Case Title: Debra L. Kontowicz v. American Standard Insurance Co. of Wisconsin

Citation: 2006 WI 48

Docket Number: 

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2006-05-18T00:00:00Z

Document:
2006 WI 48 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2003AP2177 & 2003AP2534 
 
 
COMPLETE TITLE: 
 
 
Debra L. Kontowicz, Keith A. Kontowicz, Scott 
Kontowicz, and Katie Kontowicz, by their 
Guardian ad Litem, William Cannon, 
          Plaintiffs-Respondents-Petitioners, 
 
American Family Mutual Insurance Co., 
          Involuntary-Plaintiff, 
     v. 
American Standard Insurance Co. of Wisconsin, 
          Defendant-Appellant, 
 
ABC Insurance Co., 
          Defendant. 
 
 
Larry Buyatt, 
          Plaintiff-Respondent-Petitioner, 
 
American Family Mutual Insurance Company, 
          Involuntary-Plaintiff, 
     v. 
Metropolitan Property and Casualty Insurance 
Company and Jason E. Schoessow, 
          Defendants-Appellants. 
 
 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2005 WI App 22 
Reported at: 278 Wis. 2d 664, 693 N.W.2d 112 
(Ct. App. 2005-Published) 
 
 
OPINION FILED: 
May 18, 2006   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
November 15, 2005   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Waukesha   
 
JUDGE: 
Mark Gempeler and Lee S. Dreyfus,Jr. 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
PROSSER, J., dissents (opinion filed).   
 
NOT PARTICIPATING: WILCOX, J., did not participate.   
 
 
 
 
 
 
ATTORNEYS: 
 
For 
the 
plaintiffs-respondents-petitioners 
there 
were 
briefs by William M. Cannon, Edward E. Robinson, and Cannon & 
Dunphy, S.C., Brookfield, and oral argument by Edward E. 
Robinson. 
 
For the defendants-appellants Metropolitan Property and 
Casualty Insurance Company and Jason E. Schoessow, there was a 
brief by Donald H. Piper, Patrick A. O’Neil, and Piper & 
Schmidt, Milwaukee, and oral argument by Donald H. Piper. 
 
For the defendant-appellant American Standard Insurance Co. 
of Wisconsin, there was a brief by James C. Ratzel and Ratzel & 
Associates, LLC, Brookfield; and Colleen D. Ball and Appellate 
Counsel, S.C., Wauwatosa, and oral argument by James C. Ratzel. 
 
An amicus curiae brief was filed by Todd G. Smith and 
LaFollette, Godfrey & Kahn, Madison, on behalf of Civil Trial 
Counsel of Wisconsin and the Wisconsin Insurance Alliance. 
 
An amicus curiae brief was filed by Keith R. Clifford, 
Teague D. Devitt, and Clifford & Raihala, S.C., Madison, on 
behalf of the Wisconsin Academy of Trial Lawyers. 
 
 
2006 WI 48
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2003AP2177 & 2003AP2534  
(L.C. No. 
2001CV697 & 2001CV1120) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Debra L. Kontowicz, Keith A. Kontowicz, Scott 
Kontowicz, and Katie Kontowicz, by their 
Guardian ad Litem, William Cannon, 
 
          Plaintiffs-Respondents-Petitioners, 
 
American Family Mutual Insurance Co., 
 
          Involuntary-Plaintiff, 
 
     v. 
 
American Standard Insurance Co. of Wisconsin, 
 
          Defendant-Appellant, 
 
ABC Insurance Co., 
 
          Defendant. 
 
 
 
 
 
 
FILED 
 
MAY 18, 2006 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
Larry Buyatt, 
 
          Plaintiff-Respondent-Petitioner, 
 
American Family Mutual Insurance Company, 
 
          Involuntary-Plaintiff, 
 
     v. 
 
 
 
 
 
Metropolitan Property and Casualty Insurance 
Company and Jason E. Schoessow, 
 
          Defendants-Appellants. 
 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
Remanded.   
 
¶1 
N. PATRICK CROOKS, J.   Debra Kontowicz (Kontowicz) 
and Larry Buyatt (Buyatt) appeal a published decision of the 
court of appeals reversing the decisions of two different 
branches of the Waukesha County Circuit Court.  The cases were 
consolidated on appeal.  In each case, the circuit court awarded 
the plaintiffs/petitioners interest under Wis. Stat. § 628.46 
(2001-02).1  The issue before this court is whether § 628.46, 
which imposes a 12 percent simple interest rate for overdue 
payment of an insurance claim, applies to the insurance company 
of a negligent tortfeasor and, thus, allows the recovery of 
interest 
by 
a 
third-party 
claimant, 
such 
as 
the 
plaintiffs/petitioners here, injured by such tortfeasor. 
¶2 
We reverse the decision of the court of appeals.  We 
conclude that when there is clear liability, a sum certain owed, 
and 
written 
notice 
of 
both, 
the 
plain 
language 
of 
Wis. Stat. § 628.46, 
incorporating 
by 
reference 
                                                 
1 All subsequent references to the Wisconsin Statutes are to 
the 2001-02 version unless otherwise indicated. 
No. 
2003AP2177 & 2003AP2534   
 
2 
 
Wis. Stat. § 646.31(2), imposes 12 percent simple interest on 
overdue payments to third-party claimants in such personal 
injury claims and actions.  However, we limit our holding to 
only those situations in which three conditions to trigger the 
interest are met.  First, there can be no question of liability 
on the part of the insured.  Second, the amount of damages must 
be in a sum certain amount.  Third, the claimant must provide 
written notice of both liability and the sum certain amount 
owed.  We further hold that claims concerning the issue of 
interest 
due 
under 
§ 628.46 
may 
be 
bifurcated 
under 
Wis. Stat. § 805.05(2), and that in the case of Buyatt, the 
award 
of 
interest 
should 
be 
in 
accord 
with 
Wis. Stat. § 807.01(4), rather than § 628.46.   
I 
DEBRA KONTOWICZ 
¶3 
On August 30, 2000, Debra Kontowicz's spinal cord was 
severed and she was rendered a quadriplegic as a result of an 
automobile accident.  Kontowicz's van was struck from behind by 
a vehicle operated by Daniel Jeffers (Jeffers), a 16-year-old 
insured 
by 
American 
Standard 
Insurance 
Co. 
of 
Wisconsin 
(American Standard).  Based on the skid marks left by his car, 
police concluded that Jeffers had been traveling between 88 and 
90 miles per hour (m.p.h.) in a 35 m.p.h. zone.  Kontowicz's 
vehicle went off the road, striking a utility pole.  She was 
taken to the hospital by Flight for Life.  At the time of the 
accident, Jeffers' policy with American Standard included a 
$500,000 per person liability limit. 
No. 
2003AP2177 & 2003AP2534   
 
3 
 
¶4 
By September 7, 2000, American Standard was aware of 
Kontowicz's quadriplegic injuries, and Jeffers' almost certain 
liability.  The head of American Standard's legal department met 
with the claims adjuster assigned to the Kontowicz claim on that 
date, and decided that "[o]nce the paraplegic injuries are 
confirmed, we should post the $500,000 limits with what appears 
at this time to be clear liability on the part of Dan Jeffers." 
¶5 
Kontowicz and her family filed suit against American 
Standard and Jeffers on November 8, 2000.  On December 28, 2000, 
both American Standard and Jeffers filed separate answers to 
Petitioners' complaint.  In his answer, Jeffers admitted that he 
was negligent with respect to the operation of his motor 
vehicle.  One week later, on January 5, 2001, the Kontowiczs' 
attorney wrote counsel for American Standard, enclosing a copy 
of the 
hospital discharge 
summary 
documenting 
Kontowicz's 
severed spinal cord and quadriplegia, and an itemization of her 
related medical bills, along with copies of the actual billing 
statements, in the amount of $238,379.53.   
¶6 
American Standard did not agree to tender its limits 
until June 1, 2001.  Its offer to the Kontowiczs was conditioned 
upon "a full release of all defendants," even though American 
Standard was not required to secure a full release of its 
insureds as a condition of paying limits.2  
                                                 
2 American Standard's policy, however, contained a pay-and-
walk provision, which provided that "WE WILL NOT DEFEND ANY SUIT 
AFTER OUR LIMIT OF LIABILITY HAS BEEN OFFERED OR PAID."   
 
No. 
2003AP2177 & 2003AP2534   
 
4 
 
¶7 
On July 30, 2001, the attorney for the Kontowiczs 
wrote American Standard demanding the payment of policy limits, 
together with Wis. Stat. § 628.46 interest.  American Standard 
responded on October 18, 2001, reiterating its position that it 
would pay policy limits only in return for a release of American 
Standard and its insureds.   
¶8 
American Standard agreed to pay its policy limits in 
return for only a partial release of its insureds on February 2, 
2002.  Three weeks later, on February 19, 2002, the Kontowiczs 
reached a settlement with Jeffers, whereby Jeffers agreed to pay 
$78,000 over and above the $500,000 liability limit.   
¶9 
On February 20, 2002, American Standard sent a check 
to the Kontowiczs for $500,000.  The Kontowiczs reserved their 
right to bring a claim against American Standard for interest 
pursuant to Wis. Stat. § 628.46.   
¶10 Following a motion hearing, Waukesha County Circuit 
Court Judge Donald P. Hassin made an oral ruling awarding the 
Kontowiczs 
interest 
pursuant 
to Wis. Stat. § 628.46. 
 The 
circuit court ruled that a claim was made against American 
Standard for at least $238,000 when, on January 5, 2001, the 
Kontowiczs sent the company a copy of the hospital discharge 
summary and itemized medical bills.  In addition, the circuit 
court ruled that American Standard was presented with a claim 
for the full $500,000 policy limit on July 30, 2001, when the 
Kontowiczs' counsel demanded payment of the limits.  An order 
No. 
2003AP2177 & 2003AP2534   
 
5 
 
was entered on January 2, 2003, awarding the Kontowiczs 
$49,643.15 in statutory interest.3  American Standard appealed.   
LARRY BUYATT 
¶11 On June 21, 1999, Larry Buyatt was injured in a motor 
vehicle collision caused by the negligence of Jason Schoessow 
(Schoessow). Schoessow was driving west on Highway 59 at 
approximately 45 m.p.h. when he failed to stop at a red light, 
striking Buyatt's truck on its front right fender as it traveled 
north through the intersection.  At the time of the accident, 
Schoessow was covered by a Metropolitan Property and Casualty 
Insurance Co. (Metropolitan) liability insurance policy.   
¶12 On January 29, 2001, Buyatt sent Metropolitan a letter 
and documentation detailing the collision and his resulting 
injuries.  Buyatt's medical bills and lost wages, at the time, 
totaled $6,361.  In this letter, Buyatt offered to settle his 
claim for $35,000.   
¶13 In response, Metropolitan admitted that at least a 
portion of Buyatt's medical bills were reasonable and necessary 
for treatment as a result of injuries he suffered in the 
collision.  However, Metropolitan offered only $6,400 to settle 
fully Buyatt's claim.  Buyatt filed suit against Metropolitan 
                                                 
