act in bad faith

by retaining the funds it obtained as subrogation.

                                  III.       CONCLUSION

    ¶56     We    conclude       that       the    made      whole    doctrine        does     not
apply to preclude Dairyland from retaining the funds it received

from its subrogation claim because the equities favor Dairyland:

(1) Dairyland fully paid Dufour all he bargained for under his

Dairyland policy, which included the policy's limits for bodily

injury and 100% of Dufour's property damage; (2) Dufour had

priority in settling with the tortfeasor's insurer; and (3) if

Dairyland had not proceeded on its subrogation claim, Dufour

would    have     had     no     access       to        additional        funds       from     the
tortfeasor's insurer.             We further conclude that Dairyland did
                                              27
                                                               No.   2014AP157



not act in bad faith with respect to Dufour's demand for the

funds Dairyland obtained as subrogation for the property damages

it paid Dufour.     Accordingly, we reverse the court of appeals

decision in all respects.

    By   the   Court.—The   decision   of   the   court   of     appeals   is

reversed.




                                  28
                                                            No.   2014AP157.ssa

    ¶57     SHIRLEY S. ABRAHAMSON, J.            (concurring in part and

dissenting in part).       The instant case focuses on the interplay

of subrogation and the made whole doctrine.           Subrogation enables

an insurance company that has paid its insured's loss pursuant

to its policy to recoup that payment from the party responsible

for the loss.1      The made whole doctrine limits an insurance

company's rights to subrogation in recognition of the injured

insured's   right   to   obtain   full    compensation     for    his    or   her

losses.

    ¶58     A tension exists between the two doctrines.

    ¶59     The made whole doctrine is an equitable limitation on

subrogation.     Indeed,    the   court    has    called   the    made    whole

doctrine "an antisubrogation rule."2             The made whole doctrine,

simply and generally stated, is "that there is no subrogation

until the insured has been made whole,"3 that is, an insurer may


    1
       Muller v. Society Ins., 2008 WI 50, ¶22, 309 Wis. 2d 410,
750 N.W.2d 1; see also Garrity v. Rural Mut. Ins. Co., 77
Wis. 2d 537, 541, 253 N.W.2d 512 (1977) ("Subrogation rests upon
the equitable principle 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 has paid and be subject to the
defenses of the wrongdoer.") (citations omitted).

     The subrogation provision in Dairyland's policy states:
"After we have made payment under this policy and, where allowed
by law, we have the right to recover the payment from anyone who
may be held responsible." Majority op., ¶7.
    2
        Muller, 309 Wis. 2d 410, ¶25.
    3
        Garrity, 77 Wis. 2d at 542.


                                    1
                                                        No.    2014AP157.ssa

not recover payments from the tortfeasor or the tortfeasor's

insurer until the insured has been compensated for all elements

of damages he or she sustained.

     ¶60   The   limitations   on   subrogation   imposed     by   the   made

whole doctrine exist to prevent the inequitable prospect of an

insurance company competing with its insured for funds when the

insured has indisputably not been made whole.4              The court has

explained:     "Where either the [insurance company] or the insured

must to some extent go unpaid, the loss should be borne by the

[insurance company] for that is a risk the insured has paid it

to assume."5

     ¶61   Numerous cases focus on the interplay of subrogation

and the made whole doctrine in a variety of fact situations.

Because the essence of the case law is that equitable principles

apply to subrogation and the made whole doctrine,6 these cases

turn on their specific facts.



     4
       Schulte v. Franzin, 176 Wis. 2d 622, 625, 500 N.W.2d 305
(1993).

     See Petta v. ABC Ins. Co., 2005 WI 18, ¶38, 278
Wis. 2d 251, 692 N.W.2d 639 ("Outside of situations where a
person has a competing claim with a subrogated insurer, the
equities will vary dramatically.").
     5
       Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 263,
276, 316 N.W.2d 348 (1982) (quoting Garrity, 77 Wis. 2d at 542).
     6
       Fischer v. Steffen, 2011 WI 34, ¶34, 333 Wis. 2d 503, 797
N.W.2d 501.


                                    2
                                                            No.   2014AP157.ssa

    ¶62     Although the case law is not easy to follow, certain

principles   are   very    clear:    Subrogation    and     the   made   whole

doctrine are equitable doctrines.          There is no subrogation until

an insured is made whole.       Subrogated insurance companies should

not compete with their insureds for limited settlement funds.

    ¶63     The undisputed facts here are that Dufour recovered

from the tortfeasor's insurance company, American Standard, and

his insurance company, Dairyland, a total of $200,000 for bodily

injuries stemming from a motorcycle accident.             This sum did not

cover Dufour's full losses for bodily injuries.

