Title: Patricia S. Magyar v. Wisconsin Health Care Liability Insurance Plan
Citation: 2001 WI 41
Docket Number: 1998AP003289
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: May 3, 2001

2001 WI 41 
 
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
98-3289 
 
 
Complete Title 
of Case: 
 
Patricia S. Magyar, Individually and as Special 
Administrator of the Estate of Anthony F. 
Magyar, Deceased,  
 
Plaintiffs, 
City of Milwaukee, a municipal corporation,  
 
Involuntary-Plaintiff, 
 
v. 
Wisconsin Health Care Liability Insurance Plan, 
a Wisconsin insurance corporation, Lawrence J. 
Frazin, M.D., Neurological Surgery, S.C., a 
Wisconsin service corporation, f/k/a 
Neurological Surgery of Milwaukee, S.C. and 
Wisconsin Patients Compensation Fund,  
 
Defendants, 
Neurological Surgery, S.C.,  
 
Third-Party Plaintiff-Appellant-Petitioner, 
 
v. 
Physicians Insurance Company of Wisconsin,  
 
Third-Party Defendant-Respondent, 
Wisconsin Patients Compensation Fund,  
 
Defendant.  
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at:  237 Wis. 2d 694, 616 N.W.2d 922 
(Ct. App. 2000-Unpublished) 
 
 
Opinion Filed: 
May 3, 2001 
Submitted on Briefs: 
      
Oral Argument: 
February 5, 2001 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Milwaukee 
 
JUDGE: 
Victor Manian 
 
 
JUSTICES: 
 
Concurred: 
      
 
Dissented: 
      
 
Not Participating: SYKES, J., did not participate. 
 
2 
 
 
ATTORNEYS: 
For the third-party plaintiff-appellant-
petitioner there were briefs by David W. Neeb, Daniel J. Borowski 
and Davis & Kuelthau, S.C., Milwaukee, and oral argument by James 
E. Culhane. 
 
 
For the third-party defendant-respondent there 
was a brief by Jeffrey O. Davis, Cory L. Nettles and Quarles & 
Brady, LLP, Milwaukee, and oral argument by Jeffrey O. Davis and 
Owen T. Armstrong, Jr. 
 
2001 WI 41 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear 
in the bound volume of the official reports. 
 
 
No.  98-3289 
 
STATE OF WISCONSIN                    :  
  IN SUPREME COURT 
 
 
Patricia S. Magyar, Individually and as 
Special Administrator of the Estate of 
Anthony F. Magyar, Deceased, 
 
 
Plaintiffs, 
 
City of Milwaukee, a municipal 
corporation,  
 
 
Involuntary-Plaintiff, 
 
 
v. 
 
Wisconsin Health Care Liability Insurance 
Plan, a Wisconsin insurance corporation, 
Lawrence J. Frazin, M.D., Neurological 
Surgery, S.C., a Wisconsin service 
corporation, f/k/a Neurological Surgery of 
Milwaukee, S.C. and Wisconsin Patients 
Compensation Fund,  
 
 
Defendants, 
 
Neurological Surgery, S.C., 
 
Third-Party Plaintiff-Appellant-
Petitioner, 
 
v.  
 
Physicians Insurance Company of Wisconsin, 
 
Third-Party Defendant-Respondent, 
 
Wisconsin Patients Compensation Fund, 
 
 
Defendant. 
 
 
FILED 
 
MAY 3, 2001 
 
Cornelia G. Clark 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed. 
 