3 Interest owed was calculated as follows:  Twelve percent 
simple interest on $238,379.53 from January 8, 2001, to July 30, 
2001, in the amount of $15,920.65 ($238,379.53 x .000329 percent 
per day x 203 days); plus twelve percent simple interest from 
July 30, 2001, to February 20, 2002, in the amount of $33,722.50 
($500,000 x .000329 percent per day x 205 days).  
No. 
2003AP2177 & 2003AP2534   
 
6 
 
and Schoessow for damages arising from his accident, as well as 
Wis. Stat. § 628.46 interest.   
¶14 On 
June 
8, 
2001, 
Metropolitan 
admitted 
that 
Schoessow's negligence was the sole cause of the injuries Buyatt 
suffered in the collision.  However, Metropolitan refused to 
tender any amount in partial payment of Buyatt's claim, and 
conditioned any payment upon acceptance of a full settlement.4  
¶15 Buyatt filed an offer of settlement, on April 16, 
2003, for $21,000 pursuant to Wis. Stat. § 807.01(3).  On May 
14, 2003, a jury awarded Buyatt $24,081 in damages, including 
past medical expenses, past wage loss, and past and future pain, 
suffering, and disability.  
¶16 Buyatt then moved the circuit court for interest under 
Wis. Stat. § 628.46, and the court granted Buyatt's motion.  
Waukesha County Circuit Court Judge Lee S. Dreyfus, Jr. found 
that Metropolitan had written notice of Buyatt's claim on June 
8, 2001, that Schoessow was causally negligent for the injuries 
Buyatt suffered as a result of the collision, and that Buyatt 
was not contributorily negligent.  The court further determined 
that, based on the information in its possession and its own 
                                                 
4 Buyatt had suffered somewhat similar injuries in an 
automobile accident that occurred five years prior to the 
accident at issue.  Metropolitan had information that Buyatt 
failed to follow through on medical treatment recommendations 
and medical reports that Buyatt had complained, before the 
accident occurred, of pain in the area of the body where he 
claimed he was injured in the accident with Schoessow.  In 
addition, Metropolitan had information that Buyatt suffered 
somewhat similar injuries subsequent to the accident involving 
Schoessow.    
No. 
2003AP2177 & 2003AP2534   
 
7 
 
admissions, as of June 8, 2001, Metropolitan knew or reasonably 
should have known that it was responsible for at least a portion 
of Buyatt's claims.  Because the circuit court found that 
§ 628.46 applies to third-party insurance claims, it granted 
Buyatt's motion for § 628.46 interest.5  Metropolitan appealed 
the portion of the judgment imposing § 628.46 interest.   
COURT OF APPEALS 
¶17 The 
court 
of 
appeals 
consolidated 
the 
cases.  
Concluding that there were "two incompatible, yet reasonable, 
interpretations" of the statute, the court determined that 
Wis. Stat. § 628.46 was ambiguous, and therefore went on to 
explore extrinsic sources in order to discern legislative 
                                                 
5 The transcript of the hearing before the circuit court on 
July 
22, 
2003, 
shows 
that 
Judge 
Dreyfus 
calculated 
Wis. Stat. § 628.46 interest owed Buyatt as follows.  On or 
about May 9, 2001, Buyatt served on Metropolitan Requests for 
Admission.  Because Metropolitan did not respond to those 
Requests for Admission, they were deemed admitted 30 days later.  
Therefore, on June 8, 2001, Metropolitan had effectively 
admitted that Schoessow was liable for the accident and that 
Buyatt was not contributorily negligent.  By that date, 
Metropolitan also had written notice of the amount of Buyatt's 
medical specials and lost wages.  Section 628.46 interest begins 
accruing 30 days after the statutory requirements are met, 
therefore on July 8, 2001, 12 percent simple interest began 
accruing.  Judge Dreyfus determined, therefore, that interest 
accrued during the 647 days between July 8, 2001 and April 16, 
2003——the date of Buyatt's final offer of settlement.  Judge 
Dreyfus calculated the interest owed based upon the $24,081 jury 
verdict for Buyatt, which resulted in a § 628.46 award of 
$5,169.53. 
 
The 
court 
did 
not 
grant 
interest 
under 
Wis. Stat. § 807.01(4), but did grant double costs in accord 
with § 807.01(3).   
 
No. 
2003AP2177 & 2003AP2534   
 
8 
 
intent.  Kontowicz v. Am. Standard Ins. Co., 2005 WI App 22, 
¶10, 278 Wis. 2d 664, 693 N.W.2d 112 (citation omitted).  The 
court of appeals concluded that the legislature did not intend 
that the interest penalty should apply to third-party bodily 
injury claims and reversed both circuit court decisions.  Id., 
¶24.   Kontowicz and Buyatt appealed, and this court granted 
their petition for review on April 6, 2005.   
II 
¶18 Statutory interpretation is an issue of law which we 
review independently of lower court decisions.  While our review 
is de novo, this court benefits from the analyses of the circuit 
court and the court of appeals.  State v. Anderson, 2005 WI 54, 
¶23, 280 Wis. 2d 104, 695 N.W.2d 731 (citing State v. Waushara 
County Bd. of Adjustment, 2004 WI 56, ¶14, 271 Wis. 2d 547, 679 
N.W.2d 514). 
III 
¶19 American Standard and Metropolitan (Respondents) make 
three 
arguments 
in 
support 
of 
their 
position 
that 
Wis. Stat. § 628.46 does not apply to third-party liability 
claims. First, Respondents argue that the plain language and 
context of the statute make it clear that § 628.46 only applies 
to first-party claims.  For additional support, they look to 
precedent 
examining 
the 
statute 
and 
legislative 
history.  
Second, 
Respondents 
argue 
that 
the 
1999 
amendments 
to 
Wis. Stat. § 646.31 
were 
intended 
to 
eliminate 
third-party 
property damage and bodily injury claims from that statute, and 
by reference, from § 628.46.  Third, Respondents urge that it is 
No. 
2003AP2177 & 2003AP2534   
 
9 
 
bad policy to apply the statute to third-party claims.  If this 
court rejects the position that § 628.46 interest does not apply 
to third-party bodily injury claims, Respondents suggest that 
such interest should not be imposed based upon the particular 
facts of these cases.  We will examine each argument in turn. 
¶20 We 
first 
examine 
the 
applicability 
of 
Wis. Stat. § 628.46 to third-party claims.  Kontowicz and Buyatt 
(Petitioners) maintain the statute is unambiguous, the language 
plainly requiring insurers to "promptly pay every insurance 
claim."  Wis. Stat. § 628.46(1).  Further, § 628.46(3)6 clearly 
states, they argue, that the statute applies to classes of 
claims enumerated in Wis. Stat. § 646.31(2), which includes 
third-party 
claimants 
who 
are 
residents 
of 
the 
state.  
Petitioners emphasize the language in  § 646.31(2)(d).7   
¶21 American Standard and Metropolitan argue that the 
court of appeals correctly determined that Wis. Stat. § 628.46 
is ambiguous.  The ambiguity, Respondents suggest, arises from 
the fact that the statute was intended to apply only to first-
party 
claims, 
yet 
incorporates 
by 
reference 
Wis. Stat. § 646.31(2) 
which 
seems 
to 
include 
third-party 
                                                 
6 Wisconsin Stat. § 628.46(3) states: "This section applies 
only to the classes of claims enumerated in s. 646.31(2)." 
7 Wisconsin Stat. § 646.31(2)(d) provides: "Third party 
claimants. A claim under a liability or workers' compensation 
insurance policy, if either the insured or the 3rd party 
claimant was a resident of this state at the time of the insured 
event."   
 
No. 
2003AP2177 & 2003AP2534   
 
10 
 
liability claims.  Respondents maintain that because of the 
ambiguity, it was appropriate for the court of appeals to look 
to extrinsic sources, and in doing so, the court of appeals 
correctly resolved the ambiguity.   
¶22 When interpreting a statute, we first look to its 
plain meaning.  "[S]tatutory interpretation 'begins with the 
language of the statute.  If the meaning of the statute is 
plain, we ordinarily stop the inquiry.'"  State ex rel. Kalal v. 
Circuit Court, 2004 WI 58, ¶45, 271 Wis. 2d 633, 681 N.W.2d 110 
(citations omitted).  "Where statutory language is unambiguous, 
there is no need to consult extrinsic sources of interpretation, 
such as legislative history." Id., ¶46 (citations omitted).  
¶23 Wisconsin Stat. § 628.46 
Timely 
payment 
of 
claims 
states, in relevant 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 
No. 
2003AP2177 & 2003AP2534   
 
11 
 
the date of delivery.  All overdue payments shall bear 
simple interest at the rate of 12 % 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.   . . . 
. . . . 
(3) This section applies only to the classes of 
claims enumerated in s. 646.31(2). 
Wis. Stat. § 628.46 (emphasis added). 
¶24 Wisconsin Stat. § 646.31 Eligible claims states, in 
relevant part:  
(2) Classes of claims to be paid. No claim may be 
paid under this chapter unless the claim is in one of 
the following classes: 
. . . . 
(d) 
Third-party 
claimants. 
A 
claim 
under 
a 
liability or workers' compensation insurance policy, 
if either the insured or the 3rd party claimant was a 
resident of this state at the time of the insured 
event. 
Wis. Stat. § 646.31(2)(emphasis added). 
¶25 Wisconsin Stat. § 628.46 begins "[u]nless otherwise 
provided by law, an insurer shall promptly pay every insurance 
claim." 
 
Wis. Stat. § 628.46(1). 
 
