Case Title: Froedtert Memorial Lutheran Hospital, Inc. v. National States Insurance Company

Citation: 2009 WI 33

Docket Number: 2007AP000934

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2009-05-13T00:00:00Z

Document:
2009 WI 33 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2007AP934 
COMPLETE TITLE: 
 
 
Froedtert Memorial Lutheran Hospital, Inc., 
          Plaintiff-Respondent, 
     v. 
National States Insurance Company, 
          Defendant-Appellant-Petitioner, 
The Loren Ledger Trust, 
          Defendant-Respondent. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2008 WI App 59 
Reported at: 310 Wis. 2d 476, 750 N.W.2d 926 
(Ct. App. 2008-Published) 
 
 
OPINION FILED: 
May 13, 2009   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
November 5, 2008   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Milwaukee   
 
JUDGE: 
Patricia D. McMahon   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the defendant-appellant-petitioner there were briefs by 
Norman D. Farnam, John J. Laubmeier, and Stroud, Willink & 
Howard, LLC, Madison, and oral argument by Norman D. Farnam. 
 
For the plaintiff-respondent there was a brief by Susan E. 
Lovern and von Briesen & Roper, S.C., Milwaukee, and oral 
argument by Susan E. Lovern. 
 
 
 
 
2009 WI 33
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2007AP934   
(L.C. No. 
2006CV3488) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Froedtert Memorial Lutheran Hospital, Inc., 
 
          Plaintiff-Respondent, 
 
     v. 
 
National States Insurance Co., 
 
          Defendant-Appellant-Petitioner, 
 
The Loren Ledger Trust, 
 
          Defendant-Respondent. 
 
 
 
FILED 
 
MAY 13, 2009 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed in 
part, reversed in part, and cause remanded.   
 
¶1 
DAVID T. PROSSER, J.  This is a review of a published 
decision of the court of appeals, Froedtert Memorial Lutheran 
Hospital v. National States Insurance Co., 2008 WI App 58, 310 
Wis. 2d 476, 750 N.W.2d 926.  The decision affirmed an order of 
the Milwaukee County Circuit Court, Patricia D. McMahon, Judge, 
granting Froedtert Memorial Lutheran Hospital's (Froedtert) 
motion for summary judgment against National States Insurance 
No.  2007AP934 
 
 
2 
 
Company (National States).  The order awarded Froedtert a cash 
judgment 
for 
$130,725.63, 
plus 
costs, 
and 
an 
additional 
$63,223.58 for statutory interest under Wis. Stat. § 628.46 
(2007-08).1 
¶2 
This case requires us to interpret a National States' 
Medicare Supplemental Insurance (or Medigap) policy issued to 
Kathleen Ledger (Kathleen) in 1998.  The policy provided in 
part: "Benefits After Medicare Stops——If maximum benefits have 
been paid under Medicare for in-patient hospital expense, 
including the lifetime reserve days, we will pay all further 
expense incurred for hospital confinement that would have been 
covered by Medicare Part A." 
¶3 
The principal issue presented is whether this policy 
language requires National States to pay Kathleen's inpatient 
hospital expense, incurred after exhausting her Medicare Part A 
benefits, according to Froedtert's standard rate or at the lower 
Medicare reimbursement rate.  We are also asked to decide 
whether the circuit court's award of $63,223.58 in statutory 
interest under Wis. Stat. § 628.46 was appropriate under the 
circumstances. 
¶4 
We conclude that the "Benefits After Medicare Stops" 
provision in National States' 1998 Medigap policy is ambiguous 
and must be construed against the insurer to provide coverage at 
Froedtert's standard rate for Kathleen's hospital confinement at 
                                                 
1 All subsequent references to the Wisconsin Statutes are to 
the 2007-08 version unless otherwise indicated. 
No.  2007AP934 
 
 
3 
 
Froedtert after her Medicare Part A benefits were exhausted.  
This construction is supported by the sharp contrast between the 
uncertain limitations in the provision at issue and the clear 
limitations contained in other provisions of the policy.  It is 
also supported by the expectations of a reasonable insured that 
this policy would pay for "all further expenses incurred" for 
hospital confinement.  We do not agree, however, that National 
States is subject to interest under Wis. Stat. § 628.46.  The 
issue of the policy's coverage above the Medicare reimbursement 
rate was fairly debatable in light of all the facts and 
circumstances of this case. 
¶5 
Consequently, we affirm in part and reverse in part 
the decision of the court of appeals, and we remand for further 
proceedings consistent with this opinion.   
I. BACKGROUND AND PROCEDURAL HISTORY 
A. 
Medicare and Medigap Coverage 
¶6 
An elementary understanding of Medicare is necessary 
to comprehend this case.  In 1965 Congress amended the Social 
Security Act to create the contemporary Medicare system.  See 
Health Insurance for the Aged Act, Pub. L. No. 89-97, 79 Stat. 
286 (1965).  Medicare is a federally funded health insurance 
program that provides medical benefits to qualified elderly and 
disabled Americans.  See 42 U.S.C. § 1395a, et seq. (2006).2  
                                                 
2 All subsequent references to the United States Code are to 
the 2006 version unless otherwise indicated. 
No.  2007AP934 
 
 
4 
 
Medicare is administered by the U.S. Department of Health and 
Human Services' Center for Medicare and Medicaid Services (CMS).3   
¶7 
As part of its administrative duties, the CMS enters 
into contracts with medical services providers, like hospitals, 
to provide patient care for Medicare beneficiaries.  See 42 
U.S.C. § 1395cc.  The contracts require the providers, in 
exchange for receiving Medicare payments,4 to refrain from 
charging beneficiaries for "items or services" already paid by 
Medicare.  42 U.S.C. § 1395cc (a)(1)(A).   
¶8 
Hospitals and other medical services providers under 
contract charge each patient at the providers' standard rates 
for the actual services rendered, and then Medicare reimburses 
the 
providers 
at 
the 
previously 
contracted 
Medicare 
reimbursement rates.  After Medicare has reimbursed the services 
providers, the providers are prohibited from trying to collect 
the remaining balance——the difference between the billed costs 
of treatment and the Medicare reimbursement payments.  Id.  They 
are contractually obligated to accept the Medicare reimbursement 
                                                 
3 The Center for Medicare and Medicaid Services was formerly 
known as the Health Care Financing Administration or HCFA. 
4 Most hospitals are paid according to a prospective payment 
rate system under 42 U.S.C. § 1395ww(d).  Pursuant to this 
system, Medicare generally pays hospitals for their services at 
a predetermined rate regardless of the actual level of care 
provided.  Id.  This predetermined rate is based on a 
classification system used by hospitals when admitting patients—
—the "Diagnostic Related Group" (DRG) classification system.  
Id. 
No.  2007AP934 
 
