Kontowicz v. American Standard Insurance Co. of Wisconsin

Debra L. A. Keith Kontowicz, Kontowicz, Scott Kontowicz, and Katie Kontowicz, their Guardian Litem, ad William Cannon,

Plaintiffs-Respondents-Petitioners, Family American Mutual Co., Insurance Involuntary-Plaintiff,

v. Co. of Wisconsin,† American Standard Insurance Defendant-Appellant, ABC Defendant. Co., Insurance Larry Plaintiff-Respondent-Petitioner, Buyatt, Family

American Mutual Insurance Company,

Involuntary-Plaintiff,

v. Metropolitan Property Casualty Insurance

Company and Jason E. Schoessow,

Defendants-Appellants.

Supreme Court Nos. 2003AP2177 & argument 2003AP2534. Oral

November May 2005. Decided † 7-7-06; Motion reconsideration denied opinion modi- fied. See WI 90.

2006 WI 105.) (Also reported 714 N.W.2d plaintiffs-respondents-petitioners For there by Cannon, were briefs M. William Edward E. Robin- Dunphy, son, S.C., and Cannon & Brookfield, and oral argument by Edward E. Robinson. defendants-appellants Metropolitan Prop-

For the erty Casualty Company and Insurance and Jason E. by Piper, Schoessow, there was a brief Donald H. Piper O'Neil, Patrick A. Schmidt, and & Milwaukee, argument by Piper. and oral Donald H. defendant-appellant For the American Standard by Insurance Co. of Wisconsin, there was a brief James Associates, LLC, C. Ratzel and Ratzel & Brookfield; and Appellate Counsel, Colleen D. Ball S.C., Wauwa- argument by tosa, and oral James C. Ratzel.

An amicus curiae brief filed was Todd G. Smith Godfrey LaFollette, Kahn, & Madison, on behalf of Civil Trial Counsel of Wisconsin and the Wisconsin Insurance Alliance. by R. filed Keith amicus curiae brief was An Clif- Teague Raihala, S.C., Devitt, & D. and

ford, Clifford Academy of Trial Madison, behalf of the on Wisconsin Lawyers. CROOKS, J. Debra Kontowicz PATRICK N.

(Kontowicz) Larry Buyatt (Buyatt) appeal pub- reversing appeals of the court lished decision different branches Waukesha decisions two County on Court. The cases were consolidated Circuit appeal. the circuit court awarded the case, In each plaintiffs/petitioners Stat. 628.46 interest under Wis. (2001-02).1 this court is whether The issue before imposes percent simple § 628.46, a 12 interest which applies payment claim, of an insurance rate overdue company negligent and, tortfeasor to of a the insurance third-party recovery by a of interest thus, allows injured plaintiffs/petitioners here, claimant, such as the by such tortfeasor. ap- of the court of reverse the decision We liability,

peals. there is clear We conclude that when plain both, owed, certain and written notice sum incorporating language refer- 628.46, of Wis. Stat. 646.31(2), imposes percent simple ence Wis. payments claimants interest on overdue injury personal However, we and actions. claims such holding only in which three those situations limit our trigger First, there the interest are met. conditions part question liability on of the insured. can be no damages be in sum Second, amount of must provide writ- Third, the claimant must certain amount. liability amount the sum certain ten notice of both concerning the issue further hold that claims owed. We subsequent to the Statutes are All references Wisconsin indicated. unless otherwise the 2001-02 version may of interest due under 628.46 be bifurcated under 805.05(2), Buyatt, Wis. Stat. and that in the of case the award of interest should be accord with Wis. Stat. § 807.01(4), rather than 628.46.

>—i DEBRA KONTOWICZ August spinal 30, On Debra Kontowicz's quadriplegic

cord was severed and a she was rendered as a result of an automobile accident. van Kontowicz's was by by operated struck from a behind vehicle Daniel (Jeffers), 16-year-old by Jeffers a insured American (American Standard Insurance ofCo. Wisconsin Stan- dard). police Based on the skid marks left car, his traveling concluded that Jeffers had been between per (m.p.h.) m.p.h. and 90 miles hour in a 35 zone. striking utility road, Kontowicz's vehicle went off the a pole. hospital by Flight She was taken to the for Life. At policy the time of accident, Jeffers' with American per person liability Standard $500,000 included a limit. By September ¶ 4. 7, 2000, American Standard quadriplegic injuries, was of aware Kontowicz's liability. Jeffers' almost certain The head of American legal department Standard's met with the claims ad- juster assigned to date, Kontowicz claim on that "[o]nce injuries paraplegic decided that are con- post firmed, we should $500,000 limits with what appears liability part at this time to be clear on the of Dan Jeffers." family against 5. Kontowicz and her filed suit

American Standard and Jeffers on November On December both American Standard and separate complaint. Jeffers filed answers to Petitioners' negligent that he was answer, Jeffers admitted In his respect operation vehicle. of his motor to the with January 2001, the Kontowiczs' later, One week on attorney Standard, enclos- for American counsel wrote summary hospital discharge ing copy document- spinal quadriplegia, ing cord and Kontowicz's severed along bills, of her related medical and an itemization billing copies statements, actual with $238,379.53. amount agree not its did to tender 6. American Standard offer to the Kontowiczs was 1,2001. until June Its

limits upon defendants," even "a full release of all conditioned required though not to secure American Standard was paying as condition full release its insureds limits.2 attorney July 2001, the Kon- 30, the for 7. On demanding pay- the wrote American Standard

towiczs together policy Stat. 628.46 limits, with Wis. ment of responded 18, on October American Standard interest. position pay policy reiterating it would 2001, its only a of American Standard in return for release limits and its insureds. pay policy agreed its Standard 8. American only partial of its insureds a release

limits return for February February 19, later, weeks on on 2002. Three Jeffers, with reached a settlement 2002, the Kontowiczs pay whereby agreed $78,000 over and above Jeffers liability $500,000 limit. February 20, 2002, American Standard 9. On The $500,000. for the Kontowiczs sent a check to right bring against a claim reserved their Kontowiczs however, pay- a contained policy, American Standard's NOT "WE WILL provided which provision, and-walk HAS OUR LIMIT OF LIABILITY SUIT AFTER DEFEND ANY PAID." OFFERED OR BEEN pursuant

American Standard for interest to Wis. Stat. § 628.46. Following hearing,

¶ 10. a motion Waukesha County Judge Circuit Court Donald E Hassin made an ruling awarding pursuant oral the Kontowiczs interest to Wis. Stat. 628.46. The circuit court ruled that a against claim was made American for Standard at least January $238,000 when, on 5,2001, the Kontowiczs sent company copy hospital discharge summary addition, itemized medical In bills. the circuit court presented ruled that American Standard was with a policy July $500,000 claim the full 30, 2001, limit on payment when the Kontowiczs' counsel demanded January An limits. ing order was entered on award- statutory $49,643.15 the Kontowiczs interest.3 appealed. American Standard LARRYBUYATT Larry Buyatt injured

¶ 11. On June was negligence ain motor vehicle collision caused (Schoessow). driving Jason Schoessow was Schoessow Highway approximately m.p.h. west on 59 at when he stop light, striking Buyatt's failed to at red truck on its right through front fender it as traveled north intersection. At the time of accident, Schoessow was by Metropolitan Property Casualty covered Insur- (Metropolitan) liability policy. ance Co. 3 Interest owed was calculated as percent follows: Twelve simple $238,379.53 interest January 8, 2001, July on from to $15,920.65 ($238,379.53 in amount of x per .000329 per day days); cent x plus percent simple twelve from interest July 30, 2001, 20, 2002, February in $33,722.50 of amount ($500,000 x percent per day days). .000329 x 205 Buyatt January Metro- ¶ 29, 2001, sent 12. On detailing politan colli- and documentation a letter Buyatt's injuries. resulting medical bills and his sion wages, time, $6,361. In this and at the totaled lost Buyatt $35,000. claim for to settle his letter, offered response, Metropolitan In that at admitted Buyatt's portion medical bills were reasonable least injuries necessary for as a result of he and treatment Metropolitan However, offered in the collision. suffered fully Buyatt only Buyatt's claim. filed $6,400 to settle damages Metropolitan against and for suit Schoessow arising as accident, from his as well Wis. Stat. 628.46 interest. Metropolitan admitted 8, 2001, 14. On June negligence the sole cause of the

that Schoessow's was Buyatt injuries However, in Met- suffered the collision. any partial ropolitan in to tender amount refused Buyatt's any pay- payment claim, and conditioned acceptance upon a full ment settlement.4 April Buyatt settlement, on filed an offer of pursuant 16, 2003, $21,000 807.01(3). Buyatt May jury awarded On damages, including past expenses, $24,081 in medical suffering, pain, past wage past loss, and future disability. injuries an Buyatt suffered somewhat similar had acci years to the prior accident that occurred five automobile Buyatt failed Metropolitan had information dent at issue. recommendations and through on medical treatment follow acci had before the reports Buyatt complained, medical occurred, body claimed area of the where he pain dent addition, injured Schoessow. In he in the accident with was Buyatt information that suffered somewhat Metropolitan had involving Schoessow. injuries subsequent similar accident Buyatt then moved the circuit for in- court terest under 628.46, § Wis. Stat. and the granted court motion. Buyatt's Waukesha Circuit County Court Judge Lee S. Jr. Dreyfus, found that Metropolitan had written of notice claim June Buyatt's 8, 2001, on that Schoessow causally negligent was for the injuries Buyatt suffered as a result of collision, the and that not Buyatt was con- tributorily The court negligent. further determined that, on based information its its possession and own admissions, 8, of 2001, as June Metropolitan knew or reasonably should have known that it responsible was for at a portion least of Buyatt's claims. Because the § circuit found court that 628.46 applies claims, granted it Buyatt's motion for 628.46 interest.5 Metropolitan appealed the portion judgment imposing 628.46 interest.

