Sept. 29, 2014 – A 12 percent interest rate applies to undisputed insurance claims not paid within 30 days from written notice of the claim. But that 12 percent interest does not apply to settlements that resolve a disputed claim, a state appeals court has ruled.
In Singler v. Zurich American Insurance Co., 2014AP391 (Sept. 16, 2014), a three-judge panel for the District III Court of Appeals ruled that a 5 percent interest rate applied to a personal injury settlement that was not timely paid, not 12 percent.
That makes a big difference to Zurich American Insurance, which agreed to pay Robert Singler $1.9 million to settle his personal injury claim. Zurich did not pay within 30 days, so Singler sought more than $23,000 in interest, based on a 12 percent per annum rate.
Singler argued for the 12 percent rate under Wis. Stat. section 628.46, which requires insurers to promptly pay insurance claims within 30 days of receiving written notice of undisputed claims, with overdue payments subject to 12 percent interest.
The circuit court granted the interest at 12 percent. An appeals court agreed that Zurich owes interest, but not at the 12 percent rate that applies to undisputed claims.
“Singler cites no authority for the proposition that § 628.46 can apply when an insurer fails to pay an amount required by a settlement agreement resolving a disputed claim, and we are not aware of any case applying the statute under those circumstances,” wrote Judge Lisa Stark, noting that the statute applies to “sum certain” damages.
The $1.9 million was not a sum certain amount,” the appeals court explained. It was the amount that Zurich agreed to pay to resolve the personal injury claims.
“The settlement amount reflects the parties’ compromise, not the actual amount of Singler’s damages,” Judge Stark wrote. “Thus, while the settlement was in a sum certain amount, Singler’s damages were not.”
In addition, the panel explained that the 30-day deadline under section 628.46 would be unreasonable in settlement cases, because the parties could agree that full payment was not required within 30 days. In this case, the parties did not indicate a deadline.
The circuit court imposed a 30-day time limit, and the parties did not dispute that a “reasonable time” applies when parties do not specify a deadline for payment.
“What constitutes a reasonable time under the circumstances is a question of fact,” Judge Stark wrote. “A circuit court’s factual findings will not be set aside unless they are clearly erroneous.” The court found that 30 days in the case was reasonable.
Because Zurich did not meet the court’s deadline for payment, the appeals court ruled that a 5 percent interest rate applies under Wis. Stat. section 138.04, a gap-filler which says a judgment debtor pays $5 per annum in interest for every $100 owed.