In 2009, picking the story of the year for tort lawyers was easy: the passage of Governor Jim Doyle’s “Truth In Auto Insurance” changes.
The story of 2010 is not as obvious. It could be the ban on texting while driving, but it will take a few years for us to really see how the tort world reacts to and uses the ban.
This year’s story is more of a trend that is now bubbling in Wisconsin’s Circuit Courts. It is Section 628.46 Wisconsin Statutes, otherwise known as the Timely Payment of Claims Statute. Many simply refer to “Kontowicz,” the preeminent Wisconsin Supreme Court Case