Court Opinion

ID: 9673500
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:13:13.575999+00
Date Added: 2024-06-11T11:38:21.180276
License: Public Domain

SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE
¶ 37. (dissenting). I dissent because I conclude that the majority opinion reaches a result that contra*511venes the text of Wis. Stat. § 807.01(4) (1995-96),1 the purpose underlying § 807.01(4) and prior decisions.
¶ 38. I would hold that when an insurance company has the sole right and ability to settle an entire litigation, yet rejects on behalf of itself and its insured a plaintiffs offer made pursuant to Wis. Stat. § 807.01(3) to settle for an amount within the policy limits and the plaintiff subsequently recovers a total judgment greater than or equal to the amount offered, the insurer is responsible for penalty interest under § 807.01(4) on the entire amount recovered against the insurer and its insured. Such a holding would effect the legislature's purpose in enacting § 807.01(4), to encourage settlement before trial.
¶ 39. Under the majority's holding, on the other hand, the purpose of the statute is eviscerated under the facts of the present case. A party in Mutual Service's position would have virtually no incentive to settle. It could accurately gauge its maximum penalty interest (which would be determined by the policy limits) and decide whether to go to trial, imposing on the insured without the insured's consent an unknown and potentially large penalty interest.
¶ 40. The legislature enacted the § 807.01(4) interest penalty with the intent that it be calculated on an amount unknown to the recipient of the offer when the offer was made. This risk encourages settlement. On the other hand, the penalty interest imposed by the majority is calculated on a known and limited amount. The majority thus eliminates the risk of refusing to accept a settlement offer. Moreover, according to the *512majority opinion, the insured, to whom the plaintiff has offered settlement but who has no ability to settle, faces the possibility of penalty interest on an unknown and potentially large judgment. The majority's imposition of a known and limited penalty interest on the insurance company, the only party with the ability to settle, and the majority's imposition of an unknown and potentially large penalty interest on the insured, who has no ability to settle, does not encourage settlement and is inconsistent with the legislature's intent in enacting § 807.01(4).
¶ 41. I discuss in turn: (1) the text of the statute, (2) the purpose of the statute and (3) the application of prior cases to the present case. These three subjects are intertwined and the discussions necessarily overlap.
HH
¶ 42. Section 807.01(4) provides that if an offer of settlement is not accepted and the party offering the settlement recovers a judgment which is greater than or equal to the amount specified in the offer of settlement, the party offering the settlement is entitled to penalty interest at the annual rate of 12% on the amount recovered, from the date of the settlement offer until the amount is paid. Section 807.01(4) reads as follows:
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).
*513¶ 43. In analyzing the text of this statute, we find that one key word, "party," is used repeatedly. The word party obviously refers to the litigant offering settlement. Indeed, the entire statute focuses on the party offering settlement, not on the recipient of the settlement offer. The statute does not state who pays the penalty interest.
¶ 44. Another element of the text which might be analyzed is the phrase "amount recovered." This is the phrase upon which the majority's holding turns. The majority opinion construes the phrase "amount recovered" as "that portion of a verdict for which a party [the recipient of the offer] is responsible." Majority op. at 501.2 Under the majority opinion's interpretation, the *514statute would read as follows: The party making the offer of settlement is entitled to penalty interest at the annual rate of 12% on that portion of a verdict for which the party who is the recipient of the offer is responsible, from the date of the offer until the amount is paid.
¶ 45. The majority adds words to the statute. The legislature did not expressly address who was to pay penalty interest to a party making an offer when there were several persons liable for a judgment. As the court of appeals has noted, the phrase "amount recovered" "raises the question 'recovered from whom?1 "3 To answer the question left unanswered in the text of the statute, I would look to the statute's purpose.
¶ 46. Instead, the majority concludes that "amount recovered" must be given a one-size-fits-all reading. Such a reading contravenes prior case law, in which the courts have examined the facts of each case to determine the applicability of § 807.01(4). Cases have determined the statute's applicability to a joint offer of settlement from multiple plaintiffs to a defendant,4 a single offer of settlement from multiple plaintiffs to multiple defendants,5 a joint offer of judgment from defendants who were jointly and severally *515liable to a single plaintiff,6 an offer of settlement from a single plaintiff to multiple defendants jointly and severally liable with no one defendant having sole ability to settle,7 and an offer of settlement from a single plaintiff to multiple defendants represented by a single insurer with the sole right and ability to settle the entire litigation.8