 
5 
 
payments as a condition of their participation in the Medicare 
system.5  See id. 
¶9 
One component of the Medicare system is Medicare Part 
A, which provides coverage to beneficiaries for hospital 
expense, post-hospitalization care, and related nursing care.  
See 42 U.S.C. § 1395d(a).  Medicare Part A provides coverage for 
150 total days of inpatient care, 90 days of which are renewable 
for each "spell of illness"6 that results in subsequent 
hospitalization and 60 days of which are considered "lifetime 
reserve 
days" 
expendable 
any 
time 
the 
beneficiary 
is 
hospitalized for more than 90 days during a benefit period.  See 
42 U.S.C. § 1395d(a)(1); 42 C.F.R. § 409.61(a)(2) (2004).   
¶10 Medicare Part A covers most of the expense incurred 
during a beneficiary's hospitalization, but beneficiaries are 
required to pay the hospital a deductible during the first 60 
days of inpatient care.  See 42 U.S.C. § 1395e.  Beginning the 
61st day of inpatient care, including any lifetime reserve days, 
beneficiaries are required to make co-payments to the hospital.  
See id.  After exhausting all 150 days of coverage, Medicare 
                                                 
5 The term "balance billing," as Judge McMahon stated, 
"refers to the [unlawful] billing of the patient [for the 
outstanding balance] in the face of these requirements."  See 42 
U.S.C. 1395cc(a)(1)(A). 
6 A beneficiary's "spell of illness" begins on the first day 
of inpatient care, "which occurs in a month for which he is 
entitled to benefits under Part A," and it ends 60 days after 
the beneficiary is released from inpatient care. 42 U.S.C. 
§ 1395x(a).  Each time a beneficiary experiences a new "spell of 
illness," he is entitled to at least 90 days of coverage.  See 
42 U.S.C. § 1395d(a)(1).  
No.  2007AP934 
 
 
6 
 
stops paying Part A expense, at least until a new "spell of 
illness" begins.  See 42 U.S.C. §§ 1395d(a)(1), 1395x(a); 42 
C.F.R. § 409.61(a)(2) (2004). 
¶11 Medigap insurance policies were devised to "fill the 
gaps" in Medicare coverage and provide payment for expenses 
incurred by beneficiaries that are not otherwise paid for by 
Medicare.  In general, Medigap policies provide coverage for, 
among other expense, a patient's Medicare co-payments and 
deductibles as well as "all Medicare Part A eligible expenses[7] 
for hospitalization not covered by Medicare."  See Wis. Admin. 
Code § INS 3.39(5)(c) (Aug. 1997).8  While most states have been 
required 
to 
adopt 
certain 
federally 
mandated 
regulations 
governing Medigap policies, Wisconsin was granted a waiver after 
Congress found that this state "already had acceptable programs 
in place" to regulate such policies.  H.R. Rep. No. 104-79(II), 
at 2 (1995), as reprinted in 1995 U.S.C.C.A.N. 273.  Therefore, 
Wisconsin is required to update its administrative rules in 
light of the federal guidelines, but it is not governed by those 
federal guidelines.  See Medicare Program; Recognition of NAIC 
Model 
Standards 
for 
Regulation 
of 
Medicare 
Supplemental 
Insurance, 63 Fed. Reg. 67,078, 67,079 (Dec. 4, 1998). 
                                                 
7 "Medicare eligible expenses means health care expenses 
which are covered by Medicare, recognized as medically necessary 
and reasonable by Medicare, and which may or may not be fully 
reimbursed by Medicare."  Wis. Admin. Code § INS 3.39(3)(d) 
(Aug. 1997). 
8 All subsequent references to the Wisconsin Administrative 
Code are to the August 1997 version unless otherwise indicated. 
No.  2007AP934 
 
 
7 
 
B. 
Kathleen Ledger's Hospitalization 
¶12 In May 2000 Kathleen Ledger was admitted to Froedtert 
Hospital in Milwaukee for a kidney transplant.9  She remained at 
Froedtert until September 15, 2000, at which time she was 
transferred to Vencor Hospital, a long-term care facility in 
Milwaukee.  Days later, on September 25, she was unexpectedly 
readmitted to Froedtert for further treatment relating to the 
transplant.  She remained hospitalized at Froedtert for two 
days, and then was released back to the care of Vencor on 
September 27, 2000. 
¶13 On October 26, 2000, after remaining at Vencor for 
nearly a month, Kathleen was readmitted to Froedtert.  A biopsy 
of her kidney revealed renal cell carcinoma——the most common 
form of kidney cancer in adults.  She remained at Froedtert for 
the next several months receiving treatment.  Kathleen died at 
Froedtert on February 12, 2001. 
¶14 When Kathleen was initially admitted to Froedtert in 
May 2000, she was eligible for Medicare benefits, including 
benefits under Part A.  As a result, Medicare paid all her 
                                                 
9 Upon admission to the hospital, Kathleen signed a 
"Conditions of Admission" form for the treatment she was to 
receive.  As part of that agreement, Kathleen was required to 
assign her rights to receive medical benefits to the hospital.  
The pertinent part of the agreement reads as follows: "[B]y 
signing below, I authorize payment to be made directly to 
[Froedtert] for the benefits otherwise payable to me by any 
third party including major medical benefits."  For this reason, 
the dispute here is between the hospital and the insurance 
company rather than between Kathleen, or her successors, and the 
insurance company. 
No.  2007AP934 
 
 
8 
 
inpatient hospital expense, with the exception of co-payments 
and the deductible, until those benefits were exhausted.  
However, Kathleen's Medicare Part A benefits, including the 
lifetime reserve days, were exhausted after October 14, 2000, 
while she was being cared for at Vencor Hospital. 
¶15 Therefore, Kathleen was ineligible for Medicare Part A 
benefits when she was readmitted to Froedtert on October 26, 
2000. She had exhausted her 150 days of coverage, and her 
renewable days of coverage were not reset as she remained under 
the same "spell of illness."  See 42 U.S.C. § 1395x(a) (stating 
that a "spell of illness" ends 60 days after the beneficiary is 
released from an inpatient care facility).   
¶16 As noted, Kathleen purchased her Medigap policy from 
National States in 1998, well before the relevant times at issue 
in this case.  National States' Medigap policy contained the 
following provision with regard to inpatient hospital expense: 
"If maximum benefits have been paid under Medicare for in-
patient hospital expense, including the lifetime reserve days, 
we 
will 
pay 
all 
further 
expense 
incurred 
for 
hospital 
confinement that would have been covered by Medicare Part A."  
(Emphasis added.)  This policy was Kathleen's only form of 
hospitalization coverage once she was readmitted to Froedtert on 
October 26, 2000. 
¶17 Between October 26, 2000, and February 12, 2001, 
Kathleen accumulated $267,074.93 in medical bills during her 
No.  2007AP934 
 
