The recent case of Dilger v. Metropolitan Property and Casualty Insurance Company, 2014AP001851 (recommended for publication) analyzed the requirements necessary to obtain statutory interest on an insurance claim that is not promptly paid. The court’s holding appears to set a rather liberal standard regarding the requirement that “there can be no question of liability on the part of the insured,” because the court concluded that even a guilty plea in a related criminal proceeding will not extinguish doubts about liability. Instead, the uncertainty was only eliminated when the insured was sentenced, because only then was the insured’s ability to withdraw her guilty plea eliminated.
In reaching its holding, the Court of Appeals reaffirmed the work product and attorney-client privilege protections applicable to an insurance company’s claims files. However, it also held that under the circumstances of the case before it, the trial court’s error in ordering the production of the claims file was harmless.
The 2006 case of Kontowicz v. American Standard Insurance Co., 2006 WI 48, 290 Wis. 2d 302, 714 N.W.2d 105 established that Wis. Stat. § 628.46 applies to third-party insurance claims with three caveats:
(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” to the insurer.
Kontowicz, 290 Wis. 2d 302, ¶2. The Kontowicz case also held that claims for interest due under § 628.46 may be bifurcated in order to expedite resolution and to avoid prejudice. Id., ¶ 49.
The Court of Appeals called the Dilger case the “follow-up” to Kontowicz. In Dilger, both parties were appealing the application of the Kontowicz caveats. The insurer argued that its insured’s liability was debatable and that the claimant’s damages were not in a sum certain. During the underlying litigation, the trial court had ordered the production of the insurer’s claims file and the plaintiff had pointed to certain portions of the file in support of its arguments for the interest accrual date.
The case arose as a result of a drunk driver hitting an on-duty police officer walking along a street in response to a call. The officer was severely injured and the driver did not turn herself in for three days. The driver maintained that she thought she hit a deer. The officer filed an action against the driver and the driver’s insurer. The insurer, Metropolitan, eventually settled for its policy limits of $1.5 million. The insured drunk driver also contributed $40,000. All claims were then dismissed with the exception of the officer’s claim for interest under Wis. Stat. § 628.46. The trial court awarded the officer $178,191.78, which was appealed by both parties—the insurer appealed the decision to award interest at all, and the officer appealed the amount of interest awarded.
The arguments concerning the Kontowicz caveats hinged on several important dates, and a timeline may be helpful to understand the decision: