## Facts

- Shane T. Drinkwater, a Wisconsin resident employed in Iowa, was seriously injured in a Wisconsin motorcycle accident caused by another Wisconsin resident.
- The tortfeasor’s Wisconsin liability policy provided $250,000 in coverage.
- Drinkwater’s medical expenses were paid by Medical Associates Health Plans (the Plan) under a group health plan issued in Iowa through Drinkwater’s employer.
- The health plan included (1) an Iowa choice-of-law clause and (2) a subrogation/reimbursement provision requiring repayment to the Plan from any third-party recovery.
- The Plan asserted a right to reimbursement from Drinkwater’s tort recovery; Drinkwater contended Wisconsin’s made-whole doctrine barred reimbursement because he had not been fully compensated.
- The circuit court applied Wisconsin law, found Drinkwater not made whole by the available liability limits, and denied the Plan any subrogation recovery.

## Issues

1. Whether the plan’s Iowa choice-of-law clause controlled the Plan’s subrogation claim so that Iowa’s full-reimbursement rule applied rather than Wisconsin’s made-whole doctrine.
2. If the clause did not control, whether Wisconsin’s conflicts-of-law methodology nonetheless required applying Iowa law to the Plan’s subrogation rights.

## Decision

- The Wisconsin Supreme Court affirmed the circuit court.
- The court declined to enforce the Iowa choice-of-law clause for this tort-recovery subrogation dispute because it conflicted with Wisconsin public policy protecting an injured person’s right to be made whole.
- Applying Wisconsin choice-of-law factors, the court held Wisconsin had the more significant contacts and governmental interests.
- Because Drinkwater was not made whole under Wisconsin law, the Plan had no right to reimbursement from the tort recovery.

## Legal Principles

- Under Wisconsin’s made-whole doctrine, an insurer or plan may not obtain subrogation/reimbursement from an injured person’s recovery until the injured person is fully compensated, absent enforceable terms not barred by public policy.
- A contractual choice-of-law provision is not enforceable when applying the chosen law would contravene important public policy of the state whose law would otherwise govern.
- Wisconsin resolves multistate conflicts by weighing factors including predictability, interstate order, simplification of the judicial task, advancement of the forum’s governmental interests, and the better rule of law, to determine which state has contacts of greater significance to the dispute.
- In a Wisconsin-centered accident involving Wisconsin parties and Wisconsin liability coverage, Wisconsin’s interest in compensating tort victims can outweigh an out-of-state plan’s contractual choice-of-law term for purposes of subrogation against a tort recovery.

## Conclusion

The court held that Wisconsin law governed the health plan’s attempt to recoup medical payments from a Wisconsin tort recovery and, because the injured insured was not made whole, the plan could not enforce subrogation or reimbursement despite an Iowa choice-of-law clause and contract language calling for repayment.


Drinkwater v. Am. Fam. Mut. Ins. Co., 290 Wis. 2d 642, 714 N.W.2d 568 (Wis. 2006)