    ¶64     In   addition,     Dairyland    paid   Dufour     the     sum    of

$15,589.86, to compensate for damages to Dufour's motorcycle.

    ¶65     Based on this payment for damages to the motorcycle,

Dairyland sought reimbursement for the $15,589.86 from American

Standard.        Under    American   Standard's    policy     insuring      the

tortfeasor, American Standard was liable to the injured person

for property damage caused by American Standard's insured (the

tortfeasor).




                                     3
                                                                     No.    2014AP157.ssa

     ¶66     After Dairyland was reimbursed $15,589.86 by American

Standard, Dufour sought this $15,589.86 from Dairyland on the

grounds that he was not made whole.7

     ¶67     The issue in the instant case is who is entitled to

this $15,589.86——Dufour, or Dairyland, his insurance company——

given that Dufour has not been fully compensated for his bodily

injuries from the accident.

     ¶68     Contrary to the majority opinion's assertions, in the

instant    case,         the   insured   and       his   insurance         company   are

competing for a limited pool of funds that is not sufficient to

satisfy both the insured's losses and the insurance company's

subrogation interest.            An overriding concern of the made whole

doctrine     is    the    "inequitable       prospect    of    insurance      companies

attempting        to   take    the   funds    that    should    have   gone     to   the

insured."8        The majority opinion ignores this competition for the




     7
       An article refers to the three parties involved in
subrogation and the made whole doctrine as follows:          The
tortfeasor is referred to as the "loss-causer"; the injured
party is referred to as the "loss-victim"; and the loss-victim's
insurance company is referred to as the "loss-insurer."      See
Brendan S. Maher & Radha A. Pathak,           Understanding and
Problematizing Contractual Tort Subrogation, 40 Loy. U. Chi.
L.J. 49, 50 (2008). Although I do not use this terminology, I
find it descriptive and helpful.
     8
       Vogt       v.     Schroeder,    129       Wis. 2d 3,    14,   383     N.W.2d 876
(1986).


                                             4
                                                            No.   2014AP157.ssa

funds, but "[t]he practical competition between an insured and

the subrogated insurer is an equitable factor we cannot ignore."9

     ¶69     I dissent in part because I would affirm that part of

the decision of the court of appeals holding that the made whole

doctrine     applies   in   the   instant   case   and   that   Dairyland   is

barred from retaining the $15,589.86.              This result is just and

equitable under the circumstances.

     ¶70     Although "Wisconsin decisional law has done more to

influence the expansion of the made whole doctrine than that of

any other jurisdiction,"10 recent Wisconsin cases are chipping

away at the doctrine.        The majority opinion in the instant case

continues this process of chipping away and in so doing, fails

to clarify the already messy interplay between subrogation and




     9
          Schulte, 176 Wis. 2d at 633.
     10
       Johnny C. Parker, The Made Whole Doctrine:   Unraveling
the Enigma Wrapped in the Mystery of Insurance Subrogation, 70
Mo. L. Rev. 723, 771 (2005).


                                      5
                                                    No.   2014AP157.ssa

the made whole doctrine in Wisconsin.11    I disagree with chipping

away at the made whole doctrine.

     ¶71   I concur in part, however, because I agree with the

majority opinion's conclusion that Dairyland did not act in bad

faith when it denied Dufour's claim.      I do not agree with the

majority's discussion of this issue.      I conclude that Dairyland

had a reasonable basis "to conclude that [its insured's] claim




     11
       See Donald H. Piper & Terry J. Booth, Subrogation, in 3
The Law of Damages in Wisconsin § 32.22 (Russell Ware ed., 6th
ed. 2016) (stating that the scope of the made whole doctrine "is
not currently well defined" in Wisconsin); John J. Kircher,
Insurer Subrogation in Wisconsin: The Good Hands (Or a Neighbor)
In Another's Shoes, 71 Marq. L. Rev. 33, 72 (1987) (noting that
although "[m]uch water has passed over, under, around and
through the judicial dam since the supreme court articulated the
first principle affecting insurer subrogation in Wisconsin,"
"[c]larity has not always been the product of the courts'
decisions."); see also Jeffrey A. Greenblatt, Comment, Insurance
and Subrogation: When the Pie Isn't Big Enough, Who Eats Last?,
64 U. Chi. L. Rev. 1337, 1345, 1360 (1997) (discussing the
"messy difficulties of applying the made-whole doctrine," and
suggesting that "[e]ven defining the term 'made whole' is
difficult.").

