Wisconsin Court Upholds Claimant’s Right to Wis. Stat. § 628.46 Interest

The Court in the case of Dilger v. Metropolitan Property and Casualty Insurance Company (“Metropolitan”), Appeal No. 2014AP1851, determined that a claimant, upon proper compliance with the statutory requirements, is entitled to interest pursuant to Wis. Stat. § 628.46(1).

In this particular case, the plaintiff, Dilger, was a police officer for the City of Brookfield and, while walking on a highway in response to a call, was struck from behind by a vehicle driven by Metropolitan’s insured causing significant injuries including traumatic brain injury, significant back injuries, cognitive linguistic deficits, vertigo, left ACL tear, and vision problems, all of which forced him to leave his career as a police officer. Subsequently, Metropolitan’s insured, who admitted having several alcoholic drinks at a bar prior to the accident, pled guilty to a criminal charge of hit and run causing injury to Dilger.

Insureds in Wisconsin are required by Wis. Stat. § 628.46(1) to “promptly pay every insurance claim” within 30 days once the insurer has been provided written notice of a covered loss and the amount of loss. The subject statute was interpreted in the case of Kontowicz v. American Standard Insurance Co., 2006 WI 48, 290 Wis. 2d 302, 714 N.W.2d 105, in which the Supreme Court concluded that § 628.46 is applicable in a third-party context with the following requirements:

  1. “There can be no question of liability on the part of the insured”;
  2. “The amount of the damages must be in a sum certain amount”; and
  3. “The claimant must provide written notice of both liability and the sum certain amount owed.”

The Court in the present case indicated that it was a sequel to the Kontowicz case.

The subject motor vehicle accident occurred on December 11, 2009 with the subject action being filed on June 17, 2011. Subsequently, Metropolitan’s insured pled guilty to the criminal charge mentioned above and on January 5, 2012 she was sentenced to jail. The subject lawsuit settled in late January 2013 with Metropolitan paying its policy limits of $1.5 million and with its insured contributing an additional $40,000. All claims were dismissed with the exception of the claimant’s claim for interest pursuant to § 628.46.

Following briefing and a hearing, the Court found that the claimant, Dilger, was entitled to interest pursuant to Wis. Stat. § 628.46. The Court determined that Metropolitan’s insured’s guilty plea resolved any questions about her liability and that Metropolitan had prior notice of damages that “were far, far in excess of what was the insurance available under the circumstances.” The Court further determined that the award of interest originated on January 5, 2012 at the time of Metropolitan’s insured’s sentencing instead of when her guilty plea was entered on September 22, 2011 indicating that in the intervening period Metropolitan’s insured could have attempted to withdraw her guilty plea. The claimant, Dilger, and Metropolitan both appealed the judge’s decision on § 628.46 interest.

Wisconsin Appellant Court stated that a third-party claimant is entitled to § 628.46 interest “when there is clear liability, a sum certain owed, and written notice of both.” The Court stated the purpose of § 628.46 is to discourage insurance companies from creating unnecessary delays in paying claims and to compensate claimants for the value of the use of their money.

The Court went on to state that if the insurer has “reasonable proof”, it is not responsible, the statute does not apply. “Reasonable proof” of nonresponsibility under § 628.46 is equated with whether the “coverage issue is fairly debatable.” If “fairly debatable,” then the insurer has the required “proof” of nonresponsibility.

However, the Court went on to state that the issue of whether an insurer has reasonable proof of nonresponsibility is a question of fact and determined that under the facts as set forth above, Metropolitan did not have “reasonable proof” of nonresponsibility pursuant to Wis. Stat. § 628.46 and ordered Metropolitan to pay an additional $178,191.78 in § 628.46 interest.

The moral of the story is that insurers should pay close attention to the facts of its cases where § 628.46 interest is being claimed to determine if and when the insured has admitted responsibility, especially in companion criminal cases.

As an ancillary issue, the Court also dealt with the issue of if and when a claim file is discoverable and the applicability of the “work product” rule and also the attorney-client privilege.

Specifically, the Court stated Wis. Stat. § 804.01(2)(a) in stating that discovery of materials “prepared in anticipation of litigation or for trial by or for another party or by or for that other party’s representative,” including an attorney or an insurer, is available “only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the case and that the party seeking discovery is unable without undue hardship to obtain the substantial equivalent of the materials by other means.”

In addition, the Court reiterated that the attorney-client privilege applies to communications between the attorney and the client and is “absolute” unless one of the Wis. Stat. § 905.03(4) exceptions applies or unless it has been waived.

In deciding the applicability of the “work product” rule and the attorney-client privilege, the Court stated that they each apply to documents “prepared in anticipation of litigation” regardless of whether litigation had commenced at the time of their preparation or whether the “litigation” is the proceeding in which the protection is asserted.

If you should have any questions regarding this article or insurance coverage in general, please contact Brad Matthiesen at bmatthiesen@mwl-law.com.

Bradley W. Matthiesen

Bradley W. Matthiesen is an insurance trial lawyer and partner with the law firm of Matthiesen, Wickert & Lehrer, S.C. He is licensed to practice in Arizona and Wisconsin. He has been an insurance defense trial attorney for the past 40 years. He also serves as a mediator throughout the State of Wisconsin and Arizona.