 
9 
 
inpatient stay at Froedtert.10  Of this total, $63,040.05 was 
paid by Medicare Part B and is not at issue; another $73,309.25 
was paid by National States and also is not an issue in this 
case.11  The remaining $130,725.63 is outstanding and is the crux 
of this dispute. 
¶18 According 
to 
National 
States, 
it 
satisfied 
its 
obligations under the Medigap policy because it paid "all 
further expense" that Medicare would have paid.  However, 
National States paid Froedtert according to the Medicare 
reimbursement rate rather than the standard rate at which 
Froedtert billed Kathleen. The $130,725.63 balance represents 
the difference between Froedtert's billing of Kathleen according 
to its standard rate and the amount paid by National States at 
the Medicare reimbursement rate. 
C. 
Procedural Posture 
¶19 On 
February 
3, 
2003, 
after 
receiving 
several 
statements from Froedtert demanding payment of his wife's 
outstanding balance, Loren Ledger, Kathleen's husband, filed a 
complaint with the Wisconsin Office of the Commissioner of 
Insurance (OCI) stating that he believed National States owed 
the balance of Froedtert's bill under Kathleen's Medigap policy.  
                                                 
10 In addition, Kathleen paid a $2,800 co-payment as 
required by the Medigap policy.  That amount is not reflected in 
her total bill and is not at issue in this appeal. 
11 This amount represents payment of Kathleen's medical 
bills according to the Medicare reimbursement rate.  National 
States has never argued that it was not obligated to pay this 
amount on behalf of Kathleen. 
No.  2007AP934 
 
 
10 
 
In response to Loren's complaint, the OCI sent a letter to 
National States on July 1, 2003, agreeing with Loren that 
National States did in fact owe Froedtert the remaining balance.  
Notwithstanding the OCI's response, National States refused to 
make payment beyond the $73,309.25 it had already paid.   
¶20 More than five years after Kathleen passed away and 
about six months before Loren passed away, Froedtert filed the 
present lawsuit seeking payment of Kathleen's outstanding 
hospital bills.  The suit was filed against National States and 
Loren, but after Loren had passed away, the Loren Ledger Trust 
(the Trust) was substituted as a proper party. 
¶21 On January 15, 2007, following discovery, Froedtert 
filed a motion for summary judgment against National States.  
The next day, the Trust filed a motion for summary judgment 
against National States as well.  In support of its motion, 
Froedtert argued that, because Kathleen's final inpatient stay 
at Froedtert began after her Medicare Part A benefits had been 
exhausted, the plain language of National States' policy 
required it to pay for Kathleen's care at Froedtert's standard 
rate, not the Medicare reimbursement rate.  In response, 
National States argued that Froedtert was prohibited from 
charging Kathleen its standard rate and was required to accept 
the Medicare reimbursement rate as full payment.  National 
States focused its argument on the proposition that, by billing 
Kathleen according to its standard rate after her Medicare 
No.  2007AP934 
 
 
11 
 
benefits had been exhausted, Froedtert was engaging in the 
prohibited practice of "balance billing." 
¶22 On March 8, 2007, after reading the motions and the 
briefs 
and 
hearing 
oral 
argument, 
Judge 
McMahon 
granted 
Froedtert's motion for summary judgment.12  She based her 
decision on the Medigap policy's language, reading the phrase 
"that would have been covered by Medicare Part A" to modify the 
phrase "hospital confinement," rather than the phrase "all 
further expense incurred."  As she explained, "the policy 
requires that National States pay all the expenses incurred for 
[Kathleen]'s hospital confinement if it was a hospital stay that 
would have been covered by Medicare Part A."  She continued, "It 
is the nature of the medical services provided as would be 
covered by Medicare Part A, not the amount or rate Medicare 
would have billed." 
¶23 Judge McMahon supported her decision by referencing 
the Inpatient Psychiatric Hospital Benefit provision in National 
States' Medigap policy.  She said this provision "demonstrates 
that National States was aware of how it could limit its payment 
obligation but [it] chose not to [do so] in the provision at 
                                                 
12 Judge McMahon viewed the Trust's motion for summary 
judgment as joining Froedtert's, and therefore, she did not 
explicitly rule on the Trust's motion.  She did say that 
granting Froedtert's motion for summary judgment "resolves [the 
Trust's] claims or the issues there as well."  Therefore, while 
not explicitly ruling on the Trust's motion for summary 
judgment, the circuit court did dispose of the issues raised 
therein.   
No.  2007AP934 
 
 
12 
 
issue in [this] litigation."13  She continued, "the fact that 
National States managed to clarify that it would only cover 
expenses at the Medicare reimbursement rate in [the Inpatient 
Psychiatric] clause of the same policy but failed to do so in 
the clause at issue here supports the interpretation that full 
coverage is required." 
¶24 In addition to explaining her rationale, Judge McMahon 
stated that she did not "think this is a case about balance 
billing . . . .  That is not the issue here." 
¶25 Ultimately, on April 10, 2007, the circuit court 
entered judgment against National States, ordering it to pay 
Froedtert 
$130,725.63 
for 
Kathleen's 
outstanding 
balance, 
$797.00 
for 
costs 
and 
disbursements, 
and 
$63,223.58 
for 
statutory interest under Wis. Stat. § 628.46.  The judgment 
entered against National States totaled $194,746.21.  National 
States filed its notice of appeal ten days later. 
¶26 The court of appeals affirmed Judge McMahon, but it 
took a slightly different approach.  Like Judge McMahon, the 
court of appeals quickly dispelled the notion that Froedtert was 
                                                 
13 Under Part B of this Medigap policy, there are four 
benefits provided.  One of those benefits covers inpatient 
psychiatric hospital expenses, and it states, "If you incur 
expense for hospital confinement as the result of psychiatric 
disorder, we will pay your hospital expense at Medicare's 
reimbursement rate for up to a maximum of 185 days during your 
lifetime.  This benefit will apply only after you have exhausted 
Medicare's coverage for hospital inpatient psychiatric expense."  
(Emphasis added.)  Judge McMahon homed in on the fact that 
National States explicitly limited its payment obligations to 
the Medicare reimbursement rate in one clause but did not do so 
in the clause at issue here. 
No.  2007AP934 
 