5 transcript The hearing before circuit court on 22, July Judge shows that Dreyfus calculated Wis. Stat. § 628.46 Buyatt interest owed as May 9, On or follows. about 2001, Buyatt Metropolitan served on Requests for Admission. Metropolitan Because did not respond Requests to those Admission, they were days Therefore, deemed admitted 30 later. on June Metropolitan effectively had admitted that Schoessow liable was for the accident and Buyatt was not contributorily negligent. By date, Metropolitan also had Buyatt's written notice of amount specials medical and lost wages. begins Section 628.46 accruing days interest after the statutory met, requirements July 8, 2001, are therefore on percent simple began interest accruing. Judge Dreyfus deter mined, therefore, that during interest days accrued the 647 July April between Buyatt's 2003—the date of offer Judge Dreyfus final of settlement. calculated the interest $24,081 owed based upon jury for Buyatt, verdict which $5,169.53. in a resulted 628.46 award grant The court not did 807.01(4), interest under grant Wis. Stat. did but double costs 807.01(3). accord with APPEALS COURT OF appeals

¶ consolidated the cases. The court of 17. incompatible, yet Concluding were "two that there interpretations" statute, the court reasonable, ambiguous, § was that Stat. 628.46 determined Wis. explore on to extrinsic sources and therefore went legislative v. Kontowicz Am. to intent. order discern App ¶ Co., 22, 2d WI 278 Wis. Ins. Standard omitted). (citation The court of 664, 693 N.W.2d legislature appeals not intend the did concluded that third-party penalty apply the should to that bodily injury interest both circuit court and reversed claims appealed, Buyatt Id., Kontowicz and 24. decisions. petition granted April on their review and this court 6, 2005. II interpretation Statutory is an issue of law independently lower court deci- we review

which novo, is de this court benefits our review sions. While analyses the court of court and circuit from appeals. Anderson, 54, ¶ 23, 280 Wis. v. 2005 WI State (citing State v. Waushara N.W.2d 731 2d County Adjustment, 56, ¶ 14, 271 2004 WI Bd. 514).

2d 679 N.W.2d

h—I H—1 H-l (Re- Metropolitan and American Standard arguments support spondents) of their make three apply § position does not to 628.46 that Wis. Stat. Respondents argue third-party liability First, claims. language plain make and of the statute context that only applies first-party it clear that 628.46 to claims. support, they precedent For additional look examin- Respon- ing legislative history. and Second, statute argue amendments dents that the 1999 to Wis. Stat. third-party prop- 646.31 were intended to eliminate erty damage bodily injury claims from statute, that Respondents reference, from Third, 628.46. urge policy apply it is bad the statute to third-party rejects position claims. If this court apply third-party bodily 628.46 interest does not injury Respondents suggest claims, that such interest imposed upon particular should not be based facts argument of these cases. We will examine each in turn. applicability ¶ 20. We first examine the of Wis. 628.46 claims. Kontowicz and (Petitioners) Buyatt unambigu- maintain the statute is language plainly requiring ous, "promptly the insurers every

pay insurance claim." Wis. Stat. 628.46(1). 628.46(3)6 § § clearly they Further, states, argue, applies the statute to classes of claims § 646.31(2), in enumerated Wis. Stat. which includes third-party claimants who are residents of the state. 646.31(2)(d).7 § emphasize language Petitioners the Metropolitan ¶ argue 21. American Standard and appeals correctly that the of court determined that Wis. ambiguous. ambiguity, Respon- 628.46 is The suggest, dents arises from fact that the statute was apply only first-party yet intended to claims, incor- 646.31(2) porates by reference Wis. Stat. which seems 6 628.46(3) Wisconsin Stat. applies states: "This section 646.31(2)." only to the classes of claims enumerated in s. 7 646.31(2)(d) Wisconsin Stat. provides: "Third liability claimants . A claim under or workers' compensation if policy, either the insured or the 3rd party claimant of was resident state at this the time of the insured event."

314 liability Respondents claims. include ambiguity, appro- it was of the that because maintain appeals priate to extrinsic to look the court of correctly appeals doing court of so, sources, and ambiguity. resolved interpreting statute, first look to

¶ we 22. When 'begins "[Statutory interpretation meaning. plain its meaning language If the of the statute. with ordinarily stop inquiry.'" plain, State statute is we Court, WI 58, 45, 271 Wis. Kalal v. Circuit ex rel. omitted). (citations "Where 2d 681 N.W.2d unambiguous, statutory language is no need to there is interpretation, such as extrinsic sources consult omitted). (citations history." legislative Id., Timely payment 628.46 23. Wisconsin Stat. part: states, in relevant claims law,

(X)Unless an insurer provided by otherwise claim. A pay every insurance claim shall promptly shall the insurer days within 30 paid if not be overdue after loss a covered written notice is fact of furnished the loss. If such written notice is the amount and of claim, any the entire the insurer as to not furnished to by written notice is overdue if supported partial amount notice is days after such written within 30 paid not or all of the remain- Any part furnished to the insurer. subsequently supported claim that der of the days paid if not within notice is overdue written Any to the insurer. is furnished after written notice when the insurer not be deemed overdue payment shall the insurer is not to establish that proof reasonable has notwithstanding that writ- payment, responsible for to the insurer. For ten notice has been furnished any to which claim calculating the extent of purpose being as made on overdue, shall be treated payment equiva- which is or other valid instrument date a draft payment placed lent was in the in U.S. mail properly addressed, or, postpaid envelope, if not so posted, delivery. on the date of All payments overdue simple shall bear per interest at the rate year. 12%of (2) (1), Notwithstanding sub. the payment of a claim days shall not be overdue until 30 after the proof insurer receives the required loss under the of policy equivalent or evidence such loss. ... (3) applies only This section to the classes claims 646.31(2). enumerated s. added). (emphasis Wis. Stat. 628.46 Eligible ¶ 24. Wisconsin Stat. 646.31 claims part: states, relevant

(2) Classes of claims to paid. may be No claim be paid under chapter this unless the claim inis one of the following classes:

(d) Third-party A claimants . claim under a liabil- ity or compensation workers' policy, either if party insured or the 3rd claimant was a resident of this state at the time the insured event. added). § 646.31(2)(emphasis