¶ 47. Thus § 807.01(4), simple on its face, has been, and must be, interpreted and applied in a variety of fact situations. By favoring a one-size-fits-all construction of the statutory text, retreating from applying the statute to distinct factual circumstances in accordance with the statutory purpose, the majority opinion disturbs settled expectations and creates as yet unknown inequities in future cases, the facts of which we cannot foresee.
¶ 48. I turn to the purpose of the statute to answer the question "recovered from whom?"
II.
¶ 49. The principal purpose of Wis. Stat. § 807.01(4) is, as the majority recognizes, to encourage settlement before trial. DeMars v. LaPour, 123 Wis. 2d 366, 373, 366 N.W.2d 891 (1985); Blank v. USAA Property & Cas. Ins. Co., 200 Wis. 2d 270, 279, 546 N.W.2d 512 (Ct. App. 1996). Interest paid under § 807.01(4) is *516referred to as penalty interest because it penalizes failures to accept settlement offers;9 the threat of its imposition is intended to encourage settlements.
¶ 50. The majority opinion, however, states a different statutory purpose, namely "not to force a party into settlement of a suit that would more appropriately be resolved by a trial." Majority op. at 501-02. The majority opinion concludes that in the present case imposing penalty interest on the insurance company on the entire amount recovered would force settlement.
¶ 51. I disagree with this reasoning because the majority opinion confuses the unreasonable forcing of settlement proscribed by § 807.01(4) with reasonable forcing of settlement allowed under § 807.01(4) in our prior cases.
¶ 52. In concluding that imposing penalty interest on the entire amount recovered in this case would force rather than encourage settlement, the majority opinion relies on Blank, 200 Wis. 2d at 280.
¶ 53. In Blank the plaintiff offered to settle only with the insurer and not with the insured. Thus the insurer did not have the sole right and ability to agree to an offer that would have settled the entire litigation. The insurer refused the offer and judgment exceeded the amount of the offer. The insurer in Blank was assessed penalty interest only on the amount over which it had full settlement authority, not on the entire amount of the judgment. Imposing penalty interest on the insurer for that portion of the judgment over which it had no power to settle would have unreasonably forced settlement.
*517¶ 54. The Blank case relied in turn on White v. General Cas. Co. of Wisconsin, 118 Wis. 2d 433, 439, 348 N.W.2d 614 (Ct. App. 1984). White was the first in a line of cases culminating with Blank in which the court of appeals determined the application of § 807.01 to settlement offers involving multiple parties. In White the court of appeals concluded that § 807.01(4) did not apply to cases involving a joint offer of settlement made on behalf of individual plaintiffs. The court of appeals concluded that to include joint settlement offers under the statute might "unreasonably force defendants to settle a case because of the leverage exerted by the possibility of an aggregate judgment in excess of the joint settlement offer even though, as to individual plaintiffs in the lawsuit, a settlement offer would have been legitimately rejected." White, 118 Wis. 2d at 439 (emphasis added).
¶ 55. According to the WhitelBlank line of cases, § 807.01(4) should be read as condemning only an offer that unreasonably forces settlement, that is, an offer which the offeree cannot fairly assess in terms of its total individual liability to the litigant offering settlement. The court of appeals explained this principle as follows:
White and DeMars do not condemn offers of settlement that can "force" settlements. Rather, they condemn offers of settlement that unreasonably force settlements. White, 118 Wis. 2d at 439. . . . Thus, a plaintiffs offer of settlement may properly be said to "force" a settlement when the defendant's motivation to settle results from an opportunity to fairly assess the offer in light of the particular claim made against that defendant.... [T]he test remains the same — does the offeree have a fair opportunity *518to fully evaluate his or her potential individual liability to the plaintiff.
Wilber v. Fuchs, 158 Wis. 2d 158, 164-65, 461 N.W.2d 803 (Ct. App. 1990).
¶ 56. In the present case the settlement offer did not unreasonably force a settlement under the White/ Blank line of cases. Mutual Service had the opportunity to fairly assess the offer in.light of the particular claim made against it and its insured, and had exclusive control of settlement of all claims against it and its insured.10 This is not a Blank and White case.
¶ 57. The . choice Mutual Service faced is the choice usually faced by a litigant to whom a settlement offer is made — settle the entire litigation for the offered amount or refuse to settle it and risk paying penalty interest on an unknown amount of damages to be determined at trial.
¶ 58. The majority gives a hypothetical example, majority op. at 502-03, of what it views as an unreasonable forcing of settlement by the imposition of penalty interest on the entire amount recovered. The majority is concerned that "insurers which provide modest policy limits will be compelled to accept pretrial settlement offers rather than risk substantial liability for interest, even where the insured's liability is questionable or the appropriate amount of damages is highly debatable." Id.
