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Casper v. American International South Insurance Co.

Court of Appeals of Wisconsin, District I

May 16, 2017

Bryan Casper, Susan Casper, Michael Casper, a minor, by his Guardian ad Litem, Thomas Casper, a minor, by his Guardian ad Litem, Sara Janey, a minor, by her Guardian ad Litem and Sharon Janey, Plaintiffs-Respondents-Cross-Appellants,
American International South Insurance Company, Defendant-Appellant-Cross-Respondent, American Family Mutual Insurance Company and Milwaukee County Department of Health & Social Services, Involuntary-Plaintiffs, Claims Management Services, Inc., Intervenor.

         Appeal from an order of the circuit court for Milwaukee County No. 2004CV5852: JEFFREY A. CONEN, Judge. Affirmed.

          Before Brennan, P.J., Brash and Dugan, JJ.

          BRENNAN, P.J.

         ¶1 American International South Insurance Company (AISIC) appeals an order granting plaintiffs' summary judgment motion and ordering AISIC to pay $684, 499.14 in interest on its delayed payment on the underlying claim in this case. W S . § 628.46(1) (2015-16) requires isconsin tat [1] an insurer given proper notice to pay such interest when it does not timely pay claims unless "the insurer has reasonable proof to establish that the insurer is not responsible for the payment[.]" The requirement applies to claims by insureds and claims by third parties who satisfy certain conditions as set forth in Kontowicz v. American Standard Insurance Co. of Wisconsin.[2] The trial court concluded that plaintiffs, who are third-party claimants, were entitled to such interest because in 2007 they satisfied the Kontowicz conditions as to the underlying claim and because AISIC was unable to provide "reasonable proof to establish" that it was not responsible for the payment.

         ¶2 AISIC argues that both these conclusions are incorrect. AISIC also argues that Wis.Stat. § 628.46 does not apply where an insurer has contractual duties to multiple insureds, as AISIC does here, because those legal obligations make it impossible for AISIC to satisfy the statute. Plaintiffs cross-appeal, arguing that in 2005 they satisfied § 628.46's requirements as interpreted in Kontowicz and accordingly they are entitled to more interest than the trial court awarded them. We reject those arguments and affirm the order.


         ¶3 Plaintiffs are Bryan Casper ("Casper"), Susan Casper, Michael Casper, Thomas Casper, Sara Janey and Sharon Janey (collectively, "the Caspers").[3] In May 2003, the Casper family's minivan, which had stopped at an intersection for a red light, was rear-ended by AISIC's insured, Mark Wearing, who was driving a tractor-trailer. Casper v. American Int'l S. Ins. Co. (Casper II), 2011 WI 81, ¶12, 336 Wis.2d 267, 800 N.W.2d 880. All five occupants of the minivan were injured, some catastrophically-Sara Janey suffered injuries including a traumatic brain injury, and Michael Casper suffered a spinal injury that rendered him quadriplegic at age fifteen. Past itemized special damages in medical payments for the five exceeded $643, 000 on September 12, 2005; and future special damages for Michael Casper alone were estimated at seven to twelve million dollars.

         ¶4 At the time of the crash, Wearing was an employee of two firms and was making a delivery on behalf of AIT, a customer of one of his employers. Id., ¶¶15, 17. Wearing was driving while under the influence of several prescription drugs, id., ¶14, in violation of federal trucking safety regulations. The route he was driving was a 536-mile overnight route that was longer than federal trucking safety regulations permit, id., ¶¶17, 18. Wearing testified at a deposition that he did not see the minivan prior to the collision. An off-duty officer who witnessed the collision testified at a deposition that just before the collision the minivan driven by Casper had not accelerated normally from the intersection when the light turned green, and an accident reconstruction expert retained by defendants concluded based on that testimony that the accident "would likely have been avoided" if Casper had accelerated immediately when the light turned green.

         ¶5 The Caspers brought the underlying suit against seven named defendants and their insurers, alleging negligence. With the exception of AIT, the individuals and companies named as defendants were all insureds of AISIC. AISIC's policy limit was one million dollars, and AISIC's policy had a provision stating that "the most [AISIC] will pay for the total of all damages resulting from any one 'accident' is the Limit of Insurance for Liability Coverage found in the Declarations."