Wis. Stat. "[ujnless begins 25. Wisconsin Stat. 628.46 provided by promptly law, otherwise an insurer shall 628.46(1). pay every insurance claim." Wis. Stat. Metropolitan American Standard and maintain that although that first sentence seems broad and encom- passing, statutory language that follows that state- clearly "timely payment ment indicates that apply exclusively claims" statute was meant to to first- Respondents explain typical claims. that a "insur- personal when an insured suffers anee claim" occurs damage, injury property and the insured submits or Respondents "proof contrast, In to the insurer. of loss" injury personal argue third-party a lawsuit for that company damages against an an is not filed insurance against negligence a a claim "insurance claim." It is happens In addition, to have insurance. defendant who Respondents policy" phrase "under the focus on the (2) terminology suggesting has a that By way the subsection distinctly first-party example, they of cite

focus. distinguishes between claims Stat. 645.68 which Wis. "against policies" are the insurer that "under and claims bodily liability policies for under and that are for not injury...." 645.68(3) (3m). §§ Further, Stat. Respondents argue phrases the "claim ... under that policy,""proof relate histori- loss," and "covered loss" language cally first-party claims, to with policy coming fire insurance from the standard statute 203.01(1) (1973-74). annexed Wis. Respondents inclu- reason that the further "third-party via Wis. Stat. claimants"

sion of 646.31(2)(d) only third-party applies claimants (third- standing first-party claimants the shoes claims). example, making first-party parties if an For coverage passengers provides contract third-party passenger in that would be a insured, they "stranger" contract as is a to the insurance he or she party to the insurance an insured and not are not bring yet could still first- contract, provision The court of of the contract. claim as Respondent appeals agreed that Wis. Stat. insurers with apply first-party claims and 628.46 was intended policy" distinguished first-party from "under the claims "against policy." by third-parties find these We claims arguments ultimately, unconvincing. and, strained agree, maintain, 27. Petitioners and we unambiguously third-party Wis. Stat. 628.46 includes language phrase in- claimants. The broad "an promptly pay every surer shall insurance claim" means just every insurance claim. The statute is not that — application only "first-party" in limited its to claims paid days A "insureds." claim must be within 30 of an receiving insurer written notice of a 628.46(1) "the covered fact of § loss and the amount of the loss." Wis. Stat. added). (emphasis Respondents' Furthermore, reliance (2) phrase "proof prove on the in loss" subsection applies only first-party the statute claims is unsupportable. "proof typically if Even of loss"is used first-party requires "proof context, the statute either required policy equivalent of loss under the or evidence added). § 628.46(2)(emphasis such loss." Stat. Wis. only fact, In limitation in the statute (3), occurs applicability "only" subsection which confines the statute's those classes of claims enumer 646.31(2). 628.46(3). § § ated in Stat. Wis. Wis. Stat. As § 646.31(2)(d), previously, eligible noted claims includes making "[a] claimants claim under liabil ity policy, . .. insurance if either the insured or the 3rd party claimant a was resident of this state at the time of 646.31(2)(d). the insured event." Wis. Stat. already

¶ 29. Because we have determined that plain language ambigu- of Wis. Stat. 628.46 is not normally ous, we would not look to extrinsic sources. Kalal, However, 271 Wis. 2d since the court appeals heavily of analysis, relied on extrinsic sources for its appropriate appeals'

it is to review the court of analysis, including relevant case law. consistently

¶ 30. Our case law has construed applying Wis. Stat. 628.46 as to all insurers and all 646.31(2). In Wis that fall within Wis. claims Corp. Physicians Mitchell, Insurance v. Service consin ap appeals 628.46 considered whether the court of Phy corporations.8 plied Wisconsin insurance service Corp. Mitchell, 2d v. sicians Serv. Ins. 1983). (Ct. apply, holding App. In it did

N.W.2d acknowledged that: the court loss," of the loss" and "covered "amount phrases

[the] indemnity- usually identified with loss" are "proof of corpo- not service insurance companies, insurance type do not corporations rations because service insureds, from but any proof notice or of loss receive directly for ser- providers the health care pay rather insureds.9 vices rendered to appeals Despite court of was fact, this

Id. at 343. language swayed by plain, "In of the statute. the broad requiring light all first sentence of the all-inclusive pay companies claims, all we conclude insurance thirty-day require- apply legislature intended corporations." at 344. Id. insurance ment to service legislature "[i]f Critically, had in- court noted exemption grant to service an additional tended to corporations, at have done so." Id. it would insurance [was] exemption "[S]ince in the contained no 344-45. appeals language," held that the court of statute's corporations. § applies Id. at insurance 628.46 to service 345. 8 Mitchell, Corp. v. Service Insurance Physicians Wisconsin (Ct. 1983) App. 326 considered 2d 338 N.W.2d

114 Wis. (1979-80), to Wis. predecessor § Stat. 636.10 scope Wis. (2001-02). was renumbered The statute § Stat. 628.46 §§ Act 24. 1981 Wis. relocated 1981. § 628.46 was suggest that because Wis. Stat. Respondents Mitchell, we appeals the court of ambiguous

found to be forth herein. disagree, for the reasons set We must also do so. Poling Physicians 31. Moreover, in v. Wisconsin appeals again Service, the court of held that Wis. Stat. § applied group Poling 628.46 to a health insurer. v. Physicians Serv., Wisconsin 2d 603, 612-13, (Ct. 1984). App. Awarding prejudgment N.W.2d 293 plaintiffs' interest on explained breach of award, contract the court § provision that 628.46 "an additional incorporated by operation insurance contract into it (citation omitted). law."Id. at 612 There was no statu tory provision company that allowed an insurance delay payment only escape of a claim. Id. at 613. "The clause for avoidance of this interest assessment is when proof responsible the insurer has reasonable that it is not payment." for the Id. Lending support further a broad, inclusive

reading analysis is the Seventh Circuit's in Allison v. appellate Ticor Title Insurance Co. The federal court interplay construed the of Wis. Stat. 628.46 with Wis. 646.31(2) Stat. and determined that the classes of paid claims to be under 628.46 include "residents, property certain nonresidents, owners of interests, third assignees." claimants, and Allison v. Ticor Title (7th 1992). Co., Significantly, Ins. 979 F.2d 1187, 1202 Cir. applied the Seventh Circuit held that 628.46 to title though exempt insurers, even title insurers are from the (WISF).10 Security Wisconsin Insurance Fund See Wis. 646.01(l)(b)2. Respondent companies argue appellate controlling, they these court cases are not as all first-party deal with claims under the statute. While we 10 §646.31(2), Wisconsin Stat. which §628.46 Wis. Stat. incorporates by reference, lists classes of eligible claims payment (WISF). under the Wisconsin Security Insurance Fund The WISF was created protect to insureds the event of the insolvency of their insurance company. distinguishable may on that

recognize be the cases they of the statute's point, reinforce the breadth do similarly scope, that the statute would as the idea as well third-party apply claimants. to Metropoli- and Further, American Standard 34. statutory objective, argue and context,

tan background 628.46(2) confirm serve to Stat. of Wis. legislature first-party 1981, the focus. In the statute's taking from the statute, it and renumbered moved inserting Adjustment" chapter it into the and "Claims Marketing" chapter.11 American Standard "Insurance provision's Metropolitan current that the maintain regulate suggests insurers to how it was meant location potential policies customers, but was market their litigation regulate an between insurer meant to not argue Respondents Therefore, claimant. only proves statutory it of the section context that the first-party applies claimants. "persuasive recognize that a title can be 35. We LIRC, statutory interpretation." v. Mireles

evidence of 2d 613 N.W.2d n.13, 237 Wis. 2000 WI ultimately, unpersua argument Respondents' is, Yet encouraging chapter purposes include of the The sive. competence professional insurance improvement providing mar maximum freedom intermediaries, regulating keting insurance, and methods general conformity marketing practices with provisions Code. See Wis. Insurance provision certainly question awhat could One 628.01. failing company make from an insurance to dissuade responsible promptly payment it knows it is on claims marketing potential customers. with for has to do statutory requirement Timely payment is a of claims §§ Act 38 1981 Wis. imposed by legislature, apparently response to the perceived problem companies failing real or of insurance payment promptly they to make on claims that were pay. requirement hable to The location of that does not only first-party lead to the conclusion that claims were statutory requirements. intended to be covered appeals' ¶ analysis leg- 36. The court of that the apply islature did not intend Wis. Stat. 628.46 to third-party largely upon claimants was based what it development deemed the "historical context for of the penalty.. Kontowicz, interest Looking ." ¶ . 278 Wis. 2d period, appeals

to case law of that the court of fiduciary noted a relationship distinct "focus on the goal between protecting insured, insurer and and the rights general of the insured." Id. From this context period in which the statute enacted, was first appeals court of concluded that 628.46 "arose from the legislature's protect intent the insured from im- proper practices," protect claims settlement not added). third-parties. (emphasis Id. appeals' analysis 37. The flaw the court of timely payment

that it likens the of claims statute to tort claims for bad faith. The cases the court relied on involve part companies. bad faith on the of insurance For ex ample, Badger the court cites Kranzush v. State Mutual Casualty (1981), Co., 103 Wis. 2d 307 N.W.2d256 " proposition duty good for the that an 'insurer's faith dealing and fair arises from the insurance contract and runs to the insured'" and not to the claimant. (citation omitted). Kontowicz, 2d Wis. may While this be true, Wis. Stat. 628.46 "is unrelated permits imposition to the tort of bad faith present." Poling, interest even where bad faith is not (citation omitted). Wis. 2d at 613 major argument 38. We now turn to the second presented by Respondents, that the 1999 amend- to eliminate were intended ments to third-party property Stat. 646.31 bodily injury

damage claims from statute. the eligible

¶ claims 646.31 lists Wisconsin Stat. 39. by purpose WISF, created The under the WISF. protect an in event insured the 646, Stat. ch. is to Wis. company becomes insolvent. or her insurance that his Frialator, Pitco 145 Wis. 2d Fireman's Fund v. 1988). (Ct. App. is a Section 646.31

427 N.W.2d eligible detailing claims under the statute, stand-alone independent 628.46. Subsec of Wis. Stat. WISF, and is (2) by paid fund, the of claims be tion lists classes party including Stat. claimants." Wis. "third 646.31(2)(d). substantially its cur- ¶ in WISF, The what 40. by in in Included statute 1979.12 form, rent was created by eligible paid the to be of claims were the classes fund were:

(d) liability A claim under a Third claimants. party if: policy, insurance compensation or workers' 3rd claimant was party Either insured or the 1. event; of the insured at the time a resident this state injuries bodily personal or other The claim is for 2. person or who suffered by

suffered this state state; or injuries resident of this while a damage property situated The claim is for 3. damage occurred. at the time

this state 646.31(2)(d)(1979-80). Wis. Security prior to Although Fund existed an Insurance 646 of recreated Wis. Stat. ch.