 
13 
 
engaging in "balance billing" practices.  See Froedtert, 310 
Wis. 2d 476, ¶10 n.5 ("National States insisted at the trial 
court, and continues to insist before this court, that this case 
is about 'balance billing' . . . .  National States' continued 
repetition of this inapplicable argument . . . is curious.").   
¶27 The court of appeals then determined that the Medigap 
policy's clause relating to inpatient hospital benefits was 
ambiguous because it could "be read to establish two different 
obligations."14  Id., ¶27 (citation omitted).  Having found the 
clause ambiguous, the court said it was required to "consider 
the language from the perspective of what a reasonable insured 
would expect" and make all inferences in favor of coverage.  Id. 
(citations omitted).   
¶28 With that in mind, the court of appeals focused on the 
fact that state administrative rules in effect at the time 
Kathleen bought her Medigap policy required that Medigap 
policies sold in Wisconsin provide coverage for "all Medicare 
Part A eligible expenses"——"which may or may not be fully 
reimbursed by Medicare"——"for hospitalization not covered by 
                                                 
14  
National States claims that "all further expenses 
[sic] incurred" is modified by "that would have been 
covered by Medicare Part A," which would limit its 
obligation 
to 
paying 
only 
Medicare 
reimbursement 
amounts.  Froedtert reads "covered by Medicare Part A" 
as 
modifying 
"hospital 
confinement," 
which 
would 
require full payment for hospital confinement if that 
treatment would have been covered by Medicare Part A 
before it was exhausted. 
Froedtert Mem'l Lutheran Hosp. v. Nat'l States Ins Co., 2008 WI 
App 58, ¶26, 310 Wis. 2d 476, 750 N.W.2d 926. 
No.  2007AP934 
 
 
14 
 
Medicare." Id., ¶20 (quoting Wis. Admin. Code § INS 3.39(3)(d) 
and (5)(c)(12)).  The court found the rules significant because 
"National States could not market this Medicare supplement 
policy in Wisconsin if it did not comply with Wisconsin OCI 
regulations."  Id., ¶28.  Therefore, the court of appeals 
concluded that it was reasonable to assume "that National States 
intended to comply with [Wisconsin's] regulations," and those 
administrative rules would have required coverage of Kathleen's 
bills in this case.  Id. 
¶29 The court of appeals also looked to other provisions 
of National States' Medigap policy where it had expressly 
limited its expense obligations to "Medicare's reimbursement 
rate" and no "doctors' charges above Medicare-approved amounts."  
Id., ¶30.  The court observed that "[t]he policy contains no 
such exclusion or limitation for hospital charges."  Id. 
¶30 Based on the administrative rules in effect at the 
time National States sold Kathleen its Medigap policy and the 
fact that the policy expressly limited its amount of coverage in 
several provisions but did not do so for the provision at issue, 
the court of appeals construed the ambiguous provision in favor 
of coverage.  Id., ¶¶26-31.  As a result, the court of appeals 
No.  2007AP934 
 
 
15 
 
affirmed Judge McMahon's judgment against National States for 
the remaining balance of Kathleen's bills.15  Id., ¶38.   
¶31 The court of appeals also affirmed the circuit court's 
award of statutory interest to Froedtert under Wis. Stat. 
§ 628.46(1).16  See id., ¶¶35-38.  The court of appeals noted 
that 
National 
States 
relied 
solely 
on 
its 
own 
legal 
interpretations in denying Froedtert full payment, and even in 
the face of the OCI's rejection of those interpretations, 
National States never changed its position.  Id., ¶¶35-36.  
According to the court, National States' attempts to justify its 
denial of payment did "not create a fairly debatable question as 
to whether payment was due."  Id., ¶36.  Ultimately, the court 
                                                 
15 Judge Ralph Adam Fine issued a dissenting opinion stating 
that the policy's language was unambiguous.  Id., ¶40.  Quoting 
from the Medigap policy, Judge Fine argued that the policy was 
triggered when Medicare benefits were exhausted, id., ¶41, and 
after it was triggered the policy required National States to 
pay all "'further expense incurred for hospital confinement' 
provided that 'further expense' 'would have been covered by 
Medicare Part A,'" id., ¶42.  He then reasoned that Medicare 
"would not have covered the charges for which Froedtert Memorial 
Lutheran Hospital seeks payment from National States."  Id.  
According to Judge Fine, "This ends the discussion."  Id. 
16 Unless otherwise provided by law, an insurer shall 
promptly pay every insurance claim.  A claim shall be 
overdue if not paid within 30 days after the insurer 
is furnished written notice of the fact of a covered 
loss. . . .  Any payment shall not be deemed overdue 
when the insurer has reasonable proof to establish 
that the insurer was not responsible for the payment, 
notwithstanding that written notice has been furnished 
to the insurer. . . .  All overdue payments shall bear 
simple interest at the rate of 12 [percent] per year.   
Wis. Stat. § 628.46(1). 
No.  2007AP934 
 
 
16 
 
of appeals concluded that "National States had a clear and 
obvious obligation under its policy and the applicable law.  
National States did not have 'reasonable proof' that it '[wa]s 
not responsible for the payment.'"  Id., ¶37 (quoting Wis. Stat. 
§ 628.46(1)).  Therefore, the court of appeals affirmed the 
circuit court's award of 12 percent interest pursuant to Wis. 
Stat. § 628.46(1).  Id. 
¶32 Following the court of appeals decision, National 
States petitioned this court for review, which we granted on 
June 10, 2008. 
II. STANDARD OF REVIEW 
¶33 We review summary judgment decisions de novo, applying 
the same methodology as the circuit court.  Green Spring Farms 
v. Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816 (1987).  In 
this case, we apply that methodology while interpreting an 
insurance contract.  The interpretation of an insurance contract 
also is a question of law that we review de novo.  Frost v. 
Whitbeck, 2002 WI 129, ¶5, 257 Wis. 2d 80, 654 N.W.2d 225. 
III. DISCUSSION 
¶34 This case presents the question of whether National 
States' Medigap policy obligates it to pay Froedtert for the 
services rendered to Kathleen between October 26, 2000, and 
February 12, 2001, according to Froedtert's standard rate, or 
whether National States may pay Froedtert at the lower Medicare 
reimbursement rate.  To answer a question of this nature, we 
look first to the language of the policy.  Plastics Eng'g Co. v. 
No.  2007AP934 
 