         ¶6 From 2004 through 2012, the case proceeded through extensive litigation, appeals, [4] a remand to the trial court, and mediation. Notwithstanding the accident reconstruction expert's opinion, AISIC's internal claim evaluations and litigation plan reflected the expectation that this was a policy limits case. This expectation was based on the high damages and the fact that five of the six defendants were AISIC's insureds. The possibility of some level of contributory negligence on Casper's part was assumed. The initial AISIC claims adjuster concluded that liability was "unfavorable, " that the damages would far exceed the policy limits, and that this was a "policy limits case, " and in their depositions the three subsequent AISIC claims adjusters did not dispute his assessment.

         ¶7 AISIC offered to settle for the policy limits in return for a release, but plaintiffs declined the settlement on those terms. The parties ultimately settled for the policy limits, which AISIC paid on November 22, 2012. The settlement released all defendants.

         ¶8 Following settlement, the sole issue that remained unresolved was the question of whether the Caspers were entitled to Wis.Stat. § 628.46 interest. After further discovery and briefing, the Caspers moved for summary judgment on that question. The parties agreed "that there are no genuine issues of material fact to prevent [the trial court] from determining whether AISIC is liable for Wis.Stat. § 628.46 interest."

         ¶9 The trial court granted the summary judgment motion, holding that the Caspers had satisfied the conditions set forth in Kontowicz for third-party claimants. It held that the condition that there is no question of the insured's liability was satisfied because, given the fact that Wearing was driving while under the influence of prescription drugs, no reasonable jury would find that he did not bear the majority of the liability for the accident. It held that the sum certain condition was satisfied by the Caspers' Itemization of Special Damages, submitted September 12, 2005, which included medical expenses and other damages for each plaintiff. And it held that the written notice condition was met on February 7, 2007, the date on which plaintiffs sent a letter demanding payment of AISIC's one million dollar policy limit and noting that "the damages sustained by the Plaintiffs … well exceed the policy limit[.]"

         ¶10 Having determined that plaintiffs had satisfied the Kontowicz conditions as third-party claimants, the trial court turned to the question of whether AISIC had reasonable proof that it was not responsible for the payment. The trial court rejected AISIC's argument "that an insurer has reasonable proof of non-responsibility any time insurers can mount a non-frivolous defense." It concluded that the defenses AISIC argued would not have "convinced a reasonable insurer that it may not be responsible for the payment, " applying the standard set forth in Kontowicz. It concluded that in light of the "excessive damages" present in this case, even if defending the claim resulted in an apportionment of liabilities among the parties, no "reasonable apportionment" would bring the claims below the policy limit. It noted that coverage was "not fairly debatable" and that AISIC had filed no coverage motion. For these reasons, it concluded that AISIC had not shown reasonable proof that it was not responsible for the payment.

         ¶11 Concluding that the conditions had been met as of February 7, 2007, the trial court calculated interest from thirty days after that date, with three days added to account for the notice being served by mail, consistent with Wis.Stat. § 801.15(5)(a) and Kontowicz, 290 Wis.2d 302, ¶53 n.18. At a rate of twelve percent interest on the one million dollar payment, beginning March 12, 2007, and ending November 22, 2012, the date AISIC made payment, the interest came to $684, 499.14.

         ¶12 AISIC appealed the award of interest, and the Caspers cross- appealed, arguing that they satisfied the conditions in 2005, not 2007, and that the interest must be re-calculated.

         ¶13 For the reasons given below, we reject these arguments and affirm.


         I. Standard of review and relevant legal principles.

         A. Summary judgment principles.

         ¶14 This is an appeal of an order granting summary judgment. When a party seeks summary judgment, "[t]he judgment sought shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file … show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Wis.Stat. § 802.08(2). "When this court is called upon to review the grant of a summary judgment motion … we are governed by the standard articulated in section 802.08(2), and we are thus required to apply the standards set forth in the statute just as the trial court applied those standards." Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816 (1987) (citation omitted).