1979, repealed and the 1979 Act security changes in the fund statutes, "major making 109, § 1979, 14. L. c. law...." legislature In 41. amended the section relating third-party

of the statute claimants. Act The amendments consolidated the introduc (d)2 repealed tion and subsection and subsections (d)3. The amended version of the statute reads: "Third party liability claimants. A claim under a or workers' compensation policy, if either the insured or 3rd claimant awas resident of this state at the 646.31(2)(d) time the insured event." Wis. Stat. (1999-2000). Respondents ap maintain, and the court

peals reasoned, that the 1999 amendments eliminated personal injury claims from the WTSF.Kon towicz, 278 Wis.2d 18. The court reasoned that removing injury" "bodily "property reference to dam age" third-party from the on claimants, section 1999Wis. types coverage Act 30 removed of those claims from § by under Stat. 646.31, Wis. and reference Wis. Stat. Agreeing appeals, 628.46. with the court of American argue Metropolitan Standard and that the amend 1999 bodily injury property damage ments removed prejudgment provisions claims from the interest in disagree argument. 628.46 the and WISF.We with this Additionally, agree we not do with Petition- position solely amendments ers' that the were made purpose eliminating redundancy of the in statute, the maintaining original scope. By the amended version its eliminating 646.31(2)(d), clearly appears Wis. Stat. it legislature change that the effected a in substantive the by eliminating statute claims of non-residents who injured being by paid were while in Wisconsin from the agree do, fund.13 however, We with Petitioners that the 13The eliminated the portions of statute included claims bodily personal injuries "for or other by in or this state suffered they nor to, were not intended did 1999 amendments bodily injury eliminating claims of, the have the effect third-party who were residents Wiscon- claimants coverage at from under at time of the event issue sin the WISE14 appeals Moreover, relied on the the court of response

argument amendments that the 1999 were County by, minimum informed Dane to, or at two Stat. which had ruled that Wis. Circuit Court decisions § inter- to collect allowed claimants 628.46 Kontowicz, 2d 278 Wis. est under the statute. history legislative

¶ 21.15 no in the There is indication legislature of, aware much less was even by, County Dane Circuit Court cases influenced appeals appeals. The court cited court extremely legislative inappropriately relied on limited interpretation contrary history, support an in order to language plain of the statutes.16 to the injuries of this while resident person who suffered (1979-80) 646.31(2)(d)2 (emphasis Wis. Stat. state...." added). accompanying Act 30 are silent The revisor's notes revising motives legislature's as 646.31(2)(d). cited Leister v. General appeals' The court of decision Co., County Dane Circuit Court Case No. Casualty Insurance (Memorandum on Motion Decision and Order 98-CV-3182 Co., Dismiss), Family Mutual Insurance and Coker v. American (Decision 99-CV-2949 County Circuit Court Case No. Dane Order). Co., App 2005 v. Standard Ins. WI Kontowicz Am. 2d 693 N.W.2d 278 Wis. known circuit court cases note that all five Petitioners applies 628.46 the issue of whether Wis. Stat. have addressed liability and insurers determined that third-party claims apply. § 628.46 does disagree

¶ 45. We therefore with the court of appeals' interpretation, Respondents' position, that bodily- the 1999 amendments eliminated claims for injury damage, narrowing property eligibility or third-party parties to "third claimants whose claims policy arise under the in the same manner and under provisions .Id., same as the named insured. . years "[t]his ago, ¶ 18. As we noted than more court consistently liability has viewed automobile insurance policies indemnity as more than contracts between strong public policy insured; insurer and favoring there is a injured compensation parties." third Simo Bouton, nds v. 87 Wis. 2d 274 N.W.2d 666 (citations (1979) omitted). appeals' The court of inter pretation strong public is in direct conflict with that policy. plain language

¶ 46. The of the statute not by Respondents' policy arguments against overcome applying third-party

Wis. Stat. 628.46 interest Respondents suggest allowing claims. that 628.46 to applied third-party be claimants like Petitioners, they so are able to receive interest, 628.46 will fiduciary relationship undermine the between insurer application, Respondents argue, and insured. Such im- poses penalty attempts on an insurer who to fulfill its duty Respondents to defend Moreover, its insured. argue allowing such interest on claims chilling upon negotia- would have a effect settlement litigation, contrary tions, increase and is to the adver- third-party litigation. sarial nature of disagree arguments. pur- 47. We with these The pose discourage of Wis. Stat. 628.46 tois companies creating unnecessary delays paying from injured purpose if the This is advanced claims owed. just third-party he as much as if or is a claimant also note that our case law has she is insured. We penalize purpose of 628.46 is not to reasoned that compensate for the value of insurers, but to claimants money. Upthegrove v. Lumbermans Ins. the use of their (Ct. 1989). App. Co., 7, 13, 152 Wis. 2d N.W.2d367 compen generally "Prejudgment is considered interest money and a means of sation for the time value of prolonging litigation preventing from defendants (sic) delay." benefitting Allison, F.2d at from the omitted). (citations purpose is furthered This timely general application of the statute to ensure just payments first-party, all, not claim are made to ants. apply does hold that Wis. Stat. 628.46 We liability injury. personal How claims for holding only those situations

ever, limit our we trigger are met. conditions interest which three liability part question of no on First, there can be damages Second, the amount of must be the insured. pro Third, the claimant must sum certain amount. liability and the certain written notice of sum vide both proof' it has is owed. If insurer "reasonable amount apply. responsible, does not "Reasonable the statute not proof1 which is that amount information means to conclude that to allow a reasonable insurer sufficient may payment responsible of claim. Our it not be proof' generally equated "reasonable case law has non-responsibility 628.46 with whether under "coverage fairly Co. Allstate Ins. v. was debatable." issue (Ct. App. Konicki, 2d 519 N.W.2d723 186 Wis. omitted). 1994)(citation coverage fairly debatable, If "the insurer must be considered to have had the re- quired 'proof non-responsibility." Id. Finally, concerning

¶ 49. we hold that claims the may issue of interest due under Wis. Stat. 628.46 be pursuant § 805.05(2), bifurcated to Wis. Stat. when expedition economy," "conducive to or convenience, 805.05(2). prejudice. or to avoid In Wis. v. Waters Pertzborn, we held that bifurcation under 805.02 is Pertzborn, to claims, limited not issues. v. Waters 2001 ¶62, 35, 703, 2d However, WI 243 Wis. 627 N.W.2d497. legislative history we also noted that the of the "statute reveal[ed] barring that the rule of bifurcation issues apply regarding coverage." does not to issues insurance Family App Co., Dahmen v.Am. Mut. Ins. 198, 2001 WI (citing 9, Waters, 2d 635 Wis. N.W.2d 1 23)(emphasis original). ¶¶ 21, 2d 703,

IV Having concluded that Wis. Stat. 628.46 apply Respon- does claimants, we address position imposition pen- dents' that the of the interest alty inappropriate in either of these as cases, companies proof insurance had neither of nor knew loss previously, the amount of loss. As noted the statute applies paid days to claims not within 30 "after the insurer is furnished written notice of the a fact of covered loss and of the amount of the loss." Wis. Stat. 628.46(1). Once the insurer has had written notice of the "fact of a covered loss" and the "amount the loss," pay days, it must within 30 unless it has "reasonable proof' responsible payment. not, fact, that it is for Respondents argue