     For discussions of subrogation and the made whole doctrine,
see, e.g., 4 New Appleman Law of Liability Insurance ch. 42
(Matthew Bender rev. ed., 2d ed. 2015); 16 Lee R. Russ & Thomas
F. Segalla, Couch on Insurance 3d, chs. 222-226 (2005); II
Arnold P. Anderson, Wisconsin Insurance Law ch. 10 (7th ed.
2015); 3 The Law of Damages in Wisconsin, ch. 32 (Russell Ware
ed., 6th ed. 2016); Maher & Pathak, supra note 7; Parker, supra
note 7; Greenblatt, supra, at 1345, 1360; Kircher, supra, at 72;
Matthiesen, Wickert & Lehrer, S.C., Made Whole Doctrine in All
50               States,              https://www.mwl-law.com/wp-
content/uploads/2013/03/made-whole-doctrine-in-all-50-states.pdf
(last updated Feb. 5, 2016)


                                   6
                                                              No.   2014AP157.ssa

is fairly debatable and that therefore payment need not be made

on the claim."12

     ¶72    Accordingly, I dissent in part, concur in part, and

write separately.

                                        I

     ¶73    I    begin   with    the   undisputed    facts    and   the   issue

presented.

     ¶74    Dennis Dufour was seriously injured in a motorcycle

accident.       Dufour's bodily injuries exceeded $200,000.            Dufour's

property damage, namely damage to his motorcycle, amounted to

$15,589.86.

     ¶75    Dairyland     paid    Dufour,   its   insured,     $100,000,     its

policy limit for underinsured motorist coverage, for his bodily

injuries.         American      Standard,   the     tortfeasor's      insurance

company, paid Dufour $100,000, its liability policy limit, for

his bodily injuries.

     ¶76    Dairyland also paid Dufour $15,589.86 for the damage

to his motorcycle.

     ¶77    As a result, Dufour received the full amount of his

property damage from his insurance company.                  Dufour has not,

however, received full compensation for his bodily injuries.                  He




     12
       See Brown v. LIRC, 2003 WI 142, ¶24, 267 Wis. 2d 31, 671
N.W.2d 279.


                                        7
                                                                     No.    2014AP157.ssa

has not been made whole for all bodily injuries he sustained in

the motorcycle accident.

     ¶78    After       paying     Dufour    its       $100,000    policy    limit      for

bodily injury and $15,589.86 for his property damage, Dairyland

sought and obtained in subrogation from American Standard, the

tortfeasor's         insurance     company,      $15,589.86——the       sum       Dairyland

paid Dufour for damage to his motorcycle.                       Obviously in paying

Dairyland $15,589.86, American Standard agreed that its policy

obligated       it    to     pay   Dufour        for    property     damage       to    his

motorcycle.

     ¶79    The central question presented in the instant case is

who is entitled to the $15,589.86 obtained by Dairyland from

American Standard: Dairyland or Dufour?                        The answer hinges on

whether Dufour has been "made whole," the general rule being

that "there is no subrogation until the insured has been made

whole,"13    in      light   of    the   equities        of   this   particular        fact

situation.

                                            II

     ¶80    I turn now to applying subrogation and the made whole

doctrine in the instant case.

     ¶81    A     premise     of   the   made      whole      doctrine,     as    we   have

previously stated, is that subrogation does not ordinarily arise

until the loss has been fully paid.                     When speaking of the loss

     13
          Garrity, 77 Wis. 2d at 542.

                                            8
                                                                          No.    2014AP157.ssa

in a tort case, "the loss" refers to all damages arising from a

single      occurrence.          Considering          all     damages    arising       from   a

single occurrence as "the loss" is in keeping with the rule that

a cause of action in tort includes all elements of damages.14

       ¶82    In the instant case, it is undisputed that Dufour has

not    been    made    whole      for     "all       the    elements     of     damages"      he

sustained      as   the      result      of   the         accident.      Dufour's      bodily

injuries exceeded the $200,000 he received.

       ¶83    Since     our      seminal      cases         applying     the    made     whole

doctrine,      Rimes    v.      State    Farm       Automobile        Insurance      Co.,   106

Wis. 2d 263, 275, 316 N.W.2d 348 (1982), and Garrity v. Rural

Mutual      Insurance     Co.,    77     Wis. 2d 537,          542-43,    253     N.W.2d 512

(1977), this court has made clear that the made whole doctrine

bars     subrogation         unless      "the       insured      has     been     completely

compensated for all the elements of damages, not merely those

damages for which the insurer has indemnified the insured."15

       ¶84    After this court decided Garrity and Rimes, the court

clarified the role of the equities in applying subrogation and

the made whole doctrine.                The court stated in Vogt v. Schroeder,

129    Wis. 2d 3,         12,     383     N.W.2d 876           (1986),        that     because


       14
        The cause of action against a tortfeasor is indivisible.
Muller, 309 Wis. 2d 410 (citing Garrity, 77 Wis. 2d at 542); see
also Caygill v. Ipsen, 27 Wis. 2d 578, 582-83, 135 N.W.2d 284
(1965).
       15
       Rimes, 106 Wis. 2d at                        275    (quoted     with     approval      in
Schulte, 176 Wis. 2d at 628).