         ¶15 In opposing summary judgment here, AISIC does not argue that there is a genuine issue as to any material fact. Rather, AISIC argues that the trial court erred in applying Wis.Stat. § 628.46 to the facts because AISIC had knowledge of a fact--namely that Casper failed to immediately accelerate at the green light--that created "reasonable proof" that AISIC was not responsible for payment of the claim, and this, AISIC argues, precludes an award of interest as a matter of law. Although there is no factual finding in the record that Casper failed to immediately accelerate at the green light, no party disputes it[5] for the purposes of analysis of the legal question on the "reasonable proof" defense to the claim payment under the statute. Therefore, the question we address is whether W . S . § 628.46 applies to these facts. That question presents a question of is tat [6] law we review de novo. See Teague v. Bad River Band of Lake Superior Tribe of Chippewa Indians, 2000 WI 79, ¶17, 236 Wis.2d 384, 612 N.W.2d 709.

         B. Law governing interest on untimely paid insurance claims.

         ¶16 An insurer's liability for interest on claims that are overdue is created by Wis.Stat. § 628.46(1). It defines overdue claims as follows:

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.… 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.

Id. (emphasis added).

         ¶17 Several cases provide guidance on the interpretation of the statute. First, in Fritsche v. Ford Motor Credit Co., this court flatly rejected the insurer's argument that "the only way damages could be determined was by trial" or a settlement agreement, and that without such a determination, no interest could be awarded. See Fritsche v. Ford Motor Credit Co., 171 Wis.2d 280, 305, 491 N.W.2d 119 (Ct. App. 1992). This court stated that to accept such a view "would effectively repeal the statute." Id. The court stated that, for purposes of the timely payment of claims statute, the time that the insurer has "proof of loss or equivalent evidence of the loss" can be "far in advance of a judgment or award." Id. (emphasis added).

         ¶18 In Kontowicz, 290 Wis.2d 302, ¶48, our supreme court answered the question of whether Wis.Stat. § 628.46 interest can be awarded in cases of third-party liability claims for personal injury such as here. It held that the statute's language--"every insurance claim"--encompassed such claims. Id., ¶27. However, it limited the awards of § 628.46 interest to third-party claimants "to only those situations in which three conditions to trigger interest are met." Id., ¶48. The conditions it imposed raise the bar for such claimants. Rather than merely requiring "written notice of the fact of a covered loss, " see § 628.46(1), and of the amount, as for first-party claimants, Kontowicz required third-party claimants to show first, that there is "no question" of the insured's liability; second, that there is a "sum certain" of plaintiffs' damages; and third, that the insurer received written notice of liability and the "sum certain" damages. Id.

         ¶19 Kontowicz noted that the statute "does not apply" if the insurer has reasonable proof it is not responsible, and the court defined "reasonable proof" for purposes of the statute as "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." Id. It further noted that the question of reasonable proof sufficient for purposes of this statute is "generally equated" "with whether the 'coverage issue was fairly debatable."' Id. (citation omitted). See also Upthegrove Hardware, Inc. v. Pennsylvania Lumbermans Mut. Ins. Co., 146 Wis.2d 470, 484-85, 431 N.W.2d 689 (1988) (once adequate notice has been given, "[t]he only way an insurer can avoid an interest assessment under sec. 628.46(1) is when it had reasonable proof that it was not responsible for the payment.").

         ¶20 Where damages are high and policy limits are low by comparison, the potential for contributory negligence by a party is not, in itself, sufficient to constitute "reasonable proof" that will defeat an award of interest. In Kontowicz, this principle was acknowledged without further elaboration as follows: "[D]ue to the severity of the injury suffered by Kontowicz even the maximum reduction allowed by law [for negligently failing to wear a seatbelt] would not appear to be sufficient to bring her claim below the … policy limit." Kontowicz, 290 Wis.2d 302, ¶53 n.17. Likewise, in Dilger, this court affirmed the trial court's award of interest[7] on the basis that the Kontowicz conditions were met where "[t]he [trial] court found that [plaintiff] had asserted estimates of damages that far exceeded [the] policy limits, regardless of any potential contributory negligence on [plaintiff's] part[.]" See Dilger v. Metropolitan Prop. & Cas. Ins. Co., 2015 WI.App. 54, ¶15, 364 Wis.2d 410, 868 N.W.2d 177');">868 N.W.2d 177 (emphasis added).

         II. The Caspers have satisfied the Kontowicz requirements for interest under ...

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