American 
Standard 
and 
Metropolitan maintain that although that first sentence seems 
broad and encompassing, the statutory language that follows that 
statement clearly indicates that the "timely payment of claims" 
statute was meant to apply exclusively to first-party claims.  
Respondents explain that a typical "insurance claim" occurs when 
an insured suffers personal injury or property damage, and the 
No. 
2003AP2177 & 2003AP2534   
 
12 
 
insured submits "proof of loss" to the insurer.  In contrast, 
Respondents argue that a third-party lawsuit for personal injury 
damages filed against an insurance company is not an "insurance 
claim."  It is a negligence claim against a defendant who 
happens to have insurance.  In addition, Respondents focus on 
the phrase "under the policy" in subsection (2) suggesting that 
the terminology has a distinctly first-party focus.  By way of 
example, they cite Wis. Stat. § 645.68 which distinguishes 
between claims "under policies" and claims "against the insurer 
that are not under policies and that are for liability for 
bodily injury. . . ."  Wis. Stat. §§ 645.68(3) and (3m).  
Further, Respondents argue that the phrases "claim . . . under 
the policy," "proof of loss," and "covered loss" relate 
historically to first-party claims, with the language of the 
statute coming from the standard fire insurance policy annexed 
to Wis. Stat. § 203.01(1) (1973-74).   
¶26 Respondents further reason that the inclusion of 
"third-party claimants" via Wis. Stat. § 646.31(2)(d) applies 
only to third-party claimants standing in the shoes of first-
party claimants (third-parties making first-party claims).  For 
example, 
if 
an 
insurance 
contract 
provides 
coverage 
for 
passengers of the insured, the passenger would be a third-party 
in that he or she is a "stranger" to the insurance contract as 
they are not an insured and not a party to the insurance 
contract, yet that third-party could still bring a first-party 
claim as a provision of the contract.  The court of appeals 
agreed with Respondent insurers that Wis. Stat. § 628.46 was 
No. 
2003AP2177 & 2003AP2534   
 
13 
 
intended to apply to first-party claims and distinguished first-
party claims "under the policy" from claims by third-parties 
"against the policy."  We find these arguments strained and, 
ultimately, unconvincing.   
¶27 Petitioners 
maintain, 
and 
we 
agree, 
that 
Wis. Stat. § 628.46 
unambiguously 
includes 
third-party 
claimants.  The broad language of the phrase "an insurer shall 
promptly pay every insurance claim" means just that——every 
insurance claim.  The statute is not limited in its application 
only to "first-party" claims by "insureds."  A claim must be 
paid within 30 days of an insurer receiving written notice of 
"the fact of a covered loss and the amount of the loss."  
Wis. Stat. § 628.46(1) 
(emphasis 
added). 
 
Furthermore, 
Respondents' 
reliance 
on 
the 
phrase 
"proof 
of 
loss" 
in 
subsection (2) to prove that the statute applies only to first-
party claims is unsupportable.  Even if "proof of loss" is 
typically used in a first-party context, the statute requires 
either "proof of loss required under the policy or equivalent 
evidence of such loss."  Wis. Stat. § 628.46(2)(emphasis added).   
¶28 In fact, the only limitation in the statute occurs in 
subsection (3), which confines the statute's applicability 
"only" 
to 
those 
classes 
of 
claims 
enumerated 
in 
Wis. Stat. § 646.31(2). 
 
Wis. Stat. § 628.46(3). 
 
As 
noted 
previously, § 646.31(2)(d), eligible claims includes third-party 
claimants making "[a] claim under a liability . . . insurance 
policy, if either the insured or the 3rd party claimant was a 
No. 
2003AP2177 & 2003AP2534   
 
14 
 
resident of this state at the time of the insured event."  
Wis. Stat. § 646.31(2)(d).   
¶29 Because we have already determined that the plain 
language of Wis. Stat. § 628.46 is not ambiguous, we would 
normally not look to extrinsic sources.  Kalal, 271 Wis. 2d 633, 
¶51.  However, since the court of appeals relied heavily on 
extrinsic sources for its analysis, it is appropriate to review 
the court of appeals' analysis, including relevant case law.  
¶30 Our case law has consistently construed Wis. Stat. 
§ 628.46 as applying to all insurers and all claims that fall 
within Wis. Stat. § 646.31(2).  In Wisconsin Physicians Service 
Insurance Corp. v. Mitchell, the court of appeals considered 
whether § 628.46 applied to service insurance corporations.8  
Wisconsin Physicians Serv. Ins. Corp. v. Mitchell, 114 Wis. 2d 
338, 338 N.W.2d 326 (Ct. App. 1983).  In holding that it did 
apply, the court acknowledged that:  
[the] phrases "covered loss," "amount of the loss" and 
"proof of loss" are usually identified with indemnity-
type 
insurance 
companies, 
not 
service 
insurance 
corporations because service insurance corporations do 
not receive any notice or proof of loss from insureds, 
but rather pay the health care providers directly for 
services rendered to insureds.9   
                                                 
8 Wisconsin Physicians Service Insurance Corp. v. Mitchell, 
114 Wis. 2d 338, 338 N.W.2d 326 (Ct. App. 1983) considered the 
scope of Wis. Stat. § 636.10 (1979-80), the predecessor to 
Wis. Stat. § 628.46 (2001-02).  The statute was renumbered and 
relocated in 1981.  1981 Wis. Act 38, §§ 22, 24. 
9 Respondents suggest that because Wis. Stat. § 628.46 was 
found to be ambiguous by the court of appeals in Mitchell, we 
must also do so.  We disagree, for the reasons set forth herein. 
No. 
2003AP2177 & 2003AP2534   
 
15 
 
Id. at 343.  Despite this fact, the court of appeals was swayed 
by the plain, broad language of the statute.  "In light of the 
all-inclusive first sentence requiring all insurance companies 
to pay all claims, we conclude that the legislature intended to 
apply 
the 
thirty-day 
requirement 
to 
service 
insurance 
corporations."  Id. at 344.  Critically, the court noted "[i]f 
the legislature had intended to grant an additional exemption to 
service insurance corporations, it would have done so."  Id. at 
344-45.  "[S]ince no exemption [was] contained in the statute's 
language," the court of appeals held that § 628.46 applies to 
service insurance corporations.  Id. at 345.   
¶31 Moreover, in Poling v. Wisconsin Physicians Service, 
the court of appeals again held that Wis. Stat. § 628.46 applied 
to a group health insurer.  Poling v. Wisconsin Physicians 
Serv., 120 Wis. 2d 603, 612-13, 357 N.W.2d 293 (Ct. App. 1984).  
Awarding prejudgment interest on plaintiffs' breach of contract 
award, the court explained that § 628.46 is "an additional 
provision of the insurance contract incorporated into it by 
operation of law."  Id. at 612 (citation omitted).  There was no 
statutory provision that allowed an insurance company to delay 
payment of a claim.  Id. at 613.  "The only escape clause for 
avoidance of this interest assessment is when the insurer has 
reasonable proof that it is not responsible for the payment."  
Id.   
¶32 Lending further support to a broad, inclusive reading 
is the Seventh Circuit's analysis in Allison v. Ticor Title 
Insurance Co.  The federal appellate court construed the 
No. 
2003AP2177 & 2003AP2534   
 
16 
 
interplay of Wis. Stat. § 628.46 with Wis. Stat. § 646.31(2) and 
determined that the classes of claims to be paid under § 628.46 
include "residents, certain nonresidents, owners of property 
interests, third party claimants, and assignees."  Allison v. 
Ticor Title Ins. Co., 979 F.2d 1187, 1202 (7th Cir. 1992).  
Significantly, the Seventh Circuit held that § 628.46 applied to 
title insurers, even though title insurers are exempt from the 
Wisconsin 
Insurance 
Security 
Fund 
(WISF).10 
 
See 
Wis. Stat. § 646.01(1)(b)2.   
¶33 Respondent 
insurance 
companies 
argue 
that 
these 
appellate court cases are not controlling, as they all deal with 
first-party claims under the statute.  While we recognize that 
the cases may be distinguishable on that point, they do 
reinforce the breadth of the statute's scope, as well as the 
idea that the statute would similarly apply to third-party 
claimants.   
¶34 Further, American Standard and Metropolitan argue that 
the 
context, 
objective, 
and 
statutory 
background 
of 
Wis. Stat. § 628.46(2) serve to confirm the statute's first-
party focus.  In 1981, the legislature moved and renumbered the 
statute, taking it from the "Claims Adjustment" chapter and 
                                                 
10 Wisconsin Stat. § 646.31(2), which Wis. Stat. § 628.46 
incorporates by reference, lists classes of claims eligible for 
payment under the Wisconsin Insurance Security Fund (WISF).  The 
WISF was created to protect insureds in the event of the 
insolvency of their insurance company. 
 
No. 
2003AP2177 & 2003AP2534   
 
17 
 
inserting it into the "Insurance Marketing" chapter.11  American 
Standard and Metropolitan maintain that the provision's current 
location suggests it was meant to regulate how insurers market 
their policies to potential customers, but was not meant to 
regulate litigation between an insurer and a third-party 
claimant.  Therefore, Respondents argue that the statutory 
context of the section proves it only applies to first-party 
claimants.   
¶35 We recognize that a title can be "persuasive evidence 
of statutory interpretation."  Mireles v. LIRC, 2000 WI 96, ¶60 
n.13, 237 Wis. 2d 69, 613 N.W.2d 875.  Yet Respondents' argument 
is, ultimately, unpersuasive.  The purposes of the chapter 
include encouraging improvement of professional competence of 
insurance intermediaries, providing maximum freedom of marketing 
methods 
of 
insurance, 
and 
regulating 
insurance 
marketing 
practices in conformity with the general provisions of the 
Insurance Code.  See Wis. Stat. § 628.01.  One could certainly 
question what a provision to dissuade an insurance company from 
failing to make payment promptly on claims it knows it is 
responsible for has to do with marketing to potential customers.  
Timely payment of claims is a statutory requirement imposed by 
the legislature, apparently in response to the real or perceived 
problem of insurance companies failing to make payment promptly 
on claims that they were liable to pay.  The location of that 
requirement does not lead to the conclusion that only first-
                                                 
11 1981 Wis. Act 38 §§ 22, 24. 
No. 
2003AP2177 & 2003AP2534   
 
18 
 
party claims were intended to be covered by the statutory 
requirements.   
¶36 The court of appeals' analysis that the legislature 
did not intend Wis. Stat. § 628.46 to apply to third-party 
claimants was based largely upon what it deemed the "historical 
context for development of the interest penalty. . . ."  
Kontowicz, 278 Wis. 2d 664, ¶17.  Looking to case law of that 
period, the court of appeals noted a distinct "focus on the 
fiduciary relationship between insurer and insured, and the goal 
of protecting the rights of the insured."  Id.  From this 
general context of the period in which the statute was first 
enacted, the court of appeals concluded that § 628.46 "arose 
from the legislature's intent to protect the insured from 
improper claims settlement practices," not to protect third-
parties.  Id. (emphasis added). 
¶37  The flaw in the court of appeals' analysis is that it 
likens the timely payment of claims statute to tort claims for 
bad faith.  The cases the court relied on involve bad faith on 
the part of insurance companies.  For example, the court cites 
Kranzush v. Badger State Mutual Casualty Co., 103 Wis. 2d 56, 
73, 307 N.W.2d 256 (1981), for the proposition that an 
"'insurer's duty of good faith and fair dealing arises from the 
insurance contract and runs to the insured'" and not to the 
third-party claimant.  Kontowicz, 278 Wis. 2d 664, ¶15 (citation 
omitted).  While this may be true, Wis. Stat. § 628.46 "is 
unrelated to the tort of bad faith and permits the imposition of 
No. 
2003AP2177 & 2003AP2534   
 
