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2000  WI  App  165
COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION
Case No.:                                                                00-0455
†Petition for Review filed.
Complete Title
of Case:
SCOTT K. REED AND JULIE REED,
PLAINTIFFS-RESPONDENTS,
V.
BRENDA L. BRADLEY AND AMERICAN FAMILY MUTUAL
INSURANCE COMPANY,
DEFENDANTS-APPELLANTS,†
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
DEFENDANT.
Opinion Filed:                                                           July 27, 2000
Submitted on Briefs:                                                     June 12, 2000
JUDGES:                                                                  Eich, C.J., Vergeront and Roggensack, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYS:                                                               On behalf of the defendants-appellants, the cause was submitted on the
briefs of  David J. Pliner of Corneille Law Group, L.L.C., of Madison.
Respondent
ATTORNEYS:                                                               On behalf of the plaintiffs-respondents, the cause was submitted on
the brief of C.M. Bye of Bye, Goff & Rohde, Ltd., of River Falls.




COURT OF APPEALS                                                 2000  WI  App  165
DECISION
                                                                 DATED AND FILED           NOTICE
                                                                                           This  opinion  is  subject  to  further  editing.  If
                                                                 July 27, 2000             published, the official version will appear in the
                                                                                           bound volume of the Official Reports.
                                                                 Cornelia G. Clark
                                                                                           A  party  may  file  with  the  Supreme  Court  a
                                                                 Clerk, Court of Appeals
                                                                                           petition  to  review  an  adverse  decision  by  the
                                                                 of Wisconsin
                                                                                           Court of Appeals.   See WIS. STAT. § 808.10 and
                                                                                           RULE 809.62.
No.                                                              00-0455
                                                                 STATE OF WISCONSIN        IN COURT OF APPEALS
SCOTT K. REED AND JULIE REED,
PLAINTIFFS-RESPONDENTS,
V.
BRENDA L. BRADLEY AND AMERICAN FAMILY MUTUAL
INSURANCE COMPANY,
DEFENDANTS-APPELLANTS,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
DEFENDANT.
APPEAL from a judgment of the circuit court for Monroe County:
STEVEN L. ABOTT, Judge.   Affirmed.
Before Eich, Vergeront and Roggensack, JJ.




No. 00-0455
¶1                                                                                       EICH,  J.    Scott  and  Julie  Reed  were  injured  in  an  automobile
accident.   Their medical expenses, which were stipulated to be $2,978, were paid
by their insurer, State Farm Mutual Automobile Insurance Company.1   Prior to
trial, the other driver’s insurer, American Family Mutual Insurance Company,
negotiated a settlement with State Farm in which State Farm accepted payment of
75% of the stipulated medical expenses, or $2,246, in exchange for assignment of
its subrogation claim.
¶2                                                                                       Liability and the amount of health care expenses were stipulated,
leaving only pain, suffering and disability, and future health care expenses, for
trial.   The jury returned a verdict of $22,978, which included stipulated past health
care expenses of $2,978.   The Reeds agreed that American Family was entitled to
a  credit  against  the  verdict  for  the                                               $2,246  it  had  paid  to  State  Farm.    They
maintained, however, that the difference between that and the medical-expense
award of $2,978—some $731—should revert to them.   The trial court found in the
Reeds’  favor  and  American  Family  appeals,  arguing  that  we  should  reverse
because: (1) the Reeds were unjustly enriched by the court’s ruling, effectively
receiving a double recovery; and (2) the ruling runs counter to established public
policy favoring settlements.   We disagree and affirm the judgment.
¶3                                                                                       The  Reeds  contend—and  we  agree—that  the  rationale  of  the
collateral source rule—which provides that “a plaintiff is entitled to recover the
reasonable and customary charges for past medical expenses without regard to the
payment of those expenses or the amount of such payment by a third party,”
1  State Farm has declined to participate in this appeal.
2




No. 00-0455
Ellsworth  v.  Schelbrock,  229  Wis. 2d  542,  553,  600  N.W.2d  247  (Ct.  App.
1999)—is applicable here.   The reasoning underlying the rule is that the recovery
of medical costs has a penal effect on a tortfeasor, who should not receive the
advantage of “gratuities from third parties.”   Thoreson v. Milwaukee & Suburban
Transp. Co.,  56 Wis. 2d  231,  243,  201 N.W.2d  745  (1972).    And the Reeds
maintain that, as in Ellsworth, the trial court’s decision in this case ensures that the
defendant and her insurer “will not be subject to answer twice in damages.   [They]
will, however, be responsible for the full amount of the value of the services
rendered.”   Ellsworth, 229 Wis. 2d at 554.
¶4                                                                                         There is no question that a plaintiff who has been injured by another
person’s tortious conduct is entitled to recover the reasonable value of his or her
medical costs occasioned by the injury.   Thoreson, 56 Wis. 2d at 243.   And the
test is the value of those costs, not the actual charge.   See id.   In our view, State
Farm’s agreement to settle its limited subrogation claim for less than its face value
is analogous to the situation where a health care provider sets an injured plaintiff’s
broken bone for less than the reasonable cost.   While some may view a verdict for
the plaintiff for the reasonable cost of such a procedure as a double recovery,
under the collateral source rule it does not amount to unjust enrichment.
¶5                                                                                         Applying these principles to the case at hand, we believe the trial
court came to the reasonable and legally sound conclusion that, as between the
parties, the Reeds were entitled to the benefit of the insurers’ bargain by virtue of
having paid premiums for health care coverage over time.   And American Family,
as  the  defendant’s  insurer,  has  already  been  paid  a  premium  for  the  risk  it
assumed.
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No. 00-0455
¶6                                                                                       As to American Family’s argument that affirming the circuit court’s
judgment would run counter to established public policy favoring settlements, we
disagree.    The  agreement  between  State  Farm  and  American  Family  did  not
constitute a settlement of the action, or any major portion of it.   Rather, it was an
agreement between the defendant’s insurer and the holder of a limited subrogated
interest to settle that limited claim for 75% of its face value.   The agreement did
not abrogate the necessity for a trial, or curtail the proceedings in any meaningful
way.   Additionally, as the trial court noted, where, as here, there is only a partial
settlement, the subrogated insurer receives the benefit of being released from the
lawsuit and all of the concomitant expenses.
By the Court.—Judgment affirmed.
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