In the case of Lyle and Carol Hird v. American Family Mutual Insurance Company, Appeal No. 2014AP2402, a 2015 Wisconsin Court of Appeals decision dealt with allegations of (1) bad faith; (2) Wis. Stat. § 628.46(1) statutory interest; and (3) Wisconsin’s Offer of Settlement Statute – Wis. Stat. § 807.01. Taking into account the very specific facts of this case, the Court determined that each insurance contract has an implied duty of good faith and fair dealing between the insurer and the insured. It also went on to state that when a claim is “fairly debatable,” the insurer is entitled to debate it, whether the debate concerns a matter of law or fact. In this particular case, the Court concluded that American Family’s coverage claim was “fairly debatable” and had a reasonable basis for denying coverage and, as such, did not commit bad faith as a matter of law.
In addition, the Court interpreted the applicability of Wis. Stat. § 628.46 with American Family’s insured claiming statutory interest pursuant to such section. The Court indicated that interest pursuant to Wis. Stat. § 628.46 is only due when there is clear liability, a sum certain owed, and written notice of both is given to the insurance company. Despite the fact that the initial itemized claim submitted by its insureds to American Family turned out to be the correct and accurate damage amount, because American Family was allowed to pursue its defense to the claim, the Court concluded that the amount was not a “sum certain owed” even though the original amount was considered to be the correct amount of damages. The Court indicated that the issue of damages was “fairly debatable” and, as such, was an open question up to the point a decision was made on the actual amount of damages.
Finally, the Court stated that, as a general rule, to be valid a statutory offer must be absolutely unambiguous and is unambiguous if it allows the defendant to fully and fairly evaluate his or her own exposure to liability. The Court went on to state that even though the bifurcation and stay procedure was properly used, when the final judgment amount turned out to be more than the original statutory offer of settlement filed by the plaintiff, despite American Family’s “fairly debatable” arguments, American Family was responsible for double costs and statutory interest pursuant to Wis. Stat. § 807.01 stating that it is the risk of being assessed the penalty of double costs that encourages parties to seriously assess their chances of winning a coverage or liability dispute.
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