                                                9
                                                                   No.   2014AP157.ssa

subrogation and the made whole doctrine are equitable doctrines,

and "[e]quity does not lend itself to the application of black

letter rules," the made whole doctrine as set forth in Garrity

and   Rimes    would    be    applied   only    when   it    leads   to    equitable

results.16

      ¶85     Relying on this language in Vogt, the majority opinion

concludes that even though Dufour has not been made whole for

"all elements of damages"——namely his bodily injuries——the made

whole      doctrine    does    not   apply     because      "the   equities     favor

Dairyland . . . ."17

      ¶86     The majority opinion relies on three non-exhaustive

equitable principles that may affect subrogation:18 (1) ensuring

that the injured person (here Dufour) is fully compensated for

the loss; (2) preventing the injured person (here Dufour) from

being unjustly enriched; and (3) ensuring that the tortfeasor is

held responsible for his conduct and does not get off scot-free

while another, here the injured person's (Dufour's) insurance


      16
       See Muller, 309 Wis. 2d 410, ¶44 ("'Hence, only under
fact situations where an equitable result will follow should the
statements quoted above [e.g., 'the conventionally subrogated or
contractual insurer has no share in the recovery from the tort-
feasor if the total amount recovered by the insured from the
insurer does not cover his loss' Garrity, 77 Wis. 2d at 544] be
applied literally.'") (quoting Vogt, 129 Wis. 2d at 12)
(alteration in original) (emphasis omitted).
      17
           See majority op., ¶4.
      18
           See majority op., ¶18 (quoting Muller, 309 Wis. 2d 410,
¶60).

                                         10
                                                                 No.   2014AP157.ssa

company (Dairyland), is required to pay for the tortfeasor's

conduct.

     ¶87    The majority opinion weighs the equities and permits

Dairyland to retain the $15,589.86 it obtained in subrogation

from American Standard, the tortfeasor's insurance company.19

     ¶88    I     also   weigh     the   equities.         Applying     the     three

equitable    principles     set     forth     by   the    majority     opinion,     I

conclude that the equities favor Dufour, not Dairyland (see part

A below).        I also disagree with the majority's reading of the

case law (see part B below).

                                         A

     ¶89    The equities favor Dufour, not Dairyland.

     ¶90    In    the    instant    case,     Dairyland     is   competing       with

Dufour, its insured, for a limited pool of funds.                   Dairyland and

Dufour are competing for the same $15,589.86 that the tortfeasor

(through his insurance company, American Standard) was liable

for under its policy as a result of the motorcycle accident.

     ¶91    The     made   whole     doctrine      is    designed      to     prevent

competition between the injured party and his or her insurance

company when the injured party's damages exceed the limited pool

of funds from which recovery may be had.                 The case law is clear:

When a limited pool of funds is insufficient to make the injured



     19
          See majority op., ¶56.


                                         11
                                                              No.    2014AP157.ssa

party whole, the loss should be borne by the injured party's

insurance company (here, Dairyland).20

       ¶92    That the insurance company (here, Dairyland) bears the

loss    rather    than    the   insured    (here,   Dufour)   when    funds   are

insufficient to pay the insured's entire damages is referred to

as the "recovery priority rule" or the "subrogation                     rule of

priority."21      The recovery priority rule establishes that Dufour,

the injured party, should be the first to tap into the limited

pool of funds and recover any uncompensated damages under the

made whole doctrine.

       ¶93    In acting on its subrogation rights to seek recovery

from the tortfeasor, Dairyland must recognize Dufour's priority

over the limited pool of available funds.              Because there was an

insufficient pool of funds to satisfy Dufour's entire claim,

Dufour takes priority over Dairyland in the allocation of these

funds; the made whole doctrine applies with full force.22

       ¶94    In sum, Dufour is entitled to recover in full any sums

payable      by   the    tortfeasor   before   Dufour's   insurance      company

could exercise any right of subrogation.              "Subrogation is to be

allowed only when the insured is compensated in full by recovery


       20
       See Muller, 309 Wis. 2d 410, ¶¶27-44; Rimes, 106 Wis. 2d
at 275-76; Garrity, 77 Wis. 2d at 542.
       21
       This principle was established by Garrity, 77 Wis. 2d at
542-43, and is repeated in Muller, 309 Wis. 2d 410, ¶¶28-32.
       22
            Muller, 2008 WI 50, ¶72, 309 Wis. 2d 410, 750 N.W.2d 1.

                                          12
                                                                  No.   2014AP157.ssa

from    the    tortfeasor."      Rimes,     106    Wis. 2d   at   272;    see    also

Garrity, 77 Wis. 2d at 542.23

       ¶95    I conclude that Dufour, the insured who has not been

made whole for his bodily injuries in a settlement with the

tortfeasor for the tortfeasor's policy limits, has priority over

Dairyland for the $15,589.86 paid by the tortfeasor's insurance

company for Dufour's subrogated property damage claim.                           As a

result,       Dairyland    should    not     be     permitted      to    keep     the

$15,589.86.

       ¶96    The three equitable principles outlined in Muller v.

Society Ins., 2008 WI 50, ¶60, 309 Wis. 2d 410, 750 N.W.2d 1,

and    set    forth   by   the   majority    opinion    favor     Dufour    in    the

instant case.         First, Dufour was not fully compensated for his

losses.       Second, Dufour will not be unjustly enriched if he

receives $15,869.86 from Dairyland.               There is no double recovery

here because Dufour has not been fully compensated for all his

losses.       Third, the tortfeasor (through his insurance policy) is

held responsible for his conduct regardless of whether Dufour or

Dairyland retains the $15,589.86.                 The tortfeasor has paid for


       23
       See Paulson v. Allstate Ins. Co., 2003 WI 99, ¶27 & n.3,
263 Wis. 2d 520, 665 N.W.2d 744 (Rimes and Garrity apply when
the "pie" is not big enough to completely satisfy the claims of
both the injured insured and its insurance company); Drinkwater
v. Am. Family Mut. Ins. Co., 2006 WI 56, ¶¶16-23, 290
Wis. 2d 642, 714 N.W.2d 568 ("Subrogation under circumstances
where the insured had not been made whole 'turn[s] the entire
doctrine of subrogation in its head.'") (citing Ruckel v.
Gassner, 2002 WI 67, ¶41, 253 Wis. 2d 280, 646 N.W.2d 11).

                                       13
                                                                  No.    2014AP157.ssa

the property damage he caused, and the tortfeasor's insurance

company    is    not   permitted      to    retain    the    funds    it   owes   for

Dufour's property damage.

     ¶97    In    sum,   this    case      is   not   a     dispute     between   the

tortfeasor and the injured party.               The dispute is between Dufour

and Dairyland, his insurance company; Dufour and Dairyland are

competing for the funds the tortfeasor owes and has paid under

his policy.

                                            B

     ¶98    Furthermore,        the        majority's       conclusion      favoring

Dairyland over Dufour is based on a mistaken reading of Valley

Forge     Insurance      Co.    v.    Home      Mutual      Insurance      Co.,   133

Wis. 2d 364, 396 N.W.2d 348 (Ct. App. 1986).24

     ¶99    In Valley Forge, the court of appeals concluded that

the equities favored the insured in a fact situation almost

identical to that in the instant case.




     24
       The majority opinion uses sentences from cases taken out
of context and, in my view, misreads several cases.    I do not
point out each problem in the majority opinion.        See, for
example, the majority opinion's discussion (at ¶¶32-33) of
Mutual Service Casualty Co. v. American Family Insurance Group,
140 Wis. 2d 555, 561, 410 N.W.2d 582 (1987). Mutual Service was
narrowed by Schulte, 176 Wis. 2d at 635-36.     Indeed, Justice
Steinmetz's dissent in Schulte objected to the decision on the
grounds that it "improperly violate[d] the doctrine of stare
decisis by rejecting the result and some of the reasoning
in . . . Mutual Service . . . .").