 
17 
 
Liberty Mut. Ins. Co., 2009 WI 13, ¶27, ___ Wis. 2d ___, 759 
N.W.2d 613; Danbeck v. Am. Family Mut. Ins. Co., 2001 WI 91, 
¶10, 245 Wis. 2d 186, 629 N.W.2d 150.  The language of the 
policy governs unless it is supplanted by state or federal law.  
See Wis. Stat. § 631.15(3m) ("A policy that violates a statute 
or rule is enforceable against the insurer as if it conformed to 
the statute or rule.").  Of course, the language of a policy may 
not be entirely clear as applied to a given set of facts.  In 
that event, the court employs various canons of contract 
construction.  See Hull v. State Farm Mut. Auto. Ins. Co., 222 
Wis. 2d 627, 636-37, 586 N.W.2d 863 (1998); Kremers-Urban Co. v. 
Am. Employers Ins. Co., 119 Wis. 2d 722, 735-36, 351 N.W.2d 156 
(1984). 
¶35 The controversy here involves the interpretation of a 
provision in the Medigap policy's section supplementing Medicare 
Part A benefits.  The provision reads as follows: "[Part B](4) 
BENEFITS AFTER MEDICARE STOPS – If maximum benefits have been 
paid under Medicare for in-patient hospital expense, including 
the lifetime reserve days, we will pay all further expense 
incurred for hospital confinement that would have been covered 
by Medicare Part A."  (Emphasis added.) 
¶36 National States contends that this language is a 
contractual promise to pay the same amount for hospital benefits 
that Medicare would have paid had Kathleen still been eligible 
to receive those Medicare benefits.  National States follows the 
analysis of Judge Fine's dissent in the court of appeals, 
No.  2007AP934 
 
 
18 
 
arguing that the Medigap policy, when read completely, is 
unambiguous in providing coverage for only the amount of expense 
that Medicare would pay if Kathleen were still eligible for 
Medicare benefits.  National States asserts that its policy 
provides 
coverage 
for 
certain 
eligible 
expense——namely, 
inpatient hospital expense——but only at Medicare reimbursement 
rates.  It supports this position by arguing that the Medigap 
policy phrase "all further expense incurred" is modified by the 
phrase "that would have been covered by Medicare Part A."   
¶37 In contrast, Froedtert maintains that the policy 
language at issue unambiguously provides payment for the full 
amount of Kathleen's bill.  It argues that the policy's phrase 
"hospital confinement" is modified by the phrase "that would 
have been covered by Medicare Part A."  Under this reading, 
National States is required to make full payment for Kathleen's 
entire hospital confinement if such confinement would otherwise 
have been covered by Medicare Part A prior to the exhaustion of 
benefits.  Froedtert contends that this plain language reading 
is supported by the fact that the administrative rules in effect 
at the time National States sold Kathleen its Medigap policy 
appear to have required that all Medigap policies sold in 
Wisconsin provide full coverage for such hospital expense.  
Also, Froedtert supports its argument by noting that the Medigap 
policy expressly limited its amount of payment in several other 
provisions but did not do so in the provision at issue here. 
No.  2007AP934 
 
 
19 
 
¶38 Before proceeding to our primary analysis, we must 
make clear that we do not see this case as a dispute over 
"balance billing."  National States spends the majority of its 
almost 60-page brief arguing that this is a case about "balance 
billing."  It asserts that the court of appeals acknowledged 
only one type of "balance billing," which National States admits 
is not at issue in this case.17  See Froedtert, 310 Wis. 2d 476, 
¶10 n.5; see also 42 U.S.C. 1395cc(a)(1)(A).   
¶39 However, National States claims there is a second type 
of "balance billing" that prohibits a hospital from collecting 
"the balance of its standard charges from a patient who was 
formerly covered by Medicare after expiration of the Medicare 
benefits period."  National States argues that, by billing 
Kathleen according to its standard rate rather than according to 
the Medicare reimbursement rate, Froedtert was engaging in an 
impermissible "balance billing" practice.  We must note that 
National States presents little authority for its position under 
Wisconsin law; rather, it cites model regulations that Wisconsin 
did not adopt and court cases from other jurisdictions that are 
factually inapposite.   
                                                 
17 The court of appeals defined "balance billing" as a 
billing practice that takes place when the hospital or other 
medical services provider bills the patient for the difference 
between the amount Medicare reimbursed the services provider for 
the services rendered and the amount that would be due for the 
services rendered using the provider's standard billing rate.  
Froedtert, 310 Wis. 2d 476, ¶10 n.5.  Because Medicare paid none 
of Kathleen's inpatient hospital expense during her final stay 
at Froedtert, this type of "balance billing" is not at issue in 
this case.  Id. 
No.  2007AP934 
 
 
20 
 
¶40 Because 
there 
is 
no 
Wisconsin 
authority 
that 
prohibited Froedtert from billing Kathleen according to its 
standard rate when she arrived at Froedtert on October 26, 2000, 
after her Medicare Part A benefits had been exhausted, we forgo 
the invitation to create such authority on our own accord.  We 
conclude that National States' "balance billing" discussion is 
not applicable to the present dispute and analyze it no further. 
A. 
National States' Liability for the Remaining Balance 
¶41 Generally, "language in an insurance contract is given 
its common, ordinary meaning, that is, what the reasonable 
person in the position of the insured would have understood the 
words to mean."  Folkman v. Quamme, 2003 WI 116, ¶17, 264 
Wis. 2d 617, 665 N.W.2d 857 (citations and quotations omitted).  
"We interpret undefined words and phrases of an insurance policy 
as they would be understood by a reasonable insured."  Acuity v. 
Bagadia, 2008 WI 62, ¶13, 310 Wis. 2d 197, 750 N.W.2d 817 
(citation omitted).  If the words or provisions of an insurance 
contract are capable of "more than one reasonable construction, 
they are ambiguous."  Lisowski v. Hastings Mut. Ins. Co., 2009 
WI 11, ¶9, ___ Wis. 2d ___, 759 N.W.2d 754.  If an insurance 
contract is ambiguous as to coverage, "it will be construed in 
favor of the insured."  State Farm Mut. Auto Ins. Co. v. 
Langridge, 2004 WI 113, ¶15, 275 Wis. 2d 35, 683 N.W.2d 75; 
Folkman, 264 Wis. 2d 617, ¶16 ("Insurers have the advantage over 
insureds because they draft the contracts.  Thus, courts 
No.  2007AP934 
 
 
21 
 
construe 
ambiguities 
in 
coverage 
in 
favor 
of 
the 
insureds . . . .") (citation omitted). 
¶42 The parties in this case have submitted separate, 
conflicting interpretations of the policy language.  As noted, 
the policy states that after Medicare benefits have been 
exhausted, National States "will pay all further expense 
incurred for hospital confinement that would have been covered 
by Medicare Part A."  Froedtert interprets this language to mean 
that National States must pay for all hospital expense that 
would have been covered under Medicare Part A, even if such 
expense is billed according to the hospital's standard rate.  
National States argues that it is liable for that expense but 
only at the Medicare reimbursement rate.  We see both of these 
interpretations as reasonable, and thus, we deem the policy 
language ambiguous.  See Lisowski, ___ Wis. 2d ___, ¶9. 
¶43 When policy language is ambiguous, the result intended 
by those who drafted the language is uncertain.  However, 
because the insurer is in a position to write its insurance 
contracts with the exact language it chooses——so long as the 
language conforms to statutory and administrative law——ambiguity 
in that language is construed in favor of an insured seeking 
coverage.  See Folkman, 264 Wis. 2d 617, ¶16.  Consequently, we 
hold that National States is liable to Froedtert for the full 
amount of Kathleen's hospital expense at Froedtert's standard 
billing rate.   
No.  2007AP934 
 