¶ 59. I believe that the majority opinion errs in its analysis for several reasons. An insurer in the hypothetical can fully weigh the relative costs and risks of *519settling or proceeding to trial. The risk in going to trial (and paying 12% interest on the entire amount recovered by the plaintiff) may be a heavy one, but that merely tilts the scales in favor of encouraging settlement. Such is the purpose of § 807.01(4). An insurer faced with the example given by the majority should be presented with strong incentives to settle. When an insurer chooses to reject such a settlement offer it puts its insured's funds in jeopardy.
¶ 60. Furthermore, an insurer that drafts an insurance contract giving it exclusive control over offers to settle within the policy limits cannot be heard to complain that it is made to bear responsibility for what may be a difficult decision whether to settle or go to trial. It is reasonable to expect an insurer to bear responsibility for penalty interest on amounts recovered over policy limits when it reserves for itself a unilateral privilege affecting its insured.11
*520f 61. Under the majority's view the insurer is given virtually no incentive to settle and in fact is given every incentive to expose its insured to tremendous liability, even though the insured has no ability to protect against that risk. I conclude that in the majority's example the insurer, not the insured, should bear the risk of penalty interest; that result would be more in keeping with the purpose of the statute.
¶ 62. Thus the majority does not demonstrate that a party in Mutual Service's position would be unreasonably forced to settle if it were to pay penalty interest on the entire amount recovered.
f 63. Turning from the majority's hypothetical, I next consider the principles enunciated in our prior cases and apply those principles to the facts of the present case.
HH h-H hH
¶ 64. Since the enactment of § 807.01(4) in 1980, numerous cases involving multiple parties have arisen in which the validity of a settlement offer as a trigger to penalty interest has been addressed.12 These cases *521stand for three principles of general application: First, § 807.01(4) applies differently to different fact situations, consistent with the statute's purpose to encourage settlement before trial. Second, § 807.01(4) applies when the recipient of an offer has a full and fair opportunity to evaluate the offer with respect to its full exposure. Third, § 807.01(4) applies when one of multiple recipients of an offer has the sole right and ability to accept the entire offer on behalf of all recipients. Attorney Warch recently summarized these principles: "A reasonable construction of the statute's purpose would seem to be imposition of a stiff interest penalty for failure to settle a liability after being given the opportunity to do so."13
¶ 65. I have discussed the first principle above. In Testa v. Farmers Ins. Exch., 164 Wis. 2d 296, 302-03, 474 N.W.2d 776 (Ct. App. 1991), the court of appeals stated the second principle as follows:
As can be seen from these cases [White, DeMars, Denil and Wilber], the appellate courts have developed a standard to determine the validity of an offer of settlement or offer of judgment for purposes of invoking the double costs and interest provisions of sec. 807.01, Stats., namely, in order for the offer to be effective, the offeree must be able to fully and fairly evaluate the offer from his own independent perspective. Furthermore, where the offeree is the defendant, a full and fair evaluation entails the ability to analyze the offer with respect to the offeree's exposure.
*522(Citations omitted.)
¶ 66. The court of appeals stated the third principle as follows:
Rural Mutual is the only party that had a real interest with respect to the settlement offer. [The defendants] were covered under the same insurance policy. That policy was issued by Rural Mutual and gave it the right to control the litigation. Furthermore, the amount of Testa's settlement offer was within the policy's liability limits. Given these facts, Rural Mutual was the only party that had the right and ability to settle the case. Therefore, Rural Mutual is the "offeree" that the law dictates must be able to fully and fairly evaluate an offer of settlement with respect to its potential liability.
Testa, 164 Wis. 2d at 303.
¶ 67. I would apply these principles to the present case. Mutual Service had the opportunity to fully and fairly evaluate the plaintiffs offer from its own independent perspective. It knew the full extent of its exposure and its insured's exposure were it to accept the settlement offer because the offer would have settled the entire litigation as to both the insurer and its insured for an amount within the policy limits. And Mutual Service had the sole right and ability to settle the case because of its contract with its insured.
¶ 68. Under the principles enunciated in the earlier cases, Mutual Service should pay penalty interest on the entire amount recovered, not merely on its share of that amount.
¶ 69. Because a party in Mutual Service's position has the right and ability to settle the entire case, it is the party upon which the statute must be brought to bear if the statute is to have any effect.
*523¶ 70. A party in Mutual Service's position could choose to pay its policy limits and settle the entire litigation. Or, in the expectation of prevailing, it could force a trial, incurring costs itself and imposing costs on its opponent, the courts, jurors and its insured. If it chose the latter course it would, under my interpretation, risk 12% penalty interest on the entire amount, recovered. I believe a party in Mutual Service's position would be able to evaluate the risks and exercise a meaningful choice; it would in no way be unreasonably forced to settle if it were made to pay a 12% penalty interest on the entire amount recovered.14 Imposing interest as a penalty on a party with no right and ability to settle, such as the insured in the present case, does not encourage settlement and would appear to be arbitrary and unfair.