                                           14
                                                                   No.    2014AP157.ssa

       ¶100 The plaintiff in Valley Forge was injured in a car

accident.25       The plaintiff's insurance company, Valley Forge,

paid the plaintiff $6,000 for damage to his vehicle.26

       ¶101 The plaintiff then entered into a settlement agreement

with Home Mutual Insurance Company (the tortfeasor's insurance

company), whereby the plaintiff was paid $25,000 for his bodily

injuries and $6,000 for property damage to his vehicle.27                          The

plaintiff agreed to indemnify Home Mutual against any liability

Home    Mutual    incurred   as    a    result   of    the     settlement.28       The

plaintiff's bodily injuries exceeded the sum that he was paid.29

       ¶102 The     plaintiff's        insurance      company,     Valley      Forge,

asserted subrogation rights to (and requested payment of) the

$6,000 from Home Mutual (the tortfeasor's insurance company) to

avoid the possibility of a double recovery by the plaintiff.30

       ¶103 The Valley Forge court noted that although it appeared

that    the    plaintiff   was    receiving      a    double    recovery     for   his

property      damage,   there     was    no   double     recovery        because   the


       25
       Valley Forge Ins. Co. v. Home Mut. Ins.                              Co.,   133
Wis. 2d 364, 366, 396 N.W.2d 348 (Ct. App. 1986).
       26
            Valley Forge, 133 Wis. 2d at 366.
       27
            Valley Forge, 133 Wis. 2d at 366.
       28
            Valley Forge, 133 Wis. 2d at 367.
       29
            Valley Forge, 133 Wis. 2d at 367.
       30
            Valley Forge, 133 Wis. 2d at 366.


                                         15
                                                                        No.    2014AP157.ssa

plaintiff        was    not   made     whole        for    "'all    the       elements   of

damages . . . .'"31           According to Valley Forge, being made whole

depends     on    the   insured       being    completely       compensated       for    all

types     of     damages,       including      bodily        injuries     and     property

damage.32

     ¶104 Because         the    plaintiff         had    not   been    made    whole    for

"'all     the     elements       of    damages . . . ,'"            his       recovery    of

available        subrogated       property          damage      funds     was     not     an

impermissible double recovery.33

     ¶105 Valley Forge follows long-settled Wisconsin law that,

as a general rule, the subrogor (that is, the injured insured)

must be made whole before the subrogee (that is, the injured

insured's        insurance      company)      may    recover       anything      from    the

tortfeasor.34

     ¶106 Relying on Vogt's pronouncement that subrogation is an

equitable doctrine that "'depends upon a just resolution of a

dispute under a particular set of facts,'" the court of appeals

held that Valley Forge was not entitled to subrogation because



     31
       Valley Forge,            133    Wis. 2d       at   368   (quoting       Rimes,    106
Wis. 2d at 275).
     32
          See Valley Forge, 133 Wis. 2d at 368-69.
     33
       Valley Forge,            133    Wis. 2d       at   368   (quoting       Rimes,    106
Wis. 2d at 275).
     34
          Garrity, 77 Wis. 2d at 541; Rimes, 106 Wis. 2d at 272-73.


                                              16
                                                                 No.    2014AP157.ssa

the tortfeasor and Valley Forge together paid the plaintiff less

than the total loss the plaintiff suffered.35

     ¶107 Valley Forge concluded, as had previous cases, that

where either the insurance company or the injured insured has to

suffer a loss, the loss should fall on the insurance company.36

     ¶108 The majority opinion expresses "serious concerns about

the court of appeals decision in Valley Forge and caution[s]

against its use . . . ."37           Nevertheless, the majority opinion

declines to overrule Valley Forge.                 Instead it distinguishes

Valley Forge based on an overly narrow reading of the facts and

longstanding case law.38

     ¶109 I am not persuaded by the majority opinion's reading

of Valley Forge.           As the court of appeals recognized in the

instant    case,    "the    facts   before    us   here,    for    all     relevant

purposes, are identical to those in Valley Forge . . . ."39

     ¶110 In both Valley Forge and in the instant case the issue

is the same:       Do funds obtained from the tortfeasor's insurance

company    belong    to    the   injured    insured   or    to    the     insured's


     35
       Valley Forge,         133    Wis. 2d   at   369     (quoting      Vogt,   129
Wis. 2d at 12).
     36
          See Valley Forge, 133 Wis. 2d at 368.
     37
          Majority op., ¶52.
     38
          Majority op., ¶52.
     39
       Dufour v. Progressive Classic Ins. Co., No. 2014AP157,
unpublished slip op., ¶26 (Wis. Ct. App. July 16, 2015).

                                       17
                                                                  No.    2014AP157.ssa

insurance company when the insured has not been made whole for

all the elements of damages suffered?               At its core, the question

in   both    Valley   Forge    and    the   instant   case   is    who     ought    to

receive funds that are paid on behalf of the tortfeasor:                           the

injured person who has not been fully compensated for all his

losses, or his insurance company?

      ¶111 Valley Forge is applicable to the instant case because

it addresses who is entitled to the limited pool of funds by

applying the equitable subrogation and made whole doctrines.