 
22 
 
¶44 Having made this determination by using a standard 
canon of construction, we have no obligation to support it by 
additional analysis.  See Langridge, 275 Wis. 2d 35, ¶15; 
Folkman, 264 Wis. 2d 617, ¶16.  Nonetheless, the application of 
a standard canon of construction without more sometimes leaves 
an impression of arbitrariness.  Here, there is quite a bit more 
to support our conclusion. 
¶45 First, there are other provisions in the policy that 
clearly limit National States' obligation to pay, while the 
provision at issue does not.  For instance, the psychiatric 
benefits 
provision 
details 
the 
policy's 
coverage 
for 
a 
particular kind of "hospital confinement" and limits the 
insurer's 
payment 
to expense "at Medicare's reimbursement 
rate."18  The provision also limits total days of coverage 
following the exhaustion of Medicare Part A benefits.  
¶46 This provision stands in sharp contrast to the 
provision at issue in this case: "Benefits After Medicare Stops—
—If maximum benefits have been paid under Medicare for inpatient 
hospital expenses . . . we will pay all further expense incurred 
                                                 
18 The policy provides: 
Inpatient Psychiatric Hospital Benefit——If you 
incur expense for hospital confinement as a result of 
psychiatric disorder, we will pay your hospital 
expense at Medicare's reimbursement rate for up to a 
maximum of 175 days during your lifetime.  This 
benefit will apply only after you have exhausted 
Medicare's coverage for hospital inpatient psychiatric 
expense. 
(Emphasis added.)   
No.  2007AP934 
 
 
23 
 
for hospital confinement that would have been covered by 
Medicare Part A."  There is no limit as to duration in the 
provision at issue, and there is no explicit limit as to the 
payment rate. 
¶47 Another provision in the policy entitled "Exceptions 
and Limitations" states the following: "This policy does not 
cover loss resulting from . . . doctors' charges above Medicare-
approved amounts."  (Emphasis added.)  Here again, the policy 
clearly ties its payment to Medicare-approved amounts. 
¶48 We see in these provisions that National States is 
capable of limiting its rate of payment in unmistakable terms, 
something that it did not do in the provision at issue.   
¶49 Second, 
National 
States' 
interpretation 
of 
the 
provision 
at 
issue 
would 
nullify 
the 
expectations 
of 
a 
reasonable insured.  See Acuity, 310 Wis. 2d 197, ¶13. 
¶50 The policy warns insureds in its first paragraph that 
the policy, "along with Medicare, may not cover all of your 
medical 
costs. 
 
You 
should 
review 
carefully 
all 
policy 
limitations." 
 
The 
policy 
then 
incorporates 
many 
clear 
limitations on payment in addition to the limitation on the 
inpatient psychiatric hospital benefit and the limitation on 
doctors' charges.  For instance, the "Skilled Nursing Benefits 
for Medicare——Eligible Confinement" provision reads as follows: 
"When you incur expense for skilled nursing facility confinement 
which is eligible under Medicare, we will pay the co-payment 
amounts specified by Medicare from the 21st through 100th day of 
No.  2007AP934 
 
 
24 
 
confinement."  In other words, National States will not pay the 
co-payment for eligible skilled nursing facility confinement 
during the first 20 days or after the 100th day. 
¶51 Another provision, the "Prescription Drug Benefit," 
states:  
When 
you 
incur 
expense 
for 
out-patient 
prescription drugs, we will pay 80 [percent] of the 
amount in excess of $6,250.00 in each calendar year.  
The deductible of $6,250.00 will be applied once in 
each calendar year.  The out-patient drugs must be 
prescribed by a doctor for the treatment of a sickness 
or injury covered by this policy. 
This provision makes the amount of outpatient prescription drug 
expense to be borne by the insured quite specific.   
¶52 A third provision reads: "This policy does not cover 
the Medicare Part A or Medicare Part B deductibles."  This 
language is not ambiguous. 
¶53 Compare the provision at issue in this case.  It 
creates an expectation: "If maximum benefits have been paid 
under Medicare for in-patient hospital expense . . . we will pay 
all further expense incurred for hospital confinement . . . ."  
According to National States, the additional wording——"that 
would have been covered by Medicare Part A"——creates an 
exception to the insurer's promise, so that the provision 
effectively reads: we will pay all further expense incurred for 
hospital confinement except for an expense billed at greater 
than the Medicare reimbursement rate (which, in this case, 
amounts to about 65 percent of the bill, e.g., $130,725.63 plus 
the co-payment); this amount the insured must pay. 
No.  2007AP934 
 
 
25 
 
¶54 We do not believe a reasonable insured would expect 
this result to follow the words "we will pay all further expense 
incurred for hospital confinement."  See id.  Any intended 
exception or qualification is too subtle in the context of the 
entire policy to warn the insured of the limitation on the 
insurer's liability. 
¶55 The court of appeals relied on the administrative 
rules then in effect when Kathleen purchased her Medigap policy 
to support the position that we now affirm.  We acknowledge that 
Wis. Admin. Code § INS 3.39(5)(c)(12),19 read together with Wis. 
Admin. Code § INS 3.39(3)(d),20 can be interpreted to require 
that 
Medigap 
policies 
cover 
all 
unpaid 
hospital 
expense 
"recognized as medically necessary and reasonable by Medicare," 
                                                 
19 Today's version of the Administrative Code requires that 
Medigap policies, after exhaustion of all Medicare Part A 
benefits, provide coverage for "all Medicare Part A expenses for 
hospitalization not covered by Medicare to the extent the 
hospital is permitted to charge by federal law and regulation 
and subject to the Medicare reimbursement rate."  Wis. Admin. 
Code § INS 3.39(5)(c)(12) (June 2005). 
20 The current version of the Code states that "'Medicare 
eligible expenses' means health care expenses that are covered 
by Medicare Parts A and B, recognized as medically necessary and 
reasonable by Medicare, and that may or may not be fully 
reimbursed by Medicare."  Wis. Admin. Code § INS 3.39(3)(s) 
(June 2005). 
No.  2007AP934 
 
 
26 
 
irrespective of the billing rate.21  Nonetheless, Judge Fine's 
dissent, referenced supra at ¶31 n.15 and infra at ¶63, shows 
that the meaning of the rules is not free from doubt, and thus, 
we decline to rely on the administrative rules for this 
decision. 
¶56 In sum, there is a good deal of evidence within the 
policy to support our determination that an ambiguous provision 
on payment of hospital confinement expense must be construed 
against the insurer in favor of coverage.  See Langridge, 275 
Wis. 2d 35, ¶15; Folkman, 264 Wis. 2d 617, ¶16.  We believe that 
a reasonable insured, after purchasing the Medigap policy in 
this case, would expect that she would be provided coverage for 
all further expense incurred for hospital confinement after 
Medicare 
payments 
had 
been 
exhausted. 
 