¶ 71. Looking forward from the Blank case in which he represented the insurer and acknowledging the principles of the cases, Attorney Warch advised as follows:
In dealing with statutory offers of settlement, insurers should remember that the unique nature of Wisconsin's direct action statute, combined with an insurer's right to control the litigation, means that if an offer of settlement directed to both an insurer and its insured is refused, and acceptance of the offer would have settled both the insurer and the insured's liability, the insurer will be assessed *524penalty interest on the entire verdict, regardless of the policy limits."15
¶ 72. Finally, I conclude that Knoche v. Wisconsin Mut. Ins. Co., 151 Wis. 2d 754, 761, 445 N.W.2d 740 (Ct. App. 1989), properly understood, resolves the question presented in the case at bar. The plaintiff in Knoche argued that the insurer must be made to pay penalty interest on the entire valid judgment (the policy limits plus the accessible portion of the insured's estate in bankruptcy) because otherwise "[t]hey have absolutely no incentive to settle if sec. 807.01 Stats, does not require them to pay interest over the policy limits." Brief for plaintiff in Knoche at 16. The court of appeals held the insurer liable for penalty interest on the entire valid judgment, that is, the policy limits and the available assets of the bankruptcy estate. Knoche, 151 Wis. 2d at 761. The court of appeals further held that the "trial court did not err in computing the [insurer's] interest liability from the date of the settlement offer," even though the policy required only interest from the date of judgment. Knoche, 151 Wis. 2d at 760.16
*525¶ 73. As the majority points out, the court of appeals also concluded that the insurer was liable for interest on damages beyond the policy limits under the insurance policy. The majority contends that the Knoche court ruled solely on the basis of the terms of the insurance policy in that case and not on the basis of § 807.01(4).17 I understand why the part of the Knoche opinion referred to by the majority would lead a reader to this conclusion. A study of the entire opinion and the insurance policy (which appears in the Knoche briefs) should disabuse a reader of the majority's view.
¶ 74. The insurance policy at issue in Knoche obligated the insurer to pay only interest accruing after entry of judgment and before the insurer paid the policy limits. The policy established a limit to the insurer's obligation to pay interest as follows:
This Company will pay:
*526C. All interest on the entire amount of the judgment which accrues after entry of the judgment and before this Company has paid or tendered or deposited in court the part of the judgment which does not exceed the limit of this Company's liability.
See Brief for insurer in Knoche at 3 (emphasis added). The insurer in Knoche paid the limits of its liability five days after the jury returned its verdict. Thus if the insurer were paying interest on the entire judgment pursuant to the insurance policy, the insurer would have paid interest for only five days — from judgment until payment. This result would be contrary to the rest of the Knoche holding.
¶ 75. Neither the circuit court nor the court of appeals limited the insurer's liability for penalty interest to five days. Rather, the insurer was required to pay 12% of the entire valid judgment from the date of the settlement offer until the principal and interest were paid. Knoche, 151 Wis. 2d at 760. The import of the Knoche opinion is that the insurer must pay penalty interest on the policy limits and the non-discharged assets of the bankruptcy estate from the offer of settlement to payment. This result cannot have been reached through application of the insurance policy alone. In fact, the court of appeals expressly held that the policy did not require the insurer to pay interest for periods before judgment but that § 807.01(4) does. Knoche, 151 Wis. 2d at 760. Within the penalty interest the court held to be mandated under § 807.01(4) was penalty interest on the entire valid judgment. The order for judgment and judgment on remand (dated Jan. 12, 1990) supports my interpretation of the court of appeals decision.
*527¶ 76. The majority's holding in the case at bar, in my opinion, contravenes and silently overrules the Knoche case and undermines the principles supporting the line of cases interpreting § 807.01(4).
¶ 77. I conclude that when an insurance company has the sole right and ability to settle an entire litigation, yet rejects on behalf of itself and its insured a plaintiffs offer made pursuant to Wis. Stat. § 807.01(3) to settle for an amount within the policy limits and the plaintiff subsequently recovers a judgment greater than or equal to the amount offered, the insurer is responsible for penalty interest under § 807.01(4) on the entire amount recovered against the insurer and its insured. This holding, in my opinion, is consistent with the text of the statute and is mandated by the principles developed and followed in prior decisions interpreting § 807.01 and by the Knoche decision.
f 78. Accordingly, I would reverse the decision of the court of appeals and reinstate the order of the circuit court.
¶ 79. For the foregoing reasons, I dissent.
¶ 80. I am authorized to state that Justice WILLIAM A. BABLITCH and Justice ANN WALSH BRADLEY join this dissent.