19 
 
interest even where bad faith is not present."  Poling, 120 Wis. 
2d at 613 (citation omitted).   
¶38 We now turn to the second major argument presented by 
the Respondents, that the 1999 amendments to Wis. Stat. § 646.31 
were intended to eliminate third-party property damage and 
bodily injury claims from the statute.   
¶39 Wisconsin Stat. § 646.31 lists eligible claims under 
the WISF.  The purpose of the WISF, created by Wis. Stat. ch. 
646, is to protect an insured in the event that his or her 
insurance company becomes insolvent.  Fireman's Fund v. Pitco 
Frialator, 145 Wis. 2d 526, 532, 427 N.W.2d 417 (Ct. App. 1988).  
Section 646.31 is a stand-alone statute, detailing eligible 
claims 
under 
the 
WISF, 
and 
is 
independent 
of 
Wis. Stat. § 628.46.  Subsection (2) lists classes of claims to 
be paid by the fund, including "third party claimants."  
Wis. Stat. § 646.31(2)(d).   
¶40 The WISF, in what is substantially its current form, 
was created by statute in 1979.12  Included in the classes of 
claims that were eligible to be paid by the fund were: 
(d) Third party claimants.  A claim under a 
liability or workers' compensation insurance policy, 
if: 
1. Either the insured or the 3rd party claimant 
was a resident of this state at the time of the 
insured event; 
                                                 
12 Although an Insurance Security Fund existed prior to 
1979, the 1979 Act repealed and recreated Wis. Stat. ch. 646 of 
the statutes, making "major changes in the security fund law. . 
. ."  L. 1979, c. 109, § 14.   
No. 
2003AP2177 & 2003AP2534   
 
20 
 
2. The claim is for bodily or other personal 
injuries suffered in this state or by a person who 
suffered the injuries while a resident of this state; 
or 
3. The claim is for damage to property situated 
in this state at the time the damage occurred. 
Wis. Stat. § 646.31(2)(d)(1979-80).   
¶41 In 1999, the legislature amended the section of the 
statute relating to third-party claimants.  1999 Wis. Act 30.  
The amendments consolidated the introduction and subsection 1, 
and repealed subsections (d)2 and (d)3.  The amended version of 
the statute reads: "Third party claimants.  A claim under a 
liability or workers' compensation insurance policy, if either 
the insured or the 3rd party claimant was a resident of this 
state 
at 
the 
time 
of 
the 
insured 
event."  
Wis. Stat. § 646.31(2)(d) (1999-2000). 
¶42 Respondents 
maintain, 
and 
the 
court 
of 
appeals 
reasoned, 
that the 
1999 
amendments 
eliminated 
third-party 
personal injury claims from the WISF.  Kontowicz, 278 Wis. 2d 
664, ¶18.  The court reasoned that by removing reference to 
"bodily injury" and "property damage" from the section on third-
party claimants, 1999 Wis. Act 30 removed those types of claims 
from 
coverage 
under Wis. Stat. § 646.31, and 
by 
reference 
Wis. Stat. § 628.46.  Agreeing with the court of appeals, 
American 
Standard 
and 
Metropolitan 
argue 
that 
the 
1999 
amendments removed bodily injury and property damage claims from 
the prejudgment interest provisions in § 628.46 and the WISF.  
We disagree with this argument.   
No. 
2003AP2177 & 2003AP2534   
 
21 
 
¶43 Additionally, we 
do 
not 
agree with 
Petitioners' 
position that the amendments were made solely for the purpose of 
eliminating redundancy in the statute, the amended version 
maintaining 
its 
original 
scope. 
 
By 
eliminating 
Wis. Stat. § 646.31(d)2, it clearly appears that the legislature 
effected a substantive change in the statute by eliminating 
claims of non-residents who were injured while in Wisconsin from 
being paid by the fund.13  We do, however, agree with Petitioners 
that the 1999 amendments were not intended to, nor did they have 
the effect of, eliminating the bodily injury claims of third-
party claimants who were residents of Wisconsin at the time of 
the event at issue from coverage under the WISF.14   
¶44 Moreover, the court of appeals relied on the argument 
that the 1999 amendments were in response to, or at a minimum 
informed by, two Dane County Circuit Court decisions which had 
ruled that Wis. Stat. § 628.46 allowed third-party claimants to 
collect interest under the statute.  Kontowicz, 278 Wis. 2d 664, 
                                                 
13 The eliminated portions of the statute included claims 
"for bodily or other personal injuries suffered in this state or 
by a person who suffered the injuries while a resident of this 
state. . . ." Wis. Stat. § 646.31(2)(d)2 (1979-80)(emphasis 
added).   
14 The revisor's notes accompanying 1999 Act 30 are silent 
as 
to 
the 
legislature's 
motives 
in 
revising 
Wis. Stat. § 646.31(2)(d).   
No. 
2003AP2177 & 2003AP2534   
 
22 
 
¶21.15  There is no indication in the legislative history that 
the legislature was even aware of, much less influenced by, the 
Dane County Circuit Court cases cited by the court of appeals.  
The court of appeals inappropriately relied on extremely limited 
legislative history, in order to support an interpretation 
contrary to the plain language of the statutes.16    
¶45 We therefore disagree with the court of appeals' 
interpretation, 
and 
Respondents' 
position, 
that 
the 
1999 
amendments eliminated claims for bodily injury or property 
damage, narrowing the eligibility of third-party claimants to 
"third parties whose claims arise under the policy in the same 
manner and under the same provisions as the named insured. . . 
."  Id., ¶18.  As we noted more than 25 years ago, "[t]his court 
has consistently viewed automobile liability insurance policies 
as more than indemnity contracts between insurer and insured; 
there is a strong public policy favoring compensation of injured 
third parties."  Simonds v. Bouton, 87 Wis. 2d 302, 307, 274 
N.W.2d 666 (1979) (citations omitted).  The court of appeals' 
                                                 
15 The court of appeals' decision cited Leister v. General 
Casualty Insurance Co., Dane County Circuit Court Case No. 98-
CV-3182 (Memorandum Decision and Order on Motion to Dismiss), 
and Coker v. American Family Mutual Insurance Co., Dane County 
Circuit 
Court 
Case 
No. 
99-CV-2949 
(Decision 
and 
Order).  
Kontowicz v. Am. Standard Ins. Co., 2005 WI App 22, ¶21, 278 
Wis. 2d 664, 693 N.W.2d 112. 
16 Petitioners note that all five circuit court cases known 
to have addressed the issue of whether Wis. Stat. § 628.46 
applies to third-party liability claims and insurers determined 
that § 628.46 does apply.   
No. 
2003AP2177 & 2003AP2534   
 
23 
 
interpretation is in direct conflict with that strong public 
policy. 
¶46 The plain language of the statute is not overcome by 
Respondents' 
policy 
arguments 
against 
applying 
Wis. Stat. § 628.46 interest to third-party claims.  Respondents 
suggest that allowing § 628.46 to be applied to third-party 
claimants like the Petitioners, so that they are able to receive 
§ 628.46 interest, will undermine the fiduciary relationship 
between insurer and insured.  Such application, Respondents 
argue, imposes a penalty on an insurer who attempts to fulfill 
its duty to defend its insured.  Moreover, Respondents argue 
that allowing such interest on third-party claims would have a 
chilling 
effect 
upon 
settlement 
negotiations, 
increase 
litigation, and is contrary to the adversarial nature of third-
party litigation.   
¶47 We disagree with these arguments.  The purpose of 
Wis. Stat. § 628.46 is to discourage insurance companies from 
creating unnecessary delays in paying claims owed.  This purpose 
is advanced if the injured party is a third-party claimant just 
as much as if he or she is the insured.  We also note that our 
case law has reasoned that the purpose of § 628.46 is not to 
penalize insurers, but to compensate claimants for the value of 
the use of their money.  Upthegrove v. Lumbermans Ins. Co., 152 
Wis. 2d 7, 13, 447 N.W.2d 367 (Ct. App. 1989).  "Prejudgment 
interest generally is considered compensation for the time value 
of money and a means of preventing defendants from prolonging 
litigation and benefitting (sic) from the delay."  Allison, 979 
No. 
2003AP2177 & 2003AP2534   
 
24 
 
F.2d at 1201 (citations omitted).  This purpose is furthered by 
a general application of the statute to ensure timely payments 
are made to all, not just first-party, claimants.   
¶48 We hold that Wis. Stat. § 628.46 does apply to third-
party liability claims for personal injury.  However, we limit 
our holding to only those situations in which three conditions 
to trigger interest are met.  First, there can be no question of 
liability on the part of the insured.  Second, the amount of 
damages must be in a sum certain amount.  Third, the claimant 
must provide written notice of both liability and the sum 
certain amount owed.  If the insurer has "reasonable proof" it 
is not responsible, the statute does not apply.  "Reasonable 
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.  Our case law has generally 
equated "reasonable proof" of non-responsibility under § 628.46 
with whether the "coverage issue was fairly debatable." Allstate 
Ins. Co. v. Konicki, 186 Wis. 2d 140, 160, 519 N.W.2d 723 (Ct. 
App. 1994)(citation omitted).  If coverage is fairly debatable, 
"the insurer must be considered to have had the required 'proof' 
of non-responsibility." Id.  
¶49 Finally, we hold that claims concerning the issue of 
interest 
due 
under 
Wis. Stat. § 628.46 
may 
be 
bifurcated 
pursuant 
to 
Wis. Stat. § 805.05(2), 
when 
"conducive 
to 
expedition or economy," for convenience, or to avoid prejudice.  
Wis. Stat. § 805.05(2).  In Waters v. Pertzborn, we held that 
bifurcation under § 805.02 is limited to claims, not issues.  
No. 
2003AP2177 & 2003AP2534   
 
25 
 
Waters v. Pertzborn, 2001 WI 62, ¶35, 243 Wis. 2d 703, 627 
N.W.2d 497.   However, we also noted that the legislative 
history of the "statute reveal[ed] that the rule barring 
bifurcation of issues does not apply to issues regarding 
insurance coverage."  Dahmen v. Am. Family Mut. Ins. Co., 2001 
WI App 198, ¶9, 247 Wis. 2d 541, 635 N.W.2d 1 (citing Waters, 
243 Wis. 2d 703, ¶¶21, 23)(emphasis in original).   
IV 
¶50 Having concluded that Wis. Stat. § 628.46 does apply 
to third-party claimants, we address Respondents' position that 
the imposition of the interest penalty is inappropriate in 
either of these cases, as the insurance companies had neither 
proof of loss nor knew the amount of loss.  As noted previously, 
the statute applies to claims 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."  Wis. Stat. § 628.46(1).  
Once the insurer has had written notice of the "fact of a 
covered loss" and the "amount of the loss," it must pay within 
30 days, unless it has "reasonable proof" that it is not, in 
fact, responsible for the payment. 
¶51 Respondents argue that one cannot have the knowledge 
of liability required to make payment without a judgment or 
settlement.  Nor, they argue, can an insurance company know what 
it actually owes without a resolution endorsed by a court.  We 
disagree.  
¶52 In Fritsche v. Ford Motor Credit Co., the court of 
appeals 
rejected 
this 
argument, 
holding 
"[a] 
claim 
is 
No. 
2003AP2177 & 2003AP2534   
 