      ¶112 Paulson v. Allstate Insurance Co., 2003 WI 99, ¶25,

263 Wis. 2d 520, 665 N.W.2d 744, confirmed that Valley Forge was

an example of impermissible competition between the insurer and

insured for a limited pool of funds:             "In Valley Forge . . . the

court of appeals held that a victim's insurer was not entitled

to subrogation where the victim recovered less than his total

loss.       Again, the situation was one of the insurer competing

with the insured for funds."

      ¶113 In Valley Forge, the insured was in possession of the

funds   furnished      by     the    tortfeasor's     insurance         company    for

property damage; in the instant case, Dairyland is in possession

of the funds furnished by the tortfeasor's insurance company for

property damage.

      ¶114 The Valley Forge decision is not contingent on who

possesses the limited pool of funds, but rather who is entitled

to the funds.
                                        18
                                                                           No.    2014AP157.ssa

      ¶115 As      in   Valley     Forge,      the     insured       and    the     insurance

company in the instant case are fighting over a limited pool of

money owed and supplied by the tortfeasor's insurance company.

By relying on the factual difference in the two cases regarding

possession of the pool of funds, the majority opinion elevates

form over substance.

      ¶116 The majority opinion attempts to distinguish                                 Valley

Forge by maintaining that, unlike the plaintiff in Valley Forge,

Dufour     had     no   access     to    any       additional    funds           from   either

insurance        company    "but        for    Dairyland's       subrogation            action

against the tortfeasor's insurer . . . .                      Consequently, allowing

Dairyland     to    seek    and    obtain       subrogation      had        no     effect     on

Dufour's recovery."40            But Dairyland did assert its subrogation

rights,     American       Standard       paid       the   sum       its     insured       (the

tortfeasor) owed Dufour, and the issue is who is entitled to

these funds.

      ¶117 The majority does not explain how, if Dufour had no

right to seek funds for property damage from the tortfeasor's

insurance     company,      Dairyland         could    seek    such    funds        from    the

tortfeasor's insurance company.                    After all, "subrogation confers

no greater rights on the subrogee [Dairyland] than the subrogor

[Dufour] had at the time of the subrogation . . . .                              Thus, where

one   acquires      a   right     by     subrogation,         that    right        is   not    a

      40
           Majority op., ¶50.

                                              19
                                                             No.   2014AP157.ssa

separate      cause   of   action    from      the   right    held     by    the

subrogor . . . . '[I]t is better to think of the insurer as an

assignee of part of the claim.'"41

      ¶118 In the instant case, Dufour's acceptance of payment

for   property    damage   from    Dairyland    does   not   operate    as    an

assignment to Dairyland of Dufour's claim for property damage

against the tortfeasor.           When the injured party has not been

made whole, the made whole doctrine trumps any assignment based

on the doctrine of subrogation.42           We stated this principle in

Muller v. Society Insurance, 2008 WI 50, ¶29, 309 Wis. 2d 410,

750 N.W.2d 1, as follows (citation and internal quotation marks

omitted):


      The cause of action against the tortfeasor is viewed
      as an indivisible claim, and the plaintiff [here,
      Dufour] holds this claim until he is given the
      opportunity to fully recover his loss.      Logically,
      this principle establishes the insured's priority over
      his insurer [here, Dairyland] in pursuing recovery,




      41
       Wilmot v. Racine Cnty., 136 Wis. 2d 57, 63-64, 400
N.W.2d 917 (1987) (citation omitted) (quoting         Heifetz v.
Johnson, 61 Wis. 2d 111, 120, 211 N.W.2d 834 (1973)); see also
Ruckel v. Gassner, 2002 WI 67, ¶27, 253 Wis. 2d 280, 646
N.W.2d 11 ("[U]nder basic principles of subrogation . . . , the
insurer is not entitled to recoup anything until the insured has
been made whole.") (citing Garrity, 77 Wis. 2d at 543-44).
      42
           Schulte, 176 Wis. 2d at 637.


                                      20
                                                               No.   2014AP157.ssa

    and the general rule [is] that there is no subrogation
    until the insured has been made whole.43

    ¶119 Dairyland asserts that allowing Dufour to retain the

$15,589.86 amounts to rewriting the insurance policy to provide

for a combined single coverage limit to make up for inadequate

bodily injury coverage.        This argument has superficial appeal

but on analysis is not convincing.

    ¶120 The   insured's    policy        is   not   being     rewritten.      No

combined single limit is imposed on Dairyland.                   Nothing about

the instant case requires that insurance funds covering one type

of loss (e.g., property damage) be paid for another type of loss

(e.g.,   personal   injury).   Rather,         the   instant    case    involves

subrogation and the made whole doctrine and the application of

equitable principles.