¶ 51. that one cannot have the knowledge liability required payment to make without judgment they argue, or settlement. Nor, can an company actually insurance know what it owes without disagree. a resolution endorsed a court. We Co., Ford Motor Credit In Fritsche v. argument, holding "[a] rejected appeals this court statutorily paid overdue if not within claim is deemed equivalent thirty proof days loss evidence of after a or judgment be far in advance of the loss. That time can Co., 171 Wis. 2d v. Ford Motor Credit or award." Fritsche 1992) (Ct. (citation App. omit 491 N.W.2d ted). acknowledging fact that "uninsured mo Even damages, are nebulous claims, torist which often involve court still concluded evaluate," difficult to Fritsche that: outweighs the of mis-evaluation may

It be that risk 628.46, Stats., [the interest. But paying sec. risk of $25,000 has had the use of which company] of an accident owing to the Fritsches as result became 11, Presumably, [the in- occurred October which on that amount has received a return company] surance nothing illogical interpreting then. We see since pay company] to to require [the broad statute $25,000 it had the use of from the date which equivalent loss. proof of received evidence of loss (footnote omitted). Id. at 307

DEBRA KONTOWICZ argues that Kontowicz 53. American Standard requirements, statutory and notice

fell short percent for 12 interest it should not be liable therefore, all the that Kontowicz met on her claims. We conclude statutory necessary requirements trigger January On that date 628.46 interest as of her of the amount sent written notice Kontowicz totaling through expenses November medical discharge along 27, 2000 her October $238,379.53, with summary showing spinal her severed, cord had been resulting quadriplegia. question There was no of the liability of American Standard's insured. American Stan- involving dard knew the accident about Jeffers and by September 7, 2000, Kontowicz that Jeffers was at apparently paralyzed. fault, and that Kontowicz was liability interroga- Jeffers conceded in his answer to the tories on December 2000. American Standard had investigated accident, and determined that once injury light confirmed, Kontowicz's severe was liability part Jeffers, admitted on the that it was hable policy.17We, therefore, under its hold consistent with court, determination of the circuit that as Janu- ary statutory 30-day period 8, 2001,18 628.46 the after began running which interest would accrue on August $238,379.53 of on claim, Kontowicz’s days began 2001, the 30 $500,000 run on the full claim.

LARRYBUYATT regard Buyatt's Metropolitan

¶ 54. claim, With argues if even the court finds that the statute note apparently wearing We that Kontowicz was not a seat Holcka, belt at the time of the accident. In Gaertner v. this court examined the codification of the common law "seat belt" defense 347.48(2m)(c)(1997-98). into Wis. Stat. concluded We that the legislature intended to possible ensure defendants received a plaintiffs damages reduction in recoverable of not more than 15 percent Holcka, if plaintiff failed to use a seat belt. Gaertner v. (1998). 219 Wis. 2d However, 580 N.W.2d271 due to the severity the injury by of suffered Kontowicz even the maximum by reduction allowed appear law would not be sufficient bring $500,000 her policy claim below the limit. 18 January $238,379.53 Since both the 2001 claim for and July 30, $500,000 2001 for writing claim were made in prejudgment claimants, interest allows Metropoli- not determine whether below did the courts denying In for the claim. had a reasonable basis tan knowledge Metropolitan Buyatt's had case, hold that we January by liability 29, 2001. for the accident clear Metropolitan had infor- case, because However, in this injuries pre-existing of a similar there were mation that injuries subsequent to the similar nature, as well as fairly accident, and debatable as it was Schoessow wage specials were all loss and medical whether the accident, we determine to the Schoessow attributable proof Metropolitan to establish had reasonable that portion responsible for at least it not that was responsible Buyatt's The that it was claim. amount certainty. any Therefore, determined with could not be appropriate in 628.46 is not under Wis. Stat. interest rejected Metropolitan Buyatt's However, because case. jury Buyatt's April offer, and the settlement Buyatt greater offer, we an than amount awarded Buyatt entitled to interest under Wis. is determine 807.01(4), began accruing April on which Stat. Interest under offer.19 2003, the date of his settlement 807.01(4) interest of, to, in addition is in lieu not 628.46(1). Upthegrove, at 152 Wis. 2d See under get that, order to interest note However, we 14-15. by mail, the court added circuit upon American Standard served days by for service mail. three (2003-04) 807.01(4) states, in relevant Wisconsin

part: party under this section an offer of settlement

If there is judgment accepted party which is recovers is not which specified equal in the offer greater to the amount than or settlement, of 12 at annual rate entitled to interest is of the offer settlement amount recovered from the date on the % paid. until the amount 807.01(4), § pursuant a full trial must first take place, damages an of award must be made.

V ¶ 55. We reverse the decision of the of court appeals. liability, We conclude that when there clear is plain owed, sum certain both, and written notice of language incorporating by of Wis. 628.46, Stat. refer- § 646.32(2), percent imposes simple ence Wis. Stat. payments interest on overdue claimants personal injury However, claims and actions. we limit holding only our those situations in which three trigger conditions are First, interest met. there question liability part can be no on of the insured. damages Second, the amount of must be in a sum provide Third, certain amount. the claimant must writ- liability ten notice both and the sum certain amount concerning owed. We further hold that claims the issue may of interest due under 628.46 be bifurcated under § 805.05(2), Buyatt, Wis. Stat. that, in the case of the award of interest should be in with accord Wis. Stat. 807.01(4), rather than 628.46. —

By appeals the court. The decision of the court of appropri- reversed, and the matter remanded to the entry ate branch the circuit court of orders consistent with this decision. part. J., 56. JON E WILCOX, took no (dissenting).

¶ 57. DAVID T. J. PROSSER, In legislature amended the Wisconsin Insurance require every promptly pay Code to insurers to insur- § 708, ance claim. ch. Laws 1975. The new statute (1975)) (Wis. determined that an insur- 631.02 days paid if not within 30 ance claim would be overdue of with written notice was furnished after insurer a The statute amount of covered loss. the fact and potent mechanism: "All over- a enforcement included simple payments rate of bear interest at the shall due (2003-04).1 628.46(1) year." per Stat. See Wis. 12% "Timely In 1978 this court described provision payment "an additional of claims" statute as operation incorporated byit contract into the insurance Co., 675, Ins. 85 2d law." v. Continental Wis. Anderson (1978); Upthegrove Hard see also 696, 368 271 N.W.2d Co., ware, Ins. 146 2d Pa. Lumbermans Mut. Wis. Inc. v. (1988); Physi Poling v. Wis. 470, 484, 431 N.W.2d689 (Ct. Serv., N.W.2d293 120 2d 357 cians Wis. 1984). App. presented whether a in this case is 59. The issue plaintiff party an an "insured"under who is not

third tort to make a contract is entitled automobile insurance against pursuant the insurer claim § 628.46(1) judgment or a is obtained settle- —before thereby triggering the reached or ment is offered— percent requirement prompt payment 12 inter- and the timely penalty payment I not made. conclude if is est legislature a third not intend to authorize that the did 628.46(1) provisions plaintiff to invoke the tort plaintiffs were if "claim" facts, and that such on these recognized, seriously the contractual it would undermine relationship Be- and the insured. the insurer between opinion majority reaches a different conclu- cause the respectfully sion, dissent. I

1 are to the to the Statutes All references Wisconsin version unless otherwise indicated. 2003-04

333 I. STATUTORYAMBIGUITY statutory interpretation ¶ 60. This is case. Statutory interpretation begins language with the the statute. State ex rel. Kalal v. Circuit Court Dane County, ¶58, 633, WI 2dWis. 681 N.W.2d meaning plain, 110. "If the of the statute is we ordi narily stop inquiry." (quoting Id. v. Seider O'Connell, ¶76, WI 236 Wis. 2d 659). N.W.2d methodology, statutory ambigu- In the Kalal

ity precedent is a condition to the examination of except involving sources, extrinsic in situations an highly absurd or or result, unreasonable when the court verify plain meaning. seeks to confirm or This legislature's rule because we "assume that the intent is expressed statutory language." Kalal, in the 271 Wis. 2d ambiguous ¶ capable 44. A if statute is it is of being by reasonably persons understood well-informed Id., ¶ in two or more senses. majority

¶ opinion 62. The concludes unambiguous. by is 628.46 It reaches this conclusion disregarding statutory interpreta- fundamental of rules (1) including: preference tion, not words be (2) superfluous, interpret made the need statute (3) context, and the admonishment to avoid absurd or unreasonable results. ambiguous. shown, 63. As will be the statute is produces

Without sensible construction, the statute placing impos- an result, unreasonable in the insurers position fulfilling sible irreconcilable duties to their party plaintiffs. insureds and to adversarial third interpreted part 64. The statute to be reads in as follows: (1) Timely payment