26 
 
statutorily deemed overdue if not paid within thirty days after 
a proof of loss or equivalent evidence of the loss.  That time 
can be far in advance of a judgment or award."  Fritsche v. Ford 
Motor Credit Co., 171 Wis. 2d 280, 305, 491 N.W.2d 119 (Ct. App. 
1992)(citation omitted).   Even acknowledging the fact that 
"uninsured 
motorist 
claims, 
which 
often 
involve 
nebulous 
damages, are difficult to evaluate," the Fritsche court still 
concluded that:  
It may be that the risk of mis-evaluation outweighs 
the risk of paying sec. 628.46, Stats., interest.  But 
[the insurance company] has had the use of $25,000 
which became owing to the Fritsches as a result of an 
accident which occurred October 11, 1985.  Presumably, 
[the insurance company] has received a return on that 
amount since then.  We see nothing illogical in 
interpreting a broad statute to require [the insurance 
company] to pay for the use of $25,000 from the date 
by which it had received evidence of the loss 
equivalent to a proof of loss. 
Id. at 307 (footnote omitted). 
DEBRA KONTOWICZ 
¶53 American Standard argues that Kontowicz fell short of 
the statutory notice requirements, and therefore, it should not 
be liable for 12 percent interest on her claims.  We conclude 
that Kontowicz met all the statutory requirements necessary to 
trigger Wis. Stat. § 628.46 interest as of January 5, 2001.  On 
that date Kontowicz sent written notice of the amount of her 
medical expenses through November 2, 2000, totaling $238,379.53, 
along with her October 27, 2000 discharge summary showing her 
spinal cord had been severed, and the resulting quadriplegia.  
There was no question of the liability of American Standard's 
No. 
2003AP2177 & 2003AP2534   
 
27 
 
insured.  American Standard knew about the accident involving 
Jeffers and Kontowicz by September 7, 2000, that Jeffers was at 
fault, and that Kontowicz was apparently paralyzed.  Jeffers 
conceded liability in his answer to the interrogatories on 
December 28, 2000.  American Standard had investigated the 
accident, and determined that once Kontowicz's severe injury was 
confirmed, in light of the admitted liability on the part of 
Jeffers, that it was liable under its policy.17  We, therefore, 
hold consistent with the determination of the circuit court, 
that as of January 8, 2001,18 § 628.46 the statutory 30-day 
period after which interest would accrue began running on 
$238,379.53 of Kontowicz's claim, and on August 2, 2002, the 30 
days began to run on the full $500,000 claim.   
LARRY BUYATT 
¶54 With regard to Buyatt's claim, Metropolitan argues 
that even if the court finds that the statute allows prejudgment 
                                                 
17 We note that Kontowicz apparently was not wearing a seat 
belt at the time of the accident.  In Gaertner v. Holcka, this 
court examined the codification of the common law "seat belt" 
defense into Wis. Stat. § 347.48(2m)(c)(1997-98). We concluded 
that the legislature intended to ensure that defendants received 
a possible reduction in plaintiff's recoverable damages of not 
more than 15 percent if plaintiff failed to use a seat belt.  
Gaertner v. Holcka, 219 Wis. 2d 436, 452, 580 N.W.2d 271 (1998).  
However, due to the severity of the injury suffered by Kontowicz 
even the maximum reduction allowed by law would not appear to be 
sufficient to bring her claim below the $500,000 policy limit. 
18 Since both the January 5, 2001 claim for $238,379.53 and 
the July 30, 2001 claim for $500,000 were made in writing and 
served upon American Standard by mail, the circuit court added 
three days for service by mail.    
No. 
2003AP2177 & 2003AP2534   
 
28 
 
interest to third-party claimants, the courts below did not 
determine whether Metropolitan had a reasonable basis for 
denying the claim.  In Buyatt's case, we hold that Metropolitan 
had knowledge of clear liability for the accident by January 29, 
2001. 
 
However, 
in 
this 
case, 
because 
Metropolitan 
had 
information that there were pre-existing injuries of a similar 
nature, as well as similar injuries subsequent to the Schoessow 
accident, and it was fairly debatable as to whether the wage 
loss and medical specials were all attributable to the Schoessow 
accident, we determine that Metropolitan had reasonable proof to 
establish that it was not responsible for at least a portion of 
Buyatt's claim.   The amount that it was responsible for could 
not be determined with any certainty.  Therefore, interest under 
Wis. Stat. § 628.46 
is 
not 
appropriate 
in 
Buyatt's 
case.  
However, because Metropolitan rejected Buyatt's April 16, 2003 
settlement offer, and the jury awarded Buyatt an amount greater 
than that offer, we determine that Buyatt is entitled to 
interest under Wis. Stat. § 807.01(4), which began accruing on 
April 16, 2003, the date of his settlement offer.19  Interest 
under § 807.01 (4) is in lieu of, not in addition to, interest 
                                                 
19 Wisconsin Stat. § 807.01(4) (2003-04) states, in relevant 
part: 
If there is an offer of settlement by a party under 
this section which is not accepted and the party 
recovers a judgment which is greater than or equal to 
the amount specified in the offer of settlement, the 
party is entitled to interest at the annual rate of 12 
% on the amount recovered from the date of the offer 
of settlement until the amount is paid.  
No. 
2003AP2177 & 2003AP2534   
 
29 
 
under § 628.46(1). See Upthegrove, 152 Wis. 2d at 14-15.  
However, we note that, in order to get interest pursuant to 
§ 807.01(4), a full trial must first take place, and an award of 
damages must be made. 
V 
¶55 We reverse the decision of the court of appeals.  We 
conclude that when there is clear liability, a sum certain owed, 
and 
written 
notice 
of 
both, 
the 
plain 
language 
of 
Wis. Stat. § 628.46, 
incorporating 
by 
reference 
Wis. Stat. § 646.32(2), imposes 12 percent simple interest on 
overdue payments to third-party claimants in personal injury 
claims and actions.  However, we limit our holding to only those 
situations in which three conditions to trigger the interest are 
met.  First, there can be no question of liability on the part 
of the insured.  Second, the amount of damages must be in a sum 
certain amount.  Third, the claimant must provide written notice 
of both liability and the sum certain amount owed.  We further 
hold that claims concerning the issue of interest due under 
§ 628.46 may be bifurcated under Wis. Stat. § 805.05(2), and 
that, in the case of Buyatt, the award of interest should be in 
accord with Wis. Stat. § 807.01(4), rather than § 628.46.   
By the court. —— The decision of the court of appeals is 
reversed, and the matter remanded to the appropriate branch of 
the circuit court for entry of orders consistent with this 
decision.   
¶56 JON P. WILCOX, J., did not participate.  
 
No.  2003AP2177 & 2003AP2534.dtp 
 
1 
 
¶57 DAVID T. PROSSER, J.   (dissenting).  In 1975 the 
legislature amended the Wisconsin Insurance Code to require 
insurers to promptly pay every insurance claim.  § 708, ch. 39, 
Laws of 1975.  The new statute (Wis. Stat. § 631.02 (1975)) 
determined that an insurance claim would be overdue if not paid 
within 30 days after the insurer was furnished with written 
notice of the fact and amount of a covered loss.  The statute 
included a potent enforcement mechanism: "All overdue payments 
shall bear simple interest at the rate of 12% per year."  See 
Wis. Stat. § 628.46(1) (2003-04).1 
¶58 In 1978 this court described the "Timely payment of 
claims" statute as "an additional provision of the insurance 
contract incorporated into it by operation of law."  Anderson v. 
Continental Ins. Co., 85 Wis. 2d 675, 696, 271 N.W.2d 368 
(1978); see also Upthegrove Hardware, Inc. v. Pa. Lumbermans 
Mut. Ins. Co., 146 Wis. 2d 470, 484, 431 N.W.2d 689 (1988); 
Poling v. Wis. Physicians Serv., 120 Wis. 2d 603, 612, 357 
N.W.2d 293 (Ct. App. 1984).   
¶59 The issue presented in this case is whether a third 
party tort plaintiff who is not an "insured" under an automobile 
insurance contract is entitled to make a claim against the 
insurer pursuant to Wis. Stat. § 628.46(1)——before a judgment is 
obtained 
or 
a 
settlement 
is 
reached 
or 
offered——thereby 
triggering the prompt payment requirement and the 12 percent 
interest penalty if timely payment is not made.  I conclude that 
                                                 
1 All references to the Wisconsin Statutes are to the 2003-
04 version unless otherwise indicated. 
No.  2003AP2177 & 2003AP2534.dtp 
 
2 
 
the legislature did not intend to authorize a third party tort 
plaintiff to invoke the provisions of § 628.46(1) on these 
facts, and that if such a plaintiff's "claim" were recognized, 
it would 
seriously 
undermine 
the 
contractual 
relationship 
between the insurer and the insured.  Because the majority 
opinion reaches a different conclusion, I respectfully dissent. 
I. STATUTORY AMBIGUITY 
¶60 This is a statutory interpretation case.  Statutory 
interpretation begins with the language of the statute.  State 
ex rel. Kalal v. Circuit Court for Dane County, 2004 WI 58, ¶45, 
271 Wis. 2d 633, 681 N.W.2d 110.  "If the meaning of the statute 
is plain, we ordinarily stop the inquiry."  Id. (quoting Seider 
v. O'Connell, 2000 WI 76, ¶43, 236 Wis. 2d 211, 612 N.W.2d 659). 
¶61 In the Kalal methodology, statutory ambiguity is a 
condition precedent to the examination of extrinsic sources, 
except in situations involving an absurd or highly unreasonable 
result, or when the court seeks to confirm or verify plain 
meaning.  This is the rule because we "assume that the 
legislature's intent is expressed in the statutory language."  
Kalal, 271 Wis. 2d 633, ¶44.  A statute is ambiguous if it is 
capable of being understood by reasonably well-informed persons 
in two or more senses.  Id., ¶47. 
¶62 The 
majority opinion 
concludes that 
§ 628.46 is 
unambiguous.  It reaches this conclusion by disregarding 
fundamental rules of statutory interpretation, including: (1) 
the preference that words not be made superfluous, (2) the need 
No.  2003AP2177 & 2003AP2534.dtp 
 
3 
 
to interpret a statute in context, and (3) the admonishment to 
avoid absurd or unreasonable results. 
¶63 As will be shown, the statute is ambiguous.  Without a 
sensible construction, the statute produces an unreasonable 
result, 
placing 
insurers 
in 
the 
impossible 
position 
of 
fulfilling irreconcilable duties to their insureds and to 
adversarial third party plaintiffs.  
¶64 The statute to be interpreted reads in part as 
follows: 
 
628.46 
Timely payment of claims.  (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. . . .  All overdue 
payments shall bear simple interest at the rate of 12% 
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. . . .  
 