¶1 
WILLIAM A. BABLITCH, J.   Neurological Surgery, S.C. 
(NSM) petitions us to review a court of appeals' decision that 
held that Physicians Insurance Company of Wisconsin (PICW) had 
no duty to defend or indemnify NSM against allegations of 
negligence because NSM's policy was not in effect at the time of 
the negligence claim against NSM due to PICW's nonrenewal of the 
policy.  NSM argues that PICW's failure to give notice of 
nonrenewal to either NSM or the commissioner of insurance had 
the result of maintaining the insurance policy until such 
notices were given.  We disagree.  If NSM were correct, the 
statute requiring notice would in effect provide unlimited 
renewals until notice was given.  The statute does not so 
provide.  Accordingly, we affirm.   
I 
¶2 
Patricia Magyar filed a lawsuit on October 22, 1992, 
following the death of her husband, Anthony Magyar.  In her 
complaint, she alleged that her husband's death was caused by 
the medical negligence of Lawrence Frazin during care that he 
provided in 1990.  Anthony Magyar died in December 1990.  The 
complaint named Frazin, his insurer (Wisconsin Health Care 
Liability 
Insurance 
Plan), 
and 
the 
Wisconsin 
Patients 
Compensation Fund as defendants.  At the time of the alleged 
negligence, Frazin was one of two physicians at NSM.  In March 
1993, Magyar amended her complaint to add NSM as a defendant.  
No. 
98-3289 
 
 
3 
In October 1994, NSM filed a third-party complaint against PICW 
after PICW denied any obligation to defend or indemnify NSM.   
¶3 
Our review focuses on NSM's insurance policy with 
PICW; thus, some background regarding this policy is necessary. 
 In April 1987, Frazin and Richard Strassburger, the other 
physician at NSM, obtained individual medical professional 
liability claims-made insurance policies with PICW.  At that 
time, NSM received an identical policy with equal coverage at no 
additional cost.  The policy included the following stipulation: 
 "[Y]our entity is not covered unless all physicians and 
surgeons who are members of your entity are covered by 
individual policies of insurance issued by us."  The terms of 
eligibility in the policy stated:  "A partnership, association 
or corporation is eligible for coverage only if all physicians 
and 
surgeon 
members, 
partners, 
officers, 
directors 
or 
shareholders of the partnership, association or corporation:  1. 
Are insured by professional liability policies issued by us.  2. 
Maintain the same limits of liability."  
¶4 
In April 1988, PICW renewed the policies to NSM and to 
NSM's physicians individually.  The policies were all renewed 
for a term of nine months, ending January 1, 1989.  In November 
1988, PICW informed Frazin that, effective January 1, 1989, it 
would not be renewing his policy.  PICW did not send any notice 
of nonrenewal to NSM.  Frazin purchased a reporting endorsement 
through PICW, which provided "tail coverage" to him, that is, 
coverage for any incident occurring during the policy period but 
No. 
98-3289 
 
 
4 
not reported until a date within the endorsement period.  This 
endorsement took effect on January 1, 1989. 
¶5 
In January 1993, the Wisconsin Patients Compensation 
Fund notified NSM that NSM did not have a valid certificate of 
insurance on file.  NSM then contacted PICW, and PICW explained 
that a certificate was not on file because NSM's policy had been 
terminated on January 1, 1989.  After being named as a defendant 
in this lawsuit, NSM tendered a defense to PICW in January 1994. 
 PICW denied any obligation to defend or indemnify NSM under the 
policy.  Consequently, NSM filed a third-party complaint against 
PICW.  In it, NSM argued that because PICW failed to give notice 
of termination of coverage to NSM and to the commissioner of 
insurance, PICW's nonrenewal of the policy was void, and PICW 
had a duty to defend and indemnify NSM in this case.  The 
parties later brought cross-motions for summary judgment. 
¶6 
The Milwaukee County Circuit Court, the Honorable 
Victor Manian, granted summary judgment in favor of PICW.  The 
court concluded that PICW failed to provide notice of nonrenewal 
to NSM pursuant to Wis. Stat. § 631.36(4)(a)(1987-88),1 and as a 
result, NSM was entitled to a renewal of its policy.  However, 
the court found that this renewal was limited to one additional 
period under the same conditions and for the same term as the 
policy.  Because the malpractice act and claim both occurred 
after any renewal period, the court determined that PICW was not 
                     
1 All subsequent references to the Wisconsin Statutes are to 
the 1987-88 version unless otherwise indicated. 
No. 
98-3289 
 