628.46 of claims. Unless oth- law, promptly pay by an insurer shall provided erwise shall be overdue if not every claim. A claim days after the insurer is furnished paid within loss the fact of a covered and of the notice of written notice not of the loss. If such written is amount claim, any to the entire to the insurer as furnished by written notice is overdue partial supported amount days notice not after such written is paid if within Any part or all of the remain- to the insurer. furnished subsequently supported the claim that der of days paid is overdue if not within written notice Any furnished to the insurer. after notice is written be deemed overdue when the insurer payment shall not that the is not proof to establish insurer has reasonable notwithstanding that responsible payment, for the All been furnished to the insurer.... written notice has interest at the rate payments simple shall bear overdue per year. of 12%

(2) (1), Notwithstanding payment sub. days after the not until 30 claim shall be overdue under the proof required receives the loss insurer of such loss.... equivalent or evidence policy (3) only to the classes claims applies section This 646.31(2). in s. enumerated (3) references Wis. Stat. 65. Subsection 646.31(2), part: which reads

(2) claim OF TO BE PAID. No CLASSES CLAIMS the claim is in may chapter under this unless paid be following classes: one

(d) liability A claim under party Third claimants. policy, if either compensation workers' or party insured or the 3rd claimant was a resident of this state at the time of the insured event. 628.46(1) meaning

¶ § case, 66. In this seriously by confusing relationships muddled among several statutes. 628.46(1) language §

¶ First, 67. of Wis. Stat. changed beginning, has not been since 1975. From the qualifying opening the statute has contained a clause: provided by implies "Unless otherwise law."This clause quali- the need to examine other statutes. Unless this excluded, fication is considered and there is some risk in applying the statute. (1) began Second, 68. subsection as a stand- by

alone Now, however, statute. it is affected three incorporates subsections, additional one of which by second statute reference. This underscores the 628.46(1) § proposition interpreted by cannot be focusing solely on the subsection itself. 628.46(1) § 646.31(2), tying § Third, 628.46(3)

§ concept party introduces the aof third 646.31(2)(d) rely very § heavily claimant. Petitioners on 628.46(1). interpret key However, the term in 646.31(2)(d) party defined, claimant" —is not —"third requires interpretation. interpreta- and thus it too The given may tion to the term "third claimant" affect Chapter interpretation claims under 646 as well as the 628.46(1). § Fourth, inasmuch as reference is made in 628.46(3) only § 646.31(2), question arises provisions Chapter may

whether other be con- 646.31(2). interpreting Specifically, sidered in should 646.31(2) interpreted light be of the limitations in (which insurance) §§ 646.01 excludes certain 646.31(1) (which eligibility establishes conditions of "[m]ade Chapter and excludes claims 646 claims claim")? any on interest 646.31(2) 628.46(3) by § § incorporates Fifth, 71. incorporation occurred in 1976. At This

reference. "[w]hen provided law time, case Wisconsin incorporates adopting or a an earlier statute statute by specific provision particular thereof limited and incorporation it as takes the statute reference, such pro incorporation not and does at the time existed spectively repeal subsequent modifications or include portions incorporated Union or thereof." statute Cemetery Milwaukee, 68, 108 180 64, 2d N.W.2d v. 13Wis. (1961). super Although of construction was this rule 990.01(5)(b) by 1979, 539, see ch. seded Wis. may incorporated be statute Laws of the new legislature. original intent of the with the inconsistent seeking plaintiffs are inter- Sixth, because interpreted pretation that must have been of a statute (OCI) by of Insurance the Commissioner the Office of helpful 30-year period, to know what it would be over a interpretation, any, given what defer- if OCI has interpretation. OCI's ence is owed to question presents Finally, this case plaintiff permits party a third tort whether 628.46 rights. As a contract an insured defendant's invoke by person general cannot be enforced rule, a contract Realty, Kelps party Abramowski v. Wm. Sons not a to it. (1977). On the 2d 259 N.W.2d 80 Wis. "privity" negated in certain hand, other this rule Schilling party by beneficiaries, v. circumstances third Casualty Company, Employers 2dWis. Mutual (Ct. 1997), may App. be 886-87, 569 N.W.2d against direct action statute affected Wisconsin's plaintiff tort If a third insurers, Stat. 632.24. 628.46(1), it clear however, is not to invoke is entitled why parties precluded specifically some third are from 646.31(2). invoking § the statute virtue Wis. Stat. points ¶ 74. mind, With these I believe the appeals court of was correct it when concluded that the ambiguous,2 statute is inconsistent and and that its ambiguity permits us to examine extrinsic sources.

II. LEGISLATIVE HISTORY 628.46(1) § ¶ 75. Wisconsin Stat. was created as part budget § of the 1975 state 708, 39, bill. ch. Laws of § The 1975. new statute was numbered 631.02. It was part budget by submitted as Governor Patrick Lucey. year, Legislative

¶ 76. Later that Council, at the behest of the Insurance Law Committee, Revision Among things, introduced 1975 Senate Bill 642. other "general relating this revision of the insurance law § proposed insurance contracts" to renumber 631.02 as changes. 636.10, without further However, the Senate Committee on Commerce, to whom the bill was re- adding ferred, offered Senate 1, Amendment subsec- (2) (3) tions to the renumbered section. This adopted part amendment was and became of the law. § 43, 375, See ch. Laws of 1975. (3) newly Subsection created 636.10

provided: applies only "This section to the classes 646.11(2)."3 claims enumerated in s. time, At that Wis. part: Stat. 646.11 read in 2 Co., Kontowicz v.Am. Standard Ins. 22, 10, App 2005 WI Physicians see also Wis. 112; Serv. 278 2dWis. 693 N.W.2d Mitchell, Corp.

Ins. v. 338, 344-45, 2dWis. 338 N.W.2d 326 (Ct. 1983). App. again Wisconsin Stat. 628.46 was amended in 2001 and (2m), 2002 to create subsection payment which relates services. See chiropractic 16, 9327(lc); Act 2001 Wis. §§ Act

(2) A claim shall not Claims To Be Paid. Classes of is: it paid be unless

(a) or an policyholder of a Residents. The claim annuity, under, or of, beneficiary policy insured or a liquida- or of the of the insured event at the time who state; or a resident of this tion order was (c) liability A claim under claimants. party Third policy, if: compensation insurance worker's [or] claimant was or the 3rd 1.Either the insured event; the insured at the time of a resident of this state or injuries bodily personal

2. for or The claim is he or a who when person in this state suffered state; of this or injuries was a resident suffered damage to situated property 3. The claim is for damage. at time of this state (1975). §

Wis. Stat. 646.11 repealed chapter and rec- In 646 was § renumbering 646.31. former 646.11 to reated, begins as 109, Laws of 1979. New 646.31 14, ch. "(1) follows; A ELIGIBILITY. claim OF CONDITIONS payment eligible it an from fund unless is not unpaid for policy or under the a insured claim for loss (2) party annuity." claim- moved "3rd New subsection (d). (c) paragraph paragraph Id. ants" from legislature repealed subdivi- In 1999 the (d), paragraph Act 1999 Wis. 2 and 3 of sions merged §§ with subdivision liability the introduction 73-76, and (d) paragraph "Aclaim under reads: so policy, compensation if either or workers' party of this was a resident claimant or the 3rd insured state at the time of the insured event." Wis. Stat. 646.31(2)(d). part language This is we must now review.

III. ANALYSIS 628.46(1) part 80. Wisconsin Stat. has been years, Wisconsin law more than 30 but no court has given majority's interpretation ever before it the in a published opinion. good There is basis for this forbear- ance in the text the statute. respondent point

¶ 81. The insurers to certain 628.46(1) phrases (2), §§ namely, terms and and policy,""proof claim," "insurance "claim ... under the required policy," loss suggest under the loss," "covered normally

that these terms relate to first claims. Perhaps

¶ 82. the most critical term in this list is easily interpreted "insurance claim." This term can be to connote contract claim. The term "claim"—without any limiting adjective may a broader term that —is majority's interpretation include tort claim. The the statute either makes terms "claim" and "insur- interchangeable ance claim" or concludes that a third party tort claim is an "insurance claim." Both of these propositions are dubious. Metropolitan Property Casualty and adds argument, liability policy coverage