 All further statutory references are to the 1995—96 volumes, the relevant parts of which remain unchanged from the statutes in effect at the time of the offer of settlement in this case.

 The majority relies on American Motorists Ins. Co. v. R & S Meats, Inc., 190 Wis. 2d 196, 212-15, 526 N.W.2d 791 (Ct. App. 1994), to find meaning in the distinction between the word "judgment" and the phrase "amount recovered." American Motorists addressed a different issue, whether double costs under Wis. Stat. § 807.01(3) are part of the prevailing party's "amount recovered" such that they form a basis for additional penalty interest to which the plaintiff is entitled under § 807.01 (4). American Motorists did not involve multiple defendants and thus does not address which party must pay the penalty interest to which the offering party is entitled. That "judgment" and "amount recovered" have different meanings according to American Motorists is of no moment as both relate to the party offering to settle and neither indicates or suggests reference to the recipient of the offer.
Moreover, American Motorists' conclusion that "amount recovered" does not equate with "judgment" runs counter to the majority opinion's conclusion that in this case, "amount recovered" means "that portion of the verdict for which a party is responsible." The "judgment" against Mutual Service was $100,000, majority op. at 499 n.5, as was the "amount recovered" under the majority's view.

 Blank v. USAA Property & Cas. Ins. Co., 200 Wis. 2d 270, 280, 546 N.W.2d 512 (Ct. App. 1996).

 White v. General Cas. Co. of Wis., 118 Wis. 2d 433, 439-40, 348 N.W.2d 614 (Ct. App. 1984) (offer ineffective to invoke penalty interest under § 807.01(4)).

 DeMars v. LaPour, 123 Wis. 2d 366, 369, 366 N.W.2d 891 (1985) (offer ineffective to invoke penalty interest under § 807.01(4)).

 Denil v. Integrity Mut. Ins. Co., 135 Wis. 2d 373, 380-82, 401 N.W.2d 13 (Ct. App. 1986) (offer effective to invoke costs under § 807.01(1)).

 Wilber v. Fuchs, 158 Wis. 2d 158, 162, 461 N.W.2d 803 (Ct. App. 1990) (offer ineffective to invoke penalty interest under § 807.01(4)).

 Testa v. Farmers Ins. Exch., 164 Wis. 2d 296, 303-04, 474 N.W.2d 776 (Ct. App. 1991) (offer effective to invoke penalty interest under § 807.01(4)).

 The court of appeals has stated: "The objective of § 807.01, Stats., is to encourage pretrial settlement and avoid delays. The purpose of imposing costs and interest under subsecs. (3) and (4) is punitive." Blank, 200 Wis. 2d at 279 (citations omitted).