 
5 
obligated to defend or indemnify NSM in this case.  The court 
also concluded that NSM was not entitled to coverage after 
January 1, 1989, because after that date NSM failed to have all 
of its physicians covered by PICW policies with equal liability 
limits.  The court noted that this condition precedent was 
necessary for NSM to have coverage under the policy.  
¶7 
The court of appeals affirmed, and we accepted review.  
II 
¶8 
We review 
the 
circuit court's decision granting 
summary judgment to PICW.  Such decisions are reviewed de novo. 
 Smith v. Katz, 226 Wis. 2d 798, 805, 595 N.W.2d 345 (1999).  In 
reviewing this decision, we must interpret state statutes and 
provisions in an insurance contract.  Statutory interpretation 
presents a question of law that we determine independently, 
while benefiting from the analyses of the circuit court and the 
court of appeals.  Patients Compensation Fund v. Lutheran Hosp., 
223 
Wis. 2d 
439, 
454-55, 
588 
N.W.2d 
35 
(1999). 
 
Our 
interpretation of an insurance contract is also a question of 
law that we review de novo.  Smith, 226 Wis. 2d at 805.   
¶9 
It is undisputed that PICW failed to mail or deliver a 
separate notice of nonrenewal to NSM as required under Wis. 
Stat. § 631.36(4)(a).  This statute provides: 
 
Subject to subs. (2) and (3), a policyholder has a 
right to have the policy renewed, on the terms then 
being applied by the insurer to similar risks, for an 
additional period of time equivalent to the expiring 
term if the agreed term is one year or less . . . 
unless at least 60 days prior to the date of 
expiration 
provided 
in 
the 
policy 
a 
notice 
of 
No. 
98-3289 
 
 
6 
intention not to renew the policy beyond the agreed 
expiration 
date 
is 
mailed 
or 
delivered 
to 
the 
policyholder . . . . 
Wis. Stat. § 631.36(4)(a).  Thus, we must first determine what 
remedy is available to NSM for PICW's violation of this statute. 
¶10 NSM argues that the appropriate remedy for this 
violation is to permit the policy to remain in effect until PICW 
mails or delivers such notice.  This remedy is required, NSM 
asserts, because, although the statute affords a right of 
renewal to the policyholder, this right is not triggered unless 
and until notice is mailed or delivered to the policyholder.  
Until that time, coverage continues.  We disagree with this 
interpretation.  
¶11 "Where a statute unambiguously establishes legislative 
intent in its plain meaning, we apply that meaning without 
resorting to extrinsic sources."  Seider v. O'Connell, 2000 WI 
76, ¶52, 236 Wis. 2d 211, 612 N.W.2d 659.  We find the statute 
clear and unambiguous.  Within the language of the statute, 
there is nothing to suggest that the right to renewal is 
triggered by notice from the insurer.  Instead, the statute 
grants this right to any policyholder, that is, "the person who 
controls the policy by ownership, payment of premiums or 
otherwise."  Wis. Stat. § 600.03(37).  Thus, by statute, the 
policyholder obtains this right upon formation of the contract, 
not upon any triggering event.  NSM's policy also included the 
language found in Wis. Stat. § 631.36(4)(a).   
¶12 According to Wis. Stat. § 631.36(4)(a), a policyholder 
has this right "unless" the insurer mails or delivers notice of 
No. 
98-3289 
 
 
7 
nonrenewal to the policyholder at least 60 days prior to the 
date of expiration provided in the policy.  Thus, an insurer may 
effectively eliminate the policyholder's right to renewal if it 
provides valid notice of nonrenewal.  If notice is not provided, 
the policyholder retains this right, and barring any application 
of an exception under § 631.36(4)(b), it may exercise its right 
to a renewal.  This is the remedy afforded to policyholders for 
violations of § 631.36(4)(a). 
¶13 Any renewal period afforded to a policyholder is 
specifically limited under Wis. Stat. § 631.36(4)(a).  Under the 
statute, the renewal is restricted to "an additional period of 
time equivalent to the expiring term."  The expiring term here 
was for the nine months preceding January 1, 1989.  The 
additional period of time equivalent to the expiring term was 
nine months, from January 1, 1989 to October 1, 1989.  The acts 
and claim of malpractice, however, occurred after this period.  
Thus, PICW's failure to give notice pursuant to § 631.36(4)(a) 
did not result in any remedy that provided coverage to NSM in 
this case.   
 