an additional provisions require injured party do not an to submit "proof policy. of loss" to the insurer under the It cites § (approved part Wis. Stat. 631.81 as of the same Chapter initially 375, 1975, Laws of linked 646.31(2)). § 628.46 to This statute relates "notice" "proof obligation of loss" to an insured's contract A third tort party plaintiff insurance policy.4 under the notice or timely to by provide § 631.81 is not required party a third tort loss" to an insurer because of "proof obligation. contract has no plaintiff 628.46(1) to to first It makes sense apply has a contract with party claim. The first insured regu- of insurer; part heavily and the insurer is the rule, or by statute industry. regulation, lated Insurance of the "consumer" the interests protect often serves to has created an 628.46(1), In the legislature insured. provides: Wisconsin Stat. 631.81 (1) proof of Timeliness of notice. loss. 631.81 Notice reasonably proof soon or of loss is furnished as as Provided notice required by year the possible after time it was and within one the proof policy, the time to furnish such notice or within failure by policy required does invalidate or reduce a claim unless the not reasonably possible thereby prejudiced is and it was the insurer meet time limit. the (2) giving notice of notice. It a sufficient service of Method is envelope proof postage prepaid addressed of if a 1st class or loss containing proof deposited proper notice or the insurer and prescribed. post The any the time commis- U.S. office within expeditious requiring may expressly approve clauses more sioner of notice where that is reasonable. methods (3) Meaning acknowledgment of insurer's acts. The filing receipt notice, furnishing of of forms for insurer of the investigation loss, acceptance proofs, proofs of such or the rights any any are not alone sufficient waive claim any arising the insurance con- in defense of claim under insurer tract. Pierzina, 2d 2001 WI 245 Wis. In cases as v. such Neff discussed an N.W.2d Wisconsin courts have obligation provide the insurer with contractual insured's reinforces the timely proof of loss. The statute notice or obligation. breach this The insured's contractual insured's or reduce may insurer and invalidate obligation prejudice the also, 632.26. insured's claim. See provision additional of the insurance contract to assure prompt rights. vindication of the insured's contract Anderson, See 85 Wis. 2d at 696. principle applies

¶ 85. This same to certain "third party purchases To A claimants." illustrate: man policy. $500,000 life insurance He names his wife as beneficiary. expects The "insured" dies, when he prompt payment will insurer make to his benefi ciary, party. a third who is See Estate Plautz v. Time (Ct. App. Co., Ins. 189 Wis. 2d 525 N.W.2d 342 1994). employed supermarket. 86. A isman aat He is

injured job. employer purchased on the His has work compensation employees ers' insurance for and the employer expects provide "insured" the insurer prompt coverage party injury. employee's for the third Co., See Coleman v. Am. Ins. Universal 86 Wis. 2d (1979). N.W.2d policy. 87. A woman has a health insurance She hospital becomes ill and is rushed to a for treatment. party expect providers The third health care to be promptly paid by policy. the woman's insurer under her Physicians Corp. Mitchell, See Wis. Serv. Ins. v. (Ct. 1983). App.

Wis. 2d 338 N.W.2d326 typical ¶ 88. A driver a has automobile insurance policy. highway, causing The driver hits deer on the damage repair shop extensive the vehicle. The auto gives an estimate the insured driver and the insurer proceed. completes and is authorized to When it its repair shop expects work, the third auto to be paid promptly by pursuant policy. the insurer to the expects In all situations, these the insured the insurance contract to be honored insurer though may any even the insured not receive direct payment. may dispute coverage There be a about be- a insured, and the or there be may tween the insurer But, be for the most paid. about the amount dispute insured, insurer, any and third party part, The insured and third claimants are on the same side. always aligned. Sometimes claimants are almost party by named third claimants have been specifically party in the the insured policy.5 is on the same A third tort not plaintiff 90. party The third tort party the insurer and insured.

side as in these an least on the facts cases —is plaintiff —at Badger Co., State Mut. Cas. adversary. See Kranzush v. (1981). 64, In 56, explaining 103 2d 307 N.W.2d 256 Wis. an by against a faith claim an insured the basis for bad the Kranzush court stated: insurer, right fairly... be rooted in The insured's treated is to which he and the insurer are the contract insurance has not contracted The claimant parties. is in a relation- and not contractual benefits trust, a with insurer. relationship less ship, much added). Id. at 64 (emphasis 628.46(1) short, comfortably In fits most 91. it party

with first claims. Where is first party applied claims, the and third stat- party claims non-adversarial insured's contract rights. ute an expands bolsters 5 why an appeals provided explanation The court of has 628.46(1): qualify under Wis. Stat. party some claimants third law, be a cannot en- Under established Wisconsin contract exception by party rule a person a it. The to that

forced not party. specifically The made for the benefit of third contract third-party beneficiary claiming of a must person to be a contract parties to the was entered into show that the contract directly primarily for his benefit. contract Standaert, 525 N.W2d 189 Wis. 2d Goossen v. Estate of 1994) omitted). (Ct. (citations App. 314 343 628.46(1) By applying contrast, to a third plaintiffs may wedge tort claim drive a between the insurer and the insured and undermine their con relationship. recognized "spe tractual This has court duty good dealing [that] cial faith and fair runs throughout relationship the contract between the in Insurance, insured," surer and the Danner v. Auto-Owners ¶90, 49, WI 2dWis. N.W.2d relationship Their is sometimes characterized as a "fidu ciary" relationship. See DeChant v. Monarch Ins. Life (1996). Co., 2d 547 N.W.2d592 It is unlikely legislature put that the intended to financial pressure "fiduciary" on an insurer to terminate its rela tionship with the insured.6 Family

¶ In 93. Alt v.American Mutual Insurance Company, (1976), 2d Wis. 237 N.W.2d706 the court observed that an insurer "has an affirmative duty opportunity may seize to reasonable whatever present protect liability." itself to its from insured excess duty early This is inconsistent with an insurer's aban opportunity donment of the insured at the first after a money, tort claimant demands so the insurer can paying policy avoid interest in excess of limits.7 6 A liability requires contract often the insurer to provide counsel for an Although "insured" defendant. counsel is compensated by insurer, ethically the obligated counsel to represent the loyalty insured with "independence of profes 20:1.8(f)(2). judgment." sional SCR The insurer must inter not view, the advent of insurer my fere in this relationship. In liability to third party plaintiffs may tort for interest create new tensions in the relationship and cause some insurer/insured "pull plug" insurers to the on their an stage insureds at earlier they might than have in past. the 7 In Country Weimer v. Company, Mutual Insurance 2d (1998), quoted N.W.2d 466 the court speaks of the Kranzush balance between right process to control the settlement "the insurer's interests) (and right [and] protect the insured's its own liability protected is not which he covered." to be from added). (emphasis Kranzush, at 64 "These 103 Wis. 2d the claimant is are concerns to which majority disrupts stranger." balance The this Id. judicially giving sanctioned reason to elevate insurers a tort and the interests third their interests plaintiffs of their over the interests insureds. and the insured have 95. Both insurer proof.

right put plaintiff his "It is a tort still obligation tort victim to establish the fault alleged prerogative of the tortfeasor, and it is still the at himself in court." Id. 65. This tortfeasor principle defend impaired if claim would be interest on tort began against run the insurer tort victim before filed or offered settlement. suit rejected the creation of a The Kranzush case against by a tort victim the tortfeasor's

tort of bad faith failing to claim. The court insurer for settle victim's duty explained an to settle runs to the insurer's not claimant. at 68. The court cited insured, Id. including courts, Uebelacker v. several cases from other on Wisconsin Insurance Law 8.2, Arnold E Anderson's treatise (3d 1990): ... company duty ed. "An has to do at 237 any reasonably necessary to insured from protect all is its limits." Then it added: "Failure to policy in of liability excess subject may [the insured] requesting release language include of Weimer, to 724 [the insurer] a claim bad faith." 216 Wis. 2d at of Co., 71 added) Family Alt v. Am. Mut. Ins. (emphasis (citing (1976)). 706 Wis. 2d 237 N.W.2d if mean much the release of the insured will not Requesting operation of rejection request does not toll the plaintiff's the statute.