. . . .  
 
(3) This section applies only to the classes of 
claims enumerated in s. 646.31(2). 
No.  2003AP2177 & 2003AP2534.dtp 
 
4 
 
¶65 Subsection 
(3) 
references 
Wis. Stat. § 646.31(2), 
which reads in part: 
 
(2) CLASSES OF CLAIMS TO BE PAID.  No claim may 
be paid under this chapter unless the claim is in one 
of the following classes: 
 
. . . .  
 
(d) Third party claimants.  A claim under a 
liability or workers' compensation insurance policy, 
if either the insured or the 3rd party claimant was a 
resident of this state at the time of the insured 
event. 
¶66 In this case, the meaning of § 628.46(1) is seriously 
muddled by the confusing relationships among several statutes. 
¶67 First, the language of Wis. Stat. § 628.46(1) has not 
been changed since 1975.  From the beginning, the statute has 
contained 
a 
qualifying 
opening 
clause: 
"Unless 
otherwise 
provided by law."  This clause implies the need to examine other 
statutes.  Unless this qualification is considered and excluded, 
there is some risk in applying the statute.   
¶68 Second, subsection (1) began as a stand-alone statute.  
Now, however, it is affected by three additional subsections, 
one of which incorporates a second statute by reference.  This 
underscores 
the 
proposition 
that 
§ 628.46(1) 
cannot 
be 
interpreted by focusing solely on the subsection itself. 
¶69 Third, 
by 
tying 
§ 628.46(1) 
to 
§ 646.31(2), 
§ 628.46(3) introduces the concept of a third party claimant.  
Petitioners rely very heavily on § 646.31(2)(d) to interpret 
§ 628.46(1).  However, the key term in § 646.31(2)(d)——"third 
party claimant"——is not defined, and thus it too requires 
interpretation.  The interpretation given to the term "third 
No.  2003AP2177 & 2003AP2534.dtp 
 
5 
 
party claimant" may affect claims under Chapter 646 as well as 
the interpretation of § 628.46(1). 
¶70 Fourth, inasmuch as reference is made in § 628.46(3) 
only 
to 
§ 646.31(2), 
the 
question 
arises 
whether 
other 
provisions in Chapter 646 may be considered in interpreting 
§ 646.31(2).  Specifically, should § 646.31(2) be interpreted in 
light of the limitations in §§ 646.01 (which excludes certain 
insurance) 
and 646.31(1) 
(which establishes 
conditions of 
eligibility for Chapter 646 claims and excludes claims "[m]ade 
for interest on any claim")? 
¶71 Fifth, 
§ 628.46(3) 
incorporates 
§ 646.31(2) 
by 
reference.  This incorporation occurred in 1976.  At the time, 
Wisconsin case law provided that "[w]hen the adopting statute 
incorporates an earlier statute or a limited and a particular 
provision thereof by specific reference, such incorporation 
takes the statute as it existed at the time of incorporation and 
does not prospectively include subsequent modifications or a 
repeal of the incorporated statute or portions thereof."  Union 
Cemetery v. Milwaukee, 13 Wis. 2d 64, 68, 108 N.W.2d 180 (1961).  
Although 
this 
rule 
of 
construction 
was 
superseded 
by 
Wis. Stat. § 990.01(5)(b) in 1979, see § 539, ch. 89, Laws of 
1979, the new incorporated statute may be inconsistent with the 
original intent of the legislature. 
¶72 Sixth, because plaintiffs are seeking interpretation 
of a statute that must have been interpreted by the Office of 
the Commissioner of Insurance (OCI) over a 30-year period, it 
No.  2003AP2177 & 2003AP2534.dtp 
 
6 
 
would be helpful to know what interpretation, if any, OCI has 
given and what deference is owed to OCI's interpretation.   
¶73 Finally, this case presents the question whether 
§ 628.46 permits a third party tort plaintiff to invoke an 
insured defendant's contract rights.  As a general rule, a 
contract cannot be enforced by a person not a party to it.  
Abramowski v. Wm. Kelps Sons Realty, 80 Wis. 2d 468, 472, 259 
N.W.2d 306 (1977).  On the other hand, this rule of "privity" is 
negated in certain circumstances by third party beneficiaries, 
Schilling v. Employers Mutual Casualty Company, 212 Wis. 2d 878, 
886-87, 569 N.W.2d 776 (Ct. App. 1997), and may be affected by 
Wisconsin's 
direct 
action 
statute 
against 
insurers, 
Wis. Stat. § 632.24.  If a third party tort plaintiff is 
entitled to invoke § 628.46(1), however, it is not clear why 
some third parties are specifically precluded from invoking the 
statute by virtue of Wis. Stat. § 646.31(2). 
¶74 With these points in mind, I believe the court of 
appeals was correct when it concluded that the statute is 
inconsistent and ambiguous,2 and that its ambiguity permits us to 
examine extrinsic sources. 
II. LEGISLATIVE HISTORY 
¶75 Wisconsin Stat. § 628.46(1) was created as part of the 
1975 state budget bill.  § 708, ch. 39, Laws of 1975.  The new 
                                                 
2 Kontowicz v. Am. Standard Ins. Co., 2005 WI App 22, ¶10, 
278 Wis. 2d 664, 693 N.W.2d 112; see also Wis. Physicians Serv. 
Ins. Corp. v. Mitchell, 114 Wis. 2d 338, 344-45, 338 N.W.2d 326 
(Ct. App. 1983). 
No.  2003AP2177 & 2003AP2534.dtp 
 
7 
 
statute was numbered § 631.02.  It was submitted as part of the 
budget by Governor Patrick Lucey. 
¶76 Later that year, the Legislative Council, at the 
behest of the Insurance Law Revision Committee, introduced 1975 
Senate Bill 642.  Among other things, this "general revision of 
the insurance law relating to insurance contracts" proposed to 
renumber 
§ 631.02 
as 
§ 636.10, 
without 
further 
changes.  
However, the Senate Committee on Commerce, to whom the bill was 
referred, offered Senate Amendment 1, adding subsections (2) and 
(3) to the renumbered section.  This amendment was adopted and 
became part of the law.  See § 43, ch. 375, Laws of 1975. 
¶77 Subsection (3) of the newly created § 636.10 provided: 
"This section applies only to the classes of claims enumerated 
in s. 646.11(2)."3  At that time, Wis. Stat. § 646.11 read in 
part: 
(2) Classes of Claims To Be Paid.  A claim shall 
not be paid unless it is: 
 
(a) Residents.  The claim of a policyholder or 
an insured of, or a beneficiary under, a policy or 
annuity, who at the time of the insured event or of 
the liquidation order was a resident of this state; or 
 
. . . .  
 
(c) Third 
party 
claimants. 
 
A claim 
under 
liability [or] worker's compensation insurance policy, 
if: 
                                                 
3 Wisconsin Stat. § 628.46 was amended again in 2001 and 
2002 to create subsection (2m), which relates to payment for 
chiropractic services.  See 2001 Wis. Act 16, § 9327(1c); 2001 
Wis. Act 65, §§ 19, 20. 
No.  2003AP2177 & 2003AP2534.dtp 
 
8 
 
 
 
1. 
Either the insured or the 3rd party 
claimant was a resident of this state at the time of 
the insured event; or 
 
 
2. 
The claim is for bodily or personal 
injuries suffered in this state or by a person who 
when he suffered the injuries was a resident of this 
state; or 
 
 
3. 
The claim is for damage to property 
situated in this state at the time of damage. 
Wis. Stat. § 646.11 (1975). 
¶78 In 1979 chapter 646 was repealed and recreated, 
renumbering the former § 646.11 to § 646.31.  § 14, ch. 109, 
Laws of 1979.  New § 646.31 begins as follows: "(1) CONDITIONS 
OF ELIGIBILITY.  A claim is not eligible for payment from the 
fund unless it is an unpaid claim for a loss insured under the 
policy or annuity."  New subsection (2) moved "3rd party 
claimants" from paragraph (c) to paragraph (d).  Id. 
¶79 In 1999 the legislature repealed subdivisions 2 and 3 
of paragraph (d), 1999 Wis. Act 30, §§ 73-76, and merged the 
introduction with subdivision 1, so that paragraph (d) reads: "A 
claim under a liability or workers' compensation insurance 
policy, if either the insured or the 3rd party claimant was a 
resident of this state at the time of the insured event."  
Wis. Stat. § 646.31(2)(d).  This is part of the language we must 
now review. 
III. ANALYSIS 
¶80 Wisconsin Stat. § 628.46(1) has been part of Wisconsin 
law for more than 30 years, but no court has ever before given 
it the majority's interpretation in a published opinion.  There 
is good basis for this forbearance in the text of the statute. 
No.  2003AP2177 & 2003AP2534.dtp 
 
9 
 
¶81 The respondent insurers point to certain terms and 
phrases in §§ 628.46(1) and (2), namely, "insurance claim," 
"claim . . . under the policy," "proof of loss required under 
the policy," and "covered loss," and suggest that these terms 
normally relate to first party claims.   
¶82 Perhaps the most critical term in this list is 
"insurance claim."  This term can easily be interpreted to 
connote a contract claim.  The term "claim"——without any 
limiting adjective——is a broader term that may include a tort 
claim.  The majority's interpretation of the statute either 
makes the terms "claim" and "insurance claim" interchangeable or 
concludes that a third party tort claim is an "insurance claim."  
Both of these propositions are dubious. 
¶83 Metropolitan Property and Casualty adds an additional 
argument, that liability policy coverage provisions do not 
require an injured party to submit "proof of loss" to the 
insurer 
under 
the 
policy. 
 
It 
cites 
Wis. Stat. § 631.81 
(approved as part of the same Chapter 375, Laws of 1975, that 
initially linked § 628.46 to § 646.31(2)).  This statute relates 
"notice" and "proof of loss" to an insured's contract obligation 
under the insurance policy.4  A third party tort plaintiff is not 
                                                 
4 Wisconsin Stat. § 631.81 provides: 
631.81 Notice and proof of loss.  (1) Timeliness 
of notice.  Provided notice or proof of loss is 
furnished as soon as reasonably possible and within 
one year after the time it was required by the policy, 
failure to furnish such notice or proof within the 
time required by the policy does not invalidate or 
reduce a claim unless the insurer is prejudiced 
thereby and it was reasonably possible to meet the 
time limit. 
No.  2003AP2177 & 2003AP2534.dtp 
 
10 
 
required by § 631.81 to provide timely notice or "proof of loss" 
to an insurer because a third party tort plaintiff has no 
contract obligation. 
¶84 It makes sense to apply § 628.46(1) to a first party 
claim.  The first party insured has a contract with the insurer; 
and the insurer is part of a heavily regulated industry.  
Insurance regulation, by statute or rule, often serves to 
protect 
the 
interests 
of 
the 
"consumer" 
insured. 
 