See 
Acuity, 
310 
Wis. 2d 197, ¶13.  Consequently, we affirm the decision of the 
court of appeals to impose judgment against National States for 
the 
entire 
balance 
remaining 
on 
Kathleen's 
account 
with 
Froedtert.   
                                                 
21 We note that this argument does not necessarily apply 
across-the-board to all Medicare Part A benefits.  For example, 
Medigap policies sold under the then-existing administrative 
rules required that those policies provide coverage for "at 
least 175 days per lifetime for inpatient psychiatric hospital 
care."  See Wis. Admin Code § INS 3.39(5)(c)(1).  Unlike the 
previous version of the administrative rule, § INS 3.39(5)(c)(1) 
is silent with regard to "Medicare eligible expenses" or any 
other language that dictates the rate of payment that must be 
covered. 
No.  2007AP934 
 
 
27 
 
 
B. 
Statutory Interest 
¶57 The 
circuit court imposed statutory interest of 
$63,223.58 running from March 5, 2003, through March 15, 2007, 
pursuant to Wis. Stat. § 628.46.  The March 5, 2003, date 
represents 30 days after Loren filed his complaint with the OCI 
on February 3, 2003. 
¶58 Twelve percent interest was imposed upon National 
States after the circuit court granted summary judgment to 
Froedtert 
on 
the 
issue 
of 
Kathleen's 
hospital 
expense.  
Froedtert's complaint did not ask for 12 percent interest under 
Wis. Stat. § 628.46.  Rather, Froedtert requested this interest 
when it prepared a draft judgment for the circuit court after 
summary judgment. 
No.  2007AP934 
 
 
28 
 
¶59 Wisconsin Stat. § 628.46(1)22 imposes an annual rate of 
12 percent interest on any insurer who fails to pay a claim 
                                                 
22 Wisconsin Stat. § 628.46 reads in part: 
(1) Unless otherwise provided by law, an insurer 
shall promptly pay every insurance claim.  A claim 
shall be overdue if not paid within 30 days after the 
insurer is furnished written notice of the fact of a 
covered loss and of the amount of the loss.  If such 
written notice is not furnished to the insurer as to 
the entire claim, any partial amount supported by 
written notice is overdue if not paid within 30 days 
after such written notice is furnished to the insurer.  
Any part or all of the remainder of the claim that is 
subsequently supported by written notice is overdue if 
not paid within 30 days after written notice is 
furnished to the insurer.  Any payment shall not be 
deemed overdue when the insurer has reasonable proof 
to establish that the insurer is not responsible for 
the payment, notwithstanding that written notice has 
been furnished to the insurer.  For the purpose of 
calculating the extent to which any claim is overdue, 
payment shall be treated as being made on the date a 
draft or other valid instrument which is equivalent to 
payment was placed in the U.S. mail in a properly 
addressed, postpaid envelope, or, if not so posted, on 
the date of delivery.  All overdue payments shall bear 
simple interest at the rate of 12 percent per year. 
(2) Notwithstanding sub. (1), the payment of a 
claim shall not be overdue until 30 days after the 
insurer receives the proof of loss required under the 
policy or equivalent evidence of such loss.  The 
payment of a claim shall not be overdue during any 
period in which the insurer is unable to pay such 
claim because there is no recipient who is legally 
able to give a valid release for such payment, or in 
which the insurer is unable to determine who is 
entitled to receive such payment, if the insurer has 
promptly notified the claimant of such inability and 
has offered in good faith to promptly pay said claim 
upon determination of who is entitled to receive such 
payment. 
No.  2007AP934 
 
 
29 
 
within 30 days of being provided written notice of such claim.  
However, a claim cannot "be deemed overdue when the insurer has 
reasonable 
proof 
to 
establish 
that 
the 
insurer 
is 
not 
responsible for the payment."  Id.  In Kontowicz v. American 
Standard Insurance Co., 2006 WI 48, ¶48, 290 Wis. 2d 302, 714 
N.W.2d 105, this court stated that "'[r]easonable proof' means 
that amount of information which is sufficient to allow a 
reasonable insurer to conclude that it may not be responsible 
for payment of a claim."  Generally, reasonable proof is equated 
with whether coverage is considered "fairly debatable."  Id. 
(quoting Allstate Ins. Co. v. Konicki, 186 Wis. 2d 140, 160, 519 
N.W.2d 723 (Ct. App. 1994)).   Thus, the critical inquiry is 
whether National States' obligation to pay all Kathleen's 
inpatient hospital care expense at Froedtert's standard rate was 
"fairly debatable."   
¶60 For 
several 
reasons, 
we 
think 
the 
question 
of 
coverage, or more accurately the rate to be paid for coverage, 
is fairly debatable in this case.   
¶61 First, in agreement with the majority of the court of 
appeals, we have determined that the policy provision at issue 
is ambiguous.  Supra ¶42; see also Froedtert, 310 Wis. 2d 476, 
¶¶26-27.  Both parties submitted reasonable interpretations of 
the provision.  Moreover, the more persuasive reading of the 
provision relies on evidence extraneous to the provision itself.   
¶62 When we look at the first part of the provision——"If 
maximum benefits have been paid under Medicare for in-patient 
No.  2007AP934 
 
 
30 
 
hospital expenses, including the lifetime reserve days"——we see 
that the phrase "including the lifetime reserve days" does not 
relate to the immediately preceding words: "in-patient hospital 
expenses."  (Emphasis added.)  Rather, the "including" phrase 
relates back to "maximum benefits," nine words earlier.  Hence, 
National States can point to a pattern of suspect drafting to 
support its view that the phrase "that would have been covered 
by Medicare Part A" relates back to the phrase "all further 
expense incurred," not the immediately preceding words.   
¶63 Second, in his dissent, Judge Fine sided with the 
insurer in his belief that the provision at issue was 
unambiguous.  Judge Fine was not deterred in his analysis by the 
existing administrative rule.  Indeed, he used the rule to 
buttress his argument.23  Judge Fine's well-reasoned dissenting 
                                                 