345 Company, F.Supp. Horace Mann Insurance (E.D. 1980), holdings: then summarized their "These cases stress constant theme: an insurer owes duty third-party [tort] no negotiate to the claimant to settle or to good Kranzush, faith." 103 Wis. at 2d supreme the We reiterate words of the court of Maine, they express for we believe well to the extent which this unprec- cause of action would constitute a serious and departure principles: edented from established tort the representative [T]hat insurer is the of the insured claimant's logically imports the third party tort adversary him, status as the the ipso insured renders prior to facto, adversary agent. Thus, the of the insured's legal establishment liability, as the tort claimant legal right require has no to negotiate to or tortfeasor settle, it lacks right require likewise such action his by representative. [Linscott v. State Farm Mutual Auto. Ins. Co., (Me. 1977).] 368 A.2d 1163-64 added). (emphasis Id. at 72-73 majority opinion ¶ 97. The thrust is to impose duty making insurers, on statute, start payments days within 30 of a tort demand, victim's or percent duty risk commencement of interest. This may imposed say nothing be even filed, before suit liability. By of a court's determination the insurer's requiring pay insurers before a settlement is reached judgment majority a or rendered, increases the plaintiffs likelihood that will hold out and more, demand thereby elevating strategic position of third plaintiffs litigation expense tort at the of insureds. Irrespective principles, of common law this expected legislative court is to follow clear mandates so long they provi- as do not violate some constitutional case, sion. In this the mandate is not clear. Because the majority opinion represents departure a radical from ought existing precedent, some evidence there be legislature I intended. am what the result is that this in extrinsic sources. that intent unable to unearth original proposal in Gov- was contained The budget. Lucey's find I have been unable to ernor any explanation 1975-77 provision more than that does of the provision.8 summary repeat I of the form the terms any explanation of the locate unable to have also been on Com- of the Senate Committee 1976 amendment merce. of Insur- The Office of the Commissioner (OCI) recognized part of the statu- 628.46 as

ance has tory 1975. In 1978 John Insurance Code since Wisconsin attorney young Health Insurance on the Sheski, a 12-page Project memo- OCI, wrote a internal Team at interpretations discussing potential randum "Timely payment advocated of claims" statute. Sheski interpreting claimants. to benefit third the statute to Laurie Riach dated from John Sheski Memorandum regarding September to Statu- 1978, "Entitlement 'Penalty' tory 636.10, Wis. Provided Section Interest (on Office of of Wisconsin file with the State Stats." Wisconsin) (here- Insurance, Madison, Commissioner of Memorandum). inafter Sheski Budget describes the Executive Book 1 of the 1975-77 of Insurance Office of the Commissioner

budget requests of the to these respect with recommendations and the Governor's pro mention the Governor's does not requests. This document budget The of claims statute. timely payment posal for [of of the office the "mission does mention document regulate supervise Insurance] is to Commissioner of consumer can be the insurance industiy so place in the market competition fair there will be assured that can be met." consumer's needs Department and that Budget Planning Budget, & Executive Administration, Bureau of 1975). (Jan. Wisconsin, 1975-77 Book at of the State of "present ¶ 101. Sheski's memorandum discusses (never ambiguity" acted) legislation in the statute, draft en- Legislative Chapter from the Council to revise contemporary prejudgment on interest, cases 646.11(2) (1975) incorporation of then Wis. Stat. reference, and a November memorandum to Deputy Commissioner Harold R. Wilde from Assistant argued Commissioner Marvin E. Van Cleave. Sheski that party under certain third circumstances, claimants were entitled to receive the interest under the statute. He appear contended that the statute did not to alter case prejudgment "[Wisconsin §] law on interest. 636.10 provides statutory right per to such interest at a 12% annum rate which the if courts must award the claimant part requested asks for it as relief and the insurer has no valid defense." Sheski Memorandum at 5. acknowledges, 102. The memorandum however, that the Insurance Laws Revision Committee wanted to modify language removing in statute, "detail that fairly applicable is not to all kinds of claims." Sheski quotes Memorandum at 2. It the Van Cleave memoran- summarizing dum as a discussion about the modification proposal applying party not to third claims: "Laura people Sullivan related the concern her claims with responsibilities respect party what their are with to third [Spencer] response Kimball said that the could claims— liability." be that there was no Sheski Memorandum at memorandum). (quoting Van Cleave ¶ 103. Sheski's comment on this was that "It's opinion evident that Kimball and others were of the liability third-party there was no insurer claimants for 'penalty.'" the interest Sheski Memorandum at 11. importance ¶ 104. The of the Sheski Memoran- advocacy dum is 1978 OCI had an memorandum third-party in behalf of Yet, claimants. I found no evi- applied up and Wis. Stat. followed dence that OCI ever 628.46(1) promptly against an insurer who did not plaintiff. Rather, it tort claim from a third settle a 628.46(1) discipline apply appears that OCI has used promptly only in- settle with who did not to insurers parties. fact, In third and non-adversarial sureds posed question: opinion, "If an insurer OCI percent third-party agrees pay claim but does of a disagrees pay this amount because not ultimately settled for 80 and the claim is with the offer percent, subject pay penalty an interest the insurer they timely pay percent offer?" did not the 70 because legal position that "Interest is not due out the OCI staked citing liability established," Wis. has not been because Opinion § Legal 6, Binder, Number Position Stat. 628.46. (on 31, file with State of Wisconsin dated March 1987 Insurance, Madison, Wiscon- Office of Commissioner sin). interpretation statute is consis- OCI's 628.46(1) § is intended the view that Wis. Stat.

tent with rights under insured's contract to bolster the "consumer" discipline policy. an For OCI to review and the insurance party performance dealing in a third with insurer for its new element introduce a dramatic tort claimant would litigation. into tort plaintiffs party have well- tort 106. Third including protections, Stat. Wis.

established alternative 628.46(1) 807.01(4). interpreted § § If Wis. Stat. plaintiff, party apply conflicts the statute to a third tort 807.01(4),9 plaintiff § inasmuch as with Wis. 9 807.01(4) § reads as follows: Wisconsin Stat. (4) party under this If there is an offer of settlement judgment accepted party and the recovers section which is not equal specified in greater the offer than or to the amount

which is 807.01(4) § may consequential under not make a offer of joined." settlement until "after issue is On the other § require plaintiff any hand, 628.46 does not to make § 628.46(1), interpreted offer of settlement. In effect as 807.01(4) by majority, displaces every party in third plaintiff involving penalize tort case an insurer. This will penalize in insurers situations where it would not actual tortfeasors. explained pur

¶ 107. Several courts have that the 807.01(4) pose encourage of Wis. Stat. is to settlement prior Bowl, of cases to trial. See Beacon Inc. v. Wis.Elec. (1993); Co., Power 740, 778, 176 Wis. 2d 501 N.W2d 788 LaPour, DeMars v. 2d 366 N.W.2d891 (1985); Co., Graves v. Travelers Ins. 124, 140, Wis. 2d (1974); 224 N.W.2d398 Cos., Gorman v. Wausau Ins. (Ct. 1993). App. Wis. 2d 499 N.W.2d245 This purpose bolstering is different from an insured's contract rights.

¶ 108. There are numerous situations in which a pre-verdict third tort claimant will be entitled to majority's interpretation claim, interest on his but the may 628.46 conflict with established Wisconsin on law pre-verdict personal injury interest cases in the ab 807.01(4). sence of an offer of settlement under See Agri-Systems, Inc., Johnson v. Pearson 119 Wis. 2d (1984).10 By reconciling 350 N.W.2d 127 Wis. Stat. pre-verdict 628.46 with our interest decisions other settlement, party the is entitled to at interest the annual rate of 12% on the amount recovered from the date of the offer of paid. settlement until the amount is Interest under this section is 814.04(4) 815.05(8). computed in lieu of interest under ss. and 10 In Inc., Johnson v. Agri-Systems, Pearson 119 Wis. 2d (1984), 350 N.W.2d 127 the court was confronted with the question whether a plaintiff personal injury action is entitled to damage interest on the award from the time of the injury through the date the verdict is rendered. The court noted a third party cases, requires my position party third a person than meet a burden higher to tort plaintiff and thus under right policy, a contract exercising litigation. likelihood of satellite decreases concerned about were not majority If the 109. not decision, it would its far-reaching implications unambiguous a purportedly to rewrite have decided plaintiff third tort for the to create "tests" statute meet. course is to uphold I the better think court of appeals. OCI and the of the interpretation I dis- stated, respectfully For the reasons sent. 814.04(4) (1981-82) ("pre-judgment Stat.

three statutes: Wis. verdict from the time of the per year at the rate of 12% interest entered"); (post-judgment § 815.05 Wis. Stat. judgment until 807.01(4) (regarding year); and Wis. per interest at 12% The court said: plaintiff). from settlement offers arguments accept plaintiffs and allow for If this court were policy decisions pre-verdict face serious interest we would encourage legislature attempt settle- could thwart percent pre-verdict allow twelve Should we ment of lawsuits. though plaintiff offer no settlement to a even for instance interest plaintiff? incentive for There would be no made such had been get pre-verdict This interest. plaintiff in order to to offer to settle designed thwarting of a statute an unwarranted seem to he would litigation court encourage and to reheve overcrowded end to an pre-verdict an offer made interest where To award calendars. jury finally would awarded rejected than what was more pre-verdict purpose award of the statute. To likewise thwart then than the verdict would an offer was less where interest legisla- by doubling legislative the amount the act amend a effect encouraging the he the incentive should ture had determined This decline to do. making acceptance offers. we of settlement Johnson, 2d at 773-74. 119 Wis.

Case Details

Case Name: Kontowicz v. American Standard Insurance Co. of Wisconsin

Court Name: Wisconsin Supreme Court

Date Published: May 18, 2006

Citation: 714 N.W.2d 105

Docket Number: 2003AP2177 & 2003AP2534

Court Abbreviation: Wis.