In 
§ 628.46(1), the legislature has created an additional provision 
of the insurance contract to assure the prompt vindication of 
the insured's contract rights.  See Anderson, 85 Wis. 2d at 696. 
¶85 This same principle applies to certain "third party 
claimants."  To illustrate: A man purchases a $500,000 life 
                                                                                                                                                             
(2) Method of giving notice.  It is a sufficient 
service of notice or proof of loss if a 1st class 
postage prepaid envelope addressed to the insurer and 
containing the proper notice or proof is deposited in 
any U.S. post office within the time prescribed.  The 
commissioner may expressly approve clauses requiring 
more expeditious methods of notice where that is 
reasonable. 
(3) Meaning 
of 
insurer's 
acts. 
 
The 
acknowledgment by the insurer of the receipt of 
notice, the furnishing of forms for filing proofs of 
loss, 
the 
acceptance 
of 
such 
proofs, 
or 
the 
investigation of any claim are not alone sufficient to 
waive any of the rights of the insurer in defense of 
any claim arising under the insurance contract. 
 
In such cases as Neff v. Pierzina, 2001 WI 95, 245 
Wis. 2d 285, 629 N.W.2d 177, Wisconsin courts have discussed an 
insured's contractual obligation to provide the insurer with 
timely notice or proof of loss.  The statute reinforces the 
insured's contractual obligation.  The insured's breach of this 
obligation may prejudice the insurer and invalidate or reduce 
the insured's claim.  See also, Wis. Stat. § 632.26. 
No.  2003AP2177 & 2003AP2534.dtp 
 
11 
 
insurance policy.  He names his wife as beneficiary.  The 
"insured" expects that when he dies, the insurer will make a 
prompt payment to his beneficiary, who is a third party.  See 
Estate of Plautz v. Time Ins. Co., 189 Wis. 2d 136, 525 
N.W.2d 342 (Ct. App. 1994). 
¶86 A man is employed at a supermarket.  He is injured on 
the job.  His employer has purchased workers' compensation 
insurance for employees and the "insured" employer expects the 
insurer 
to 
provide 
prompt 
coverage 
for 
the 
third 
party 
employee's injury.  See Coleman v. Am. Universal Ins. Co., 86 
Wis. 2d 615, 273 N.W.2d 220 (1979). 
¶87 A woman has a health insurance policy.  She becomes 
ill and is rushed to a hospital for treatment.  The third party 
health care providers expect to be promptly paid by the woman's 
insurer under her policy.  See Wis. Physicians Serv. Ins. Corp. 
v. Mitchell, 114 Wis. 2d 338, 338 N.W.2d 326 (Ct. App. 1983). 
¶88 A driver has a typical automobile insurance policy.  
The driver hits a deer on the highway, causing extensive damage 
to the vehicle.  The auto repair shop gives an estimate to the 
insured driver and the insurer and is authorized to proceed.  
When it completes its work, the third party auto repair shop 
expects to be paid promptly by the insurer pursuant to the 
policy.  
¶89 In all these situations, the insured expects the 
insurance contract to be honored by the insurer even though the 
insured may not receive any direct payment.  There may be a 
dispute about coverage between the insurer and the insured, or 
No.  2003AP2177 & 2003AP2534.dtp 
 
12 
 
there may be a dispute about the amount to be paid.  But, for 
the most part, the insurer, the insured, and any third party 
claimants are on the same side.  The insured and third party 
claimants are almost always aligned.  Sometimes third party 
claimants have been specifically named by the insured in the 
policy.5 
¶90 A third party tort plaintiff is not on the same side 
as the insurer and the insured.  The third party tort plaintiff—
—at least on the facts in these cases——is an adversary.  See 
Kranzush v. Badger State Mut. Cas. Co., 103 Wis. 2d 56, 64, 307 
N.W.2d 256 (1981).  In explaining the basis for a bad faith 
claim by an insured against an insurer, the Kranzush court 
stated: 
The insured's right to be treated fairly . . . is 
rooted in the contract of insurance to which he and 
the insurer are parties.  The third-party claimant has 
not contracted for insurance benefits and is not in a 
contractual relationship, much less a relationship of 
trust, with the insurer. 
Id. at 64 (emphasis added). 
                                                 
5 The court of appeals has provided an explanation why some 
third party claimants qualify under Wis. Stat. § 628.46(1):  
Under 
established 
Wisconsin 
law, 
a 
contract 
cannot be enforced by a person not a party to it.  The 
exception to that rule is a contract specifically made 
for the benefit of a third party.  The person claiming 
to be a third-party beneficiary of a contract must 
show that the contract was entered into by the parties 
to the contract directly and primarily for his 
benefit. 
Goossen v. Estate of Standaert, 189 Wis. 2d 237, 249, 525 
N.W.2d 314 (Ct. App. 1994) (citations omitted). 
No.  2003AP2177 & 2003AP2534.dtp 
 
13 
 
¶91 In short, § 628.46(1) fits most comfortably with first 
party claims.  Where it is applied to first party claims and 
non-adversarial third party claims, the statute bolsters and 
expands an insured's contract rights. 
¶92 By contrast, applying § 628.46(1) to a third party 
tort plaintiff's claim may drive a wedge between the insurer and 
the insured and undermine their contractual relationship.  This 
court has recognized a "special duty of good faith and fair 
dealing [that] runs throughout the contract relationship between 
the insurer and the insured," Danner v. Auto-Owners Insurance, 
2001 WI 90, ¶49, 245 Wis. 2d 49, 629 N.W.2d 159.  Their 
relationship 
is 
sometimes 
characterized 
as 
a 
"fiduciary" 
relationship.  See DeChant v. Monarch Life Ins. Co., 200 
Wis. 2d 559, 570, 547 N.W.2d 592 (1996).  It is unlikely that 
the legislature intended to put financial pressure on an insurer 
to terminate its "fiduciary" relationship with the insured.6 
¶93 In Alt v. American Family Mutual Insurance Company, 71 
Wis. 2d 340, 350, 237 N.W.2d 706 (1976), the court observed that 
an insurer "has an affirmative duty to seize whatever reasonable 
opportunity may present itself to protect its insured from 
excess liability."  This duty is inconsistent with an insurer's 
                                                 
6 A liability insurance contract often requires the insurer 
to provide counsel for an "insured" defendant.  Although counsel 
is compensated by the insurer, counsel is ethically obligated to 
represent 
the 
insured 
with 
loyalty 
and 
"independence 
of 
professional judgment."  SCR 20:1.8(f)(2).  The insurer must not 
interfere in this relationship.  In my view, the advent of 
insurer liability to third party tort plaintiffs for interest 
may create new tensions in the insurer/insured relationship and 
cause some insurers to "pull the plug" on their insureds at an 
earlier stage than they might have in the past. 
No.  2003AP2177 & 2003AP2534.dtp 
 
14 
 
early abandonment of the insured at the first opportunity after 
a tort claimant demands money, so that the insurer can avoid 
paying interest in excess of policy limits.7 
¶94 Kranzush speaks of the balance between "the insurer's 
right to control the settlement process (and protect its own 
interests) [and] the insured's right to be protected from 
liability for which he is not covered."  Kranzush, 103 
Wis. 2d at 64 (emphasis added).  "These are concerns to which 
the third-party claimant is a stranger."  Id.  The majority 
disrupts this balance by giving insurers a judicially sanctioned 
reason to elevate their interests and the interests of third 
party tort plaintiffs over the interests of their insureds. 
¶95 Both the insurer and the insured have the right to put 
a tort plaintiff to his proof.  "It is still the obligation of 
the tort victim to establish the fault of the tortfeasor, and it 
is still the prerogative of the alleged tortfeasor to defend 
himself in court."  Id. at 65.  This principle would be impaired 
                                                 
7 In Weimer v. Country Mutual Insurance Company, 216 
Wis. 2d 705, 724, 575 N.W.2d 466 (1998), the court quoted Arnold 
P. Anderson's treatise on Wisconsin Insurance Law § 8.2, at 237 
(3d ed. 1990): "An insurance company has a duty to . . . do all 
that is reasonably necessary to protect its insured from any 
liability in excess of policy limits."  Then it added: "Failure 
to include language requesting release of [the insured] may 
subject [the insurer] to a claim of bad faith."  Weimer, 216 
Wis. 2d at 724 (emphasis added) (citing Alt v. Am. Family Mut. 
Ins. Co., 71 Wis. 2d 340, 350, 237 N.W.2d 706 (1976)). 
Requesting release of the insured will not mean much if the 
plaintiff's rejection of the request does not toll the operation 
of the statute. 
No.  2003AP2177 & 2003AP2534.dtp 
 
15 
 
if interest on a tort claim began to run against the insurer 
before a tort victim filed suit or offered settlement. 
¶96 The Kranzush case rejected the creation of a tort of 
bad faith by a tort victim against the tortfeasor's insurer for 
failing to settle the victim's claim.  The court explained that 
an insurer's duty to settle runs to the insured, not the 
claimant.  Id. at 68.  The court cited several cases from other 
courts, including Uebelacker v. Horace Mann Insurance Company, 
500 F.Supp. 180 (E.D. Wis. 1980), then summarized their 
holdings: "These cases stress a constant theme: an insurer owes 
no duty to the third-party [tort] claimant to settle or to 
negotiate in good faith."  Kranzush, 103 Wis. 2d at 72.  We 
reiterate the words of the supreme court of Maine, for we 
believe they well express the extent to which this cause of 
action would constitute a serious and unprecedented departure 
from established tort principles: 
[T]hat the insurer is the representative of the 
insured logically imports that the third party tort 
claimant's status as the adversary of the insured 
renders 
him, 
ipso 
facto, 
the 
adversary 
of 
the 
insured's agent.  Thus, prior to the establishment of 
legal liability, as the tort claimant has no legal 
right to require the tortfeasor to negotiate or 
settle, it likewise lacks right to require such action 
by his representative.  [Linscott v. State Farm Mutual 
Auto. Ins. Co., 368 A.2d 1161, 1163-64 (Me. 1977).] 
Id. at 72-73 (emphasis added). 
 