¶14 This conclusion is consistent with the statute's 
primary purpose, which is to ensure peace of mind for a 
policyholder in relying on its policy despite any desire by the 
insurer to either cancel the policy or decline renewal without 
sufficient notice.  See § 24, ch. 144, Laws of 1969 (preliminary 
comment). 
 
Our 
interpretation 
fulfills 
this 
purpose 
by 
establishing uninterrupted coverage when an insurer has not 
provided valid notice of nonrenewal.  Notice is necessary to 
No. 
98-3289 
 
 
8 
warn the policyholder that it must find additional insurance 
because its current insurance will not be renewed.  The statute 
contemplates that, when notice is not provided according to the 
statute, the policyholder may not have sufficient time to obtain 
replacement insurance, 
and 
therefore, 
the 
policyholder is 
entitled to a renewal period to maintain coverage.  By limiting 
this renewal to one additional period, however, the statute also 
balances the competing interest that a policyholder must take 
some responsibility in minding its policy and discerning whether 
renewal has occurred in light of evidence to the contrary, such 
as a failure to receive billing or declarations statements. 
¶15 In its interpretation of Wis. Stat. § 631.36(4)(a), 
NSM relies on the court of appeals' holding in Sausen v. 
American Family Mutual Insurance Co., 121 Wis. 2d 653, 360 
N.W.2d 565 (Ct. App. 1984).  In that case, Sausen obtained a 
three-year policy to insure his interest in a farm combine.  Id. 
at 655.  The insurer failed to notify Sausen that it would not 
renew the policy, and two months after the expiration date, the 
combine was damaged by fire.  Id.  Sausen argued that he was 
entitled to coverage because, under § 631.36(4)(a), his policy 
automatically renewed when his insurer failed to provide notice 
of nonrenewal.  Id.  The insurer disagreed, arguing that its 
failure to provide notice only resulted in its implied offer of 
renewal, which must be accepted by the policyholder before the 
policy expiration date for the policy to be renewed.  Id.   
¶16 The court of appeals held that notice of nonrenewal or 
of premium due is required under the statute before a policy 
No. 
98-3289 
 
 
9 
lapses and that, because such notice was not provided by the 
insurer, Sausen's coverage extended beyond the expiration date. 
 Id. at 654.  Our holding is consistent with the holding in 
Sausen.  We, like the Sausen court, recognize that, pursuant to 
Wis. Stat. § 631.36(4)(a), a policyholder is entitled to 
coverage beyond the date of expiration of the policy if notice 
of nonrenewal is not provided according to statute.  Coverage 
continues, barring any exceptions, under a renewal of the 
policy.  This conclusion promotes mandatory notice.  Our 
holding, however, goes one step further than Sausen because we 
also find that the continuation of coverage is limited to one 
renewal period.  Indeed, the Sausen court did not have to 
address this issue because the date of the accident in that case 
fell within this renewal period.  
¶17 Notwithstanding any renewal of the policy, NSM also 
argues that it is entitled to coverage under its policy because 
the policy remained in effect after Frazin's policy was not 
renewed.  NSM acknowledges that its policy required every NSM 
physician to be covered under a PICW policy with the same limits 
of liability; however, it asserts that this condition was met 
after January 1, 1989, by Frazin's reporting endorsement.  We 
disagree.  The terms of the policy required that all NSM 
physicians have individual professional liability policies with 
the same limits of liability.  Frazin's reporting endorsement 
did not provide the same limits of liability as NSM's policy 
because it did not cover claims that arose from acts occurring 
after December 31, 1988.  NSM's policy would have covered such 
No. 
98-3289 
 