23  
The Wisconsin Administrative Code provisions, 
quoted by the Majority at ¶¶20, 22, and 24 n.10, are 
wholly consistent with the plain reading of National 
States' obligations here.  First, Wis. Admin. Code 
§ INS 3.39(3)(d) (1997) defined "Medicare eligible 
expenses" to mean "health care expenses which are 
covered by Medicare, recognized as medically necessary 
and reasonable by Medicare, and which may or may not 
be fully reimbursed by Medicare."  (Emphasis added.)  
Thus, in order to be "Medicare eligible expenses," the 
expenses must be "covered by Medicare" because those 
expenses are determined by Medicare to be "necessary 
and reasonable."  Medicare's agreement with Froedtert 
promises to pay Froedtert, and Froedtert promises to 
accept, 
Medicare's 
determination 
of 
what 
is 
"reasonable 
and 
necessary" 
irrespective 
of 
what 
Froedtert might bill others not protected by the 
Medicare umbrella.  The appended clause, "which may or 
may not be fully reimbursed by Medicare" merely means 
that once Medicare coverage is exhausted, as is the 
case here, Medicare will no longer reimburse the 
No.  2007AP934 
 
 
31 
 
                                                                                                                                                             
healthcare provider for the whole of the Medicare-
approved "necessary and reasonable" expense.  To say 
that the clause, "which may or may not be fully 
reimbursed 
by 
Medicare" means what the Majority 
construes it to mean, ignores the "which are covered 
by Medicare" requirement, which is, as we have seen, 
congruent with the "that would have been covered by 
Medicare Part A" proviso in the National States 
policy. 
 
Wisconsin Admin. Code § INS 3.39(5)(c)12. (2001) 
is also consistent with the National States policy.  
As 
the 
Majority 
recognizes 
in 
¶24 
n.10, 
that 
regulation reads: "Upon exhaustion of all Medicare 
hospital inpatient coverage including the lifetime 
reserve days, [the policy must provide] coverage of 
all 
Medicare 
Part 
A 
eligible 
expenses 
for 
hospitalization 
not 
covered 
by 
Medicare." 
 
The 
expenses must be "eligible" under "Medicare Part A."  
There is no dispute here but that what Froedtert seeks 
to recover from National States are not "Medicare Part 
A eligible expenses." 
 
Although Mrs. Ledger agreed upon her admittance 
to Froedtert to be "financially responsible for all 
charges incurred" by her during her stay at the 
hospital, her undertaking does not negate her contract 
with National States, nor could it.  A simple example 
will make this clear.  Assume a bonding company 
guarantees 
a 
contractor's obligation to build a 
building, with a liability limit of $100,000.  Assume 
further that the contractor's contract with the owner 
obligates the contractor to complete the construction 
or be liable 
for all the costs of delay and 
remediation.  Assume still further that those costs 
are $500,000.  Could anyone seriously argue that the 
bonding company would be liable for the $500,000 
rather tha[n] its $100,000-undertaking?  Of course 
not.  That is the situation we have here. 
Froedtert, 310 Wis. 2d 476, ¶42 n.1 (Fine, J., dissenting). 
No.  2007AP934 
 
 
32 
 
opinion did not automatically establish that the issue of 
coverage was "fairly debatable," but we think his dissent is a 
relevant consideration.24 
¶64 Third, the coverage issue in this case is a matter of 
first impression in Wisconsin.  See United States Fire Ins. Co. 
v. Good Humor Corp., 173 Wis. 2d 804, 835-36, 496 N.W.2d 730 
(Ct. App. 1993) (using the fact that the dispute was a matter of 
first impression as partial justification for finding the 
question of coverage fairly debatable).  By accepting National 
States' petition for review, this court signaled that it thought 
National States' argument was worth serious consideration. 
¶65 Before the court granted the petition for review, the 
OCI revised its administrative rule to clarify the required 
coverage in Medigap policies.  See, supra, notes 19 and 20.  
This modification demonstrates that a major policy question was 
embodied in the interpretation of both the provision at issue 
and 
the 
administrative rule.  We think the absence of 
controlling precedent and the importance of the unsettled policy 
issue gave National States "'a right to litigate this matter 
without facing prejudgment interest.'"  See Good Humor, 173 
                                                 
24 We do not claim that every time there is a divided court 
on whether coverage exists under an insurance contract that the 
coverage is then "fairly debatable."  Instead, the fact that 
there was a well-reasoned dissenting opinion in this case 
regarding the issue of coverage is relevant evidence to consider 
in making the determination of whether coverage was actually 
"fairly debatable."  
No.  2007AP934 
 
 
33 
 
Wis. 2d at 835-36 (quoting the Brown County Circuit Court, Vivi 
Dilweg, Judge). 
¶66 In light of these considerations, we determine that 
the issue of coverage in this case was "fairly debatable" and 
National States should not be penalized for exercising its right 
to litigate the matter.  See Fritsche v. Ford Motor Credit Co., 
171 Wis. 2d 280, 306 n.7, 491 N.W.2d 119 (Ct. App. 1992).  
Therefore, we reverse the court of appeals' affirmance of the 
circuit court's judgment awarding Froedtert 12 percent statutory 
interest. 
¶67 Because the circuit court awarded 12 percent interest 
under Wis. Stat. § 628.46, it did not consider Froedtert's 
eligibility for prejudgment interest under other law.  See 
Olguin v. Allstate Ins. Co., 71 Wis. 2d 160, 168, 237 N.W.2d 694 
(1976) ("The oft-stated rule in regard to pre-judgment interest 
is that it is proper when there is reasonably certain standard 
of measurement by the correct application of which one can 
ascertain the amount he owes.") (internal quotations and 
citation omitted); Good Humor, 173 Wis. 2d at 833-35.  We remand 
the case to the circuit court for its determination of that 
issue and other actions consistent with this opinion.   
IV. CONCLUSION 
¶68 We conclude that the "Benefits After Medicare Stops" 
provision in National States' 1998 Medigap policy is ambiguous 
and must be construed against the insurer to provide coverage at 
Froedtert's standard rate for Kathleen's hospital confinement at 
No.  2007AP934 
 
 
34 
 
Froedtert after her Medicare Part A benefits were exhausted.  
This construction is supported by the sharp contrast between the 
uncertain limitations in the provision at issue and the clear 
limitations contained in other provisions of the policy.  It is 
also supported by the expectations of a reasonable insured that 
this policy would pay for "all further expense incurred" for 
hospital confinement.  We do not agree, however, that National 
States is subject to interest under Wis. Stat. § 628.46.  The 
issue of the policy's coverage above the Medicare reimbursement 
rate was fairly debatable in light of all the facts and 
circumstances of this case. 
¶69 By the Court.—The decision of the court of appeals is 
affirmed in part, reversed in part, and the cause is remanded to 
the circuit court for further proceedings consistent with this 
opinion. 
 
 
No.  2007AP934 
 
 
 
 
1