¶97 The thrust of the majority opinion is to impose a duty 
on insurers, by statute, to start making payments within 30 days 
of a tort victim's demand, or risk the commencement of 12 
percent interest.  This duty may be imposed even before suit is 
No.  2003AP2177 & 2003AP2534.dtp 
 
16 
 
filed, to say nothing of a court's determination of the 
insurer's liability.  By requiring insurers to pay before a 
settlement is reached or a judgment rendered, the majority 
increases the likelihood that plaintiffs will hold out and 
demand more, thereby elevating the strategic position of third 
party tort plaintiffs in litigation at the expense of insureds. 
¶98 Irrespective of common law principles, this court is 
expected to follow clear legislative mandates so long as they do 
not violate some constitutional provision.  In this case, the 
mandate is not clear.  Because the majority opinion represents a 
radical departure from existing precedent, there ought to be 
some evidence that this result is what the legislature intended.  
I am unable to unearth that intent in extrinsic sources. 
¶99 The 
original proposal was 
contained 
in Governor 
Lucey's 1975-77 budget.  I have been unable to find any 
explanation of the provision that does more than repeat in 
summary form the terms of the provision.8  I have also been 
unable to locate any explanation of the 1976 amendment of the 
Senate Committee on Commerce. 
                                                 
8 Book 1 of the 1975-77 Executive Budget describes the 
budget requests of the Office of the Commissioner of Insurance 
and the Governor's recommendations with respect to these 
requests.  This document does not mention the Governor's 
proposal for the timely payment of claims statute.  The budget 
document does mention that the "mission of the office [of 
Commissioner of Insurance] is to regulate and supervise the 
insurance industry so that the insurance consumer can be assured 
that there will be fair competition in the market place and that 
the consumer's needs can be met."  Department of Administration, 
Bureau of Planning & Budget, Executive Budget of the State of 
Wisconsin, Book 1, at 122, 1975-77 (Jan. 1975). 
No.  2003AP2177 & 2003AP2534.dtp 
 
17 
 
¶100 The Office of the Commissioner of Insurance (OCI) has 
recognized § 628.46 as part of the statutory Wisconsin Insurance 
Code since 1975.  In 1978 John Sheski, a young attorney on the 
Health Insurance Project Team at OCI, wrote a 12-page internal 
memorandum discussing potential interpretations of the "Timely 
payment of claims" statute.  Sheski advocated interpreting the 
statute to benefit third party claimants.  Memorandum from John 
Sheski to Laurie Riach dated September 27, 1978, regarding 
"Entitlement to Statutory Interest 'Penalty' Provided by Section 
636.10, Wis. Stats." (on file with the State of Wisconsin Office 
of Commissioner of Insurance, Madison, Wisconsin) (hereinafter 
Sheski Memorandum). 
¶101 Sheski's memorandum discusses "present ambiguity" in 
the 
statute, 
draft 
legislation 
(never 
enacted) 
from 
the 
Legislative Council to revise Chapter 636, contemporary cases on 
prejudgment 
interest, 
the 
incorporation 
of 
then 
Wis. Stat. § 646.11(2) (1975) by reference, and a November 9, 
1976, memorandum to Commissioner Harold R. Wilde from Assistant 
Deputy Commissioner Marvin E. Van Cleave.  Sheski argued that 
under certain circumstances, third party claimants were entitled 
to receive the interest under the statute.  He contended that 
the statute did not appear to alter case law on prejudgment 
interest.  "[Wisconsin Stat. §] 636.10 provides a statutory 
right to such interest at a 12% per annum rate which the courts 
must award if the claimant asks for it as part of the requested 
relief and the insurer has no valid defense."  Sheski Memorandum 
at 5. 
No.  2003AP2177 & 2003AP2534.dtp 
 
18 
 
¶102 The 
memorandum 
acknowledges, 
however, 
that 
the 
Insurance Laws Revision Committee wanted to modify the language 
in the statute, removing "detail that is not fairly applicable 
to all kinds of claims."  Sheski Memorandum at 2.  It quotes the 
Van Cleave memorandum as summarizing a discussion about the 
modification proposal not applying to third party claims: "Laura 
Sullivan related the concern of her claims people with what 
their responsibilities are with respect to third party claims——
[Spencer] Kimball said that the response could be that there was 
no liability."  Sheski Memorandum at 10 (quoting Van Cleave 
memorandum). 
¶103 Sheski's comment on this was that "It's evident that 
Kimball and others were of the opinion that there was no insurer 
liability to third-party claimants for the interest 'penalty.'"  
Sheski Memorandum at 11. 
¶104 The importance of the Sheski Memorandum is that in 
1978 OCI had an advocacy memorandum in behalf of third-party 
claimants.  Yet, I found no evidence that OCI ever followed up 
and applied Wis. Stat. § 628.46(1) against an insurer who did 
not promptly settle a claim from a third party tort plaintiff.  
Rather, it appears that OCI has used § 628.46(1) to apply 
discipline only to insurers who did not promptly settle with 
insureds and non-adversarial third parties.  In fact, in a 1987 
opinion, OCI posed the question: "If an insurer agrees to pay 70 
percent of a third-party claim but does not pay this amount 
because the third-party disagrees with the offer and the claim 
is ultimately settled for 80 percent, is the insurer subject to 
No.  2003AP2177 & 2003AP2534.dtp 
 
19 
 
pay an interest penalty because they did not timely pay the 70 
percent offer?"  OCI staked out the legal position that 
"Interest 
is 
not 
due 
because 
liability 
has 
not 
been 
established," 
citing 
Wis. Stat. § 628.46. 
 
Legal 
Position 
Binder, Opinion Number 6, dated March 31, 1987 (on file with 
State of Wisconsin Office of Commissioner of Insurance, Madison, 
Wisconsin). 
¶105 OCI's interpretation of the statute is consistent with 
the view that Wis. Stat. § 628.46(1) is intended to bolster the 
"consumer" insured's contract rights under the insurance policy.  
For OCI to review and discipline an insurer for its performance 
in dealing with a third party tort claimant would introduce a 
dramatic new element into tort litigation.   
¶106 Third party tort plaintiffs have well-established 
alternative protections, including Wis. Stat. § 807.01(4).  If 
Wis. Stat. § 628.46(1) is interpreted to apply to a third party 
tort 
plaintiff, 
the 
statute 
conflicts 
with 
Wis. Stat. § 807.01(4),9 
inasmuch 
as 
a 
plaintiff 
under 
§ 807.01(4) may not make a consequential offer of settlement 
until "after issue is joined."  On the other hand, § 628.46 does 
                                                 
9 Wisconsin Stat. § 807.01(4) reads as follows: 
(4) If there is an offer of settlement by a 
party under this section which is not accepted and the 
party recovers a judgment which is greater than or 
equal to the amount specified in the offer of 
settlement, the party is entitled to interest at the 
annual rate of 12% on the amount recovered from the 
date of the offer of settlement until the amount is 
paid. Interest under this section is in lieu of 
interest computed under ss. 814.04(4) and 815.05(8). 
No.  2003AP2177 & 2003AP2534.dtp 
 
20 
 
not require the plaintiff to make any offer of settlement.  In 
effect § 628.46(1), as interpreted by the majority, displaces 
§ 807.01(4) in every third party tort plaintiff case involving 
an insurer.  This will penalize insurers in situations where it 
would not penalize actual tortfeasors. 
¶107 Several courts have explained that the purpose of 
Wis. Stat. § 807.01(4) is to encourage settlement of cases prior 
to trial.  See Beacon Bowl, Inc. v. Wis. Elec. Power Co., 176 
Wis. 2d 740, 778, 501 N.W.2d 788 (1993); DeMars v. LaPour, 123 
Wis. 2d 366, 373, 366 N.W.2d 891 (1985); Graves v. Travelers 
Ins. Co., 66 Wis. 2d 124, 140, 224 N.W.2d 398 (1974); Gorman v. 
Wausau Ins. Cos., 175 Wis. 2d 320, 328, 499 N.W.2d 245 (Ct. App. 
1993).  This purpose is different from bolstering an insured's 
contract rights. 
¶108 There are numerous situations in which a third party 
tort claimant will be entitled to pre-verdict interest on his 
claim, but the majority's interpretation of § 628.46 may 
conflict with established Wisconsin law on pre-verdict interest 
in personal injury cases in the absence of an offer of 
settlement under § 807.01(4).  See Johnson v. Pearson Agri-
Systems, Inc., 119 Wis. 2d 766, 350 N.W.2d 127 (1984).10  By 
                                                 
10 In 
Johnson 
v. 
Pearson 
Agri-Systems, 
Inc., 
119 
Wis. 2d 766, 350 N.W.2d 127 (1984), the court was confronted 
with the question whether a plaintiff in a personal injury 
action is entitled to interest on the damage award from the time 
of the injury through the date the verdict is rendered.  The 
court noted three statutes: Wis. Stat. § 814.04(4) (1981-82) 
("pre-judgment interest at the rate of 12% per year from the 
time 
of 
the 
verdict 
until 
judgment 
is 
entered"); 
Wis. Stat. § 815.05 (post-judgment interest at 12% per year); 
and Wis. Stat. § 807.01(4) (regarding settlement offers from 
plaintiff).  The court said: 
No.  2003AP2177 & 2003AP2534.dtp 
 
21 
 
reconciling Wis. Stat. § 628.46 with our pre-verdict interest 
decisions in other third party cases, my position requires a 
third party tort plaintiff to meet a higher burden than a person 
exercising a contract right under a policy, and thus decreases 
the likelihood of satellite litigation. 
¶109 If the majority were not concerned about the far-
reaching implications of its decision, it would not have decided 
to rewrite a purportedly unambiguous statute to create "tests" 
for the third party tort plaintiff to meet. 
¶110 I 
think 
the 
better 
course 
is 
to 
uphold 
the 
interpretation of the OCI and the court of appeals. 
¶111 For the reasons stated, I respectfully dissent. 
 
                                                                                                                                                             
 
If 
this 
court 
were 
to 
accept 
plaintiff's 
arguments and allow for pre-verdict interest we would 
face serious policy decisions that could thwart the 
attempt of the legislature to encourage settlement of 
lawsuits.  Should we allow twelve percent pre-verdict 
interest for instance to a plaintiff even though no 
settlement offer had been made by such plaintiff?  
There would be no incentive for a plaintiff to offer 
to settle in order to get pre-verdict interest.  This 
would seem to be an unwarranted thwarting of a statute 
designed to encourage an end to litigation and to 
relieve overcrowded court calendars.  To award pre-
verdict interest where an offer made and rejected was 
more than what the jury finally awarded would likewise 
thwart the purpose of the statute.  To award pre-
verdict interest where an offer was less than the 
verdict would then in effect amend a legislative act 
by doubling the amount the legislature had determined 
should be the incentive for encouraging the making and 
acceptance of settlement offers.  This we decline to 
do. 
Johnson, 119 Wis. 2d at 773-74. 
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