 
10
claims.  Thus, because Frazin would not have maintained the same 
limits of liability as NSM, NSM no longer met the terms of 
eligibility in its policy as of January 1, 1989.  
III 
¶18 We must also decide what remedy, if any, is available 
to NSM for PICW's failure to notify the commissioner of 
insurance of NSM's policy termination.  Such notification is 
required under Wis. Stat. § 655.24(4), which states:  "The 
insurer shall, upon termination of a policy of health care 
liability insurance issued under this chapter by cancellation or 
nonrenewal, notify the commissioner of the termination." 
¶19 NSM correctly notes that this statute does not 
specifically enumerate any remedy for PICW's failure to the 
commissioner.  NSM argues, however, that, in light of Lang v. 
Kurtz, 100 Wis. 2d 40, 301 N.W.2d 262 (Ct. App. 1980), an 
appropriate remedy would be to require the insurance policy to 
remain in effect until PICW provided such notice.  We conclude 
that such a remedy is not available to NSM for two reasons.  
¶20 First, Wis. Stat. § 655.24(4) does not imply or 
suggest that such a remedy is appropriate.  This statute only 
requires that an insurer "shall . . . notify the commissioner of 
the termination."  This language does not suggest that the 
policy would remain in effect or would not be terminated until 
notice is provided.   
¶21 In this respect, Wis. Stat. § 655.24(4) differs from 
the statute at issue in Lang.  In Lang, the court examined Wis. 
Stat. § 344.34(1977), which provided:  "When an insurance 
No. 
98-3289 
 
 
11
carrier has certified a motor vehicle liability policy . . . the 
insurance so certified shall not be canceled or terminated until 
at least 10 days after a notice of cancellation or termination 
of the insurance so certified has been filed in the office of 
the secretary."  Id. at 42 n. 3.  Unlike § 655.24(4), the 
statute in Lang clearly implies that coverage would remain in 
effect if notice were not provided.  For this reason, the remedy 
provided in Lang is inappropriate.  
¶22 The second reason that the policy must not remain in 
effect is because the legislature has already provided for 
sanctions against an insurer in such instances.  In particular, 
the legislature authorized the commissioner to apply enforcement 
procedures and penalties under Wis. Stat. § 601.64 for such 
violations.2  We must presume that the legislature was aware that 
such sanctions were available to the commissioner when it 
promulgated Wis. Stat. § 655.24(4) in 1985.  See Jones v. State, 
226 Wis. 2d 565, 579, 594 N.W.2d 738 (1999) ("We presume that 
the legislature enacts laws with full knowledge of existing 
statutes.").   
                     
2 In particular, Wis. Stat. § 601.64(3)(c) specifically 
states: 
Whoever 
violates 
an 
insurance 
statute 
or 
rule, 
intentionally aids a person in violating an insurance 
statute or rule or knowingly permits a person over 
whom he or she has authority to violate an insurance 
statute or rule shall forfeit to the state not more 
than $1,000 for each violation.  If the statute or 
rule 
imposes 
a duty 
to 
make a 
report 
to the 
commissioner, each week of delay in complying with the 
duty is a new violation. 
 
No. 
98-3289 
 
 
12
¶23 Our interpretation preserves the legislature's scheme 
of financial responsibility.  The legislature empowered the 
commissioner to impose sanctions against insurers when they 
jeopardize financial responsibility by failing to provide proper 
notice of termination.  We give deference to the legislature's 
determination that these statutory sanctions are the most 
appropriate method of achieving financial responsibility in such 
instances.  We will not rewrite this statute.  
IV 
¶24 In sum, we conclude that PICW is entitled to summary 
judgment because its failure to give notice to either NSM or the 
commissioner did not result in an extension of the policy that 
coincided with any negligent act by Frazin or claim submitted by 
Magyar.  As a result, we affirm the court of appeals' decision. 
  
By the Court.—The judgment of the circuit court is 
affirmed. 
DIANE S. SYKES, J., did not participate. 
 
 
No. 
98-3289 
 
 
1