 In Testa, 164 Wis. 2d at 302-03, the court of appeals held that a single offer to an insurer and its insureds validly triggers penalty interest when the insurer covers all the defendants and the insurer is "the only party that has the right and ability to settle the case."

 The policy Mutual Service drafted provides: "We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. We will not defend any suit or make additional payments after we have paid the limit of liability for the coverage."
In an analogous context, commentators assert that an insurer should be liable for prejudgment interest on amounts beyond its policy limits in order to encourage settlement.
It is argued that insurers should be held liable for prejudgment interest on the entire judgment rather than merely on their policy limits because they exercise full control over the entire litigation process.... It hardly seems fair to allow the insurance company to litigate the entire case in an effort to save its policy coverage and then force the insured to pay the prejudgment interest on the excess verdict when he exercised no control over the litigation process.
David J. Pierce, Insurer's Liability for Prejudgment Interest; A Modern Approach, 17 U. Rich. L. Rev. 621, 627 (1983) (citations *520omitted). See also John Alan Appleman & Jean Appleman, Insurance Law and Practice vol. 8A § 4894.25 at p. 77—79 (1981) ("This would appear to be the only fair result, inasmuch as the insurer has control of the litigation.").
Prejudgment interest is not punitive but substitutes for the time value of money. The rationale underlying the prejudgment interest rule would appear to apply a fortiori to penalty interest because penalty interest replaces prejudgment interest when a settlement offer is refused and penalty interest has a punitive intent so as to effectively encourage settlement.

 The following cases set forth core principles for interpreting the interest penalty provision which the majority opinion disturbs. DeMars, 123 Wis. 2d at 373; Blank, 200 Wis. 2d at 280, *521282; Testa, 164 Wis. 2d at 300-05; Wilber, 158 Wis. 2d at 162-65; Smith v. Keller, 151 Wis. 2d 264, 273-76, 444 N.W.2d 396 (Ct. App. 1989); Denil, 135 Wis. 2d at 380-82.

 Stephen K. Warch, Meeting Head On: Offers of Settlement and an Insurer's Bad Faith, Wis. Lawyer, Oct. 1996 at 12.

 In this case Mutual Service chose a course of action. "It lost. It would be contrary to the purpose of sec. 807.01 to allow it to escape the consequence of its choice." Knoche v. Wisconsin Mut. Ins. Co., 151 Wis. 2d 754, 755, 445 N.W.2d 740 (Ct. App. 1989) (imposing penalty interest on the entire valid judgment on party controlling settlement)

 Warch, Meeting Head On at 12 (citing Testa, 164 Wis. 2d at 302 and Knoche, 151 Wis. 2d at 759-61).

 The circuit court in Knoche imposed penalty interest on the basis of § 807.01(4) on the entire valid judgment and not on the basis of the policy. "I conclude that, pursuant to sec. 807.01, Stats., the insurer is liable for interest at the rate of 12% on the amount plaintiff recovered from the date of the settlement offer." Knoche v. Stracka, No. 81-CV-3926 Memorandum Decision and Order, Circuit Court for Dane County, June 23, 1988 at 1.
Mutual Service argues a further issue addressed in Knoche, that even if it were liable under § 807.01(4) for penalty interest on the entire amount recovered, it was not obligated to pay any *525amounts beyond its policy limits because of an express provision in its contract with the insured. The Knoche court held that the insurer could not by the insurance contract free itself of § 807.01.
The Knoche court held that language in the insurance contract could not limit the effect of § 807.01(4).
We agree that this [policy] language does not obligate Wisconsin Mutual to pay interest under sec. 807.01(4), Stats., from the date of the settlement offer. Its obligation to pay interest under sec. 807.01 (4) is not, however, limited by its contract... .The purposes of sec. 807.01, to encourage settlement of cases prior to trial, would be subverted if the liability insurer could, by contract, free itself from the application of secs. 807.01(3) and 807.01(4). Knoche, 151 Wis. 2d at 760.

 References in Knoche and the majority opinion to McPhee v. American Motorists Ins. Co., 57 Wis. 2d 669, 205 N.W.2d 152 (1972), are not applicable because McPhee predated the enactment of § 807.01(4).