    ¶121 The   majority    opinion    suggests       that    "the    made   whole

doctrine . . . is inapplicable if the claim is 'brought by a

subrogated insurer against the tortfeasor or the tortfeasor's

    43
       In Muller, the tortfeasor's insurance liability was
sufficient to cover all the property losses sustained by the
insured and the insured's insurance carrier.       Muller, 309
Wis. 2d 410, ¶4.  The court therefore held that the made whole
doctrine did not apply even though the insured settled for less
than full losses. Muller, 309 Wis. 2d 410, ¶4.

     The Muller court, however, preserved the rule that when the
funds are limited, the insured is entitled to be made whole.
See Muller, 309 Wis. 2d 410, ¶72.

     Subrogation is not permitted in the instant case because
unlike in Muller, the injured party, Dufour, exhausted all of
the available insurance limits without being made whole.

                                     21
                                                              No.   2014AP157.ssa

insurer where the subrogated insurer's insured has previously

settled with the tortfeasor.'"44

       ¶122 This suggestion was repudiated in Schulte v. Franzin,

176 Wis. 2d 622, 635-36, 500 N.W.2d 305 (1993).

       ¶123 Schulte concluded that when an injured insured settles

with    the    tortfeasor    and    the    tortfeasor's    insurance    company

without resolving the subrogated insurance company's part of the

claim, the subrogated insurance company's rights of subrogation

depend on whether the settlement made the insured whole.45                    If

the settlement does not make the insured whole, the subrogated

insurance company has no right of subrogation.46

       ¶124 I agree with the simple, clear implication of Rimes,

Garrity, Vogt, and Valley Forge:               "[W]here either the insurer or

the insured must to some extent go unpaid, the loss should be

borne by the insurer for that is a risk the insured has paid it

to assume."47

       ¶125 In     sum,     the    well-accepted      principles,      including

equitable principles, relating to subrogation and the made whole



       44
        Majority op., ¶32 (quoting Mut. Serv. Cas. Co. v. Am.
Family Ins. Grp., 140 Wis. 2d 555, 563-64, 410 N.W.2d 582
(1987).
       45
            Schulte, 176 Wis. 2d at 637.
       46
            Schulte, 176 Wis. 2d at 637.
       47
            Garrity, 77 Wis. 2d at 542.


                                          22
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doctrine weigh in favor of Dufour, not Dairyland.             A ruling in

Dufour's favor:

    •    Protects and defends the right of the insured injured

         person to be made whole;

    •    Preserves the limitations on subrogation imposed by

         the made whole doctrine by not allowing subrogation

         for "discrete" coverages;

    •    Reaffirms the equitable principle that if someone must

         suffer a loss, it should be the insurance company, not

         the injured insured;

    •    Avoids     a   double   recovery   or   windfall     because   the

         insured has not been made whole for the full extent of

         his or her losses; and

    •    Ensures that an insurance company does not inequitably

         compete with its insured for a limited pool of funds

         insufficient to make the insured whole for the losses

         caused by the tortfeasor.

    ¶126 Unfortunately, the majority opinion shifts away from

the compensatory purpose of the made whole doctrine and instead

protects the financial interests of the insurance company to the

detriment of its insured who paid the premiums.

    ¶127 Valley Forge is not distinguishable on its facts, is

consistent   with   longstanding     case   law,    does      not   rewrite

Dairyland's policy, and correctly rules on equitable principles.


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Accordingly, I would follow Valley Forge, as did the court of

appeals.

                                                 III

       ¶128 I concur in part because I agree with the majority

opinion's conclusion that Dairyland, Dufour's insurance company,

did    not    act     in      bad   faith    when      it    denied     Dufour's      claim.

Dairyland       had      a    reasonable         basis      "to     conclude   that     [its

insured's] claim is fairly debatable and that therefore payment

need    not    be     made     on   the     claim."48         The    "fairly   debatable"

standard is an objective test that asks whether a reasonable

insurance company under similar circumstances would have denied

payment on the claim.49              I conclude that Dairyland has met this

objective      test      by    putting    forward        non-frivolous     arguments      in

favor of its view that Dufour's claim was fairly debatable.

       ¶129 For the reasons set forth, I dissent in part, concur

in part, and write separately.

       ¶130 I       am     authorized       to    state     that     Justice   ANN     WALSH

BRADLEY joins this opinion.




       48
            See Brown, 267 Wis. 2d 31, ¶24.
       49
            See Brown, 267 Wis. 2d 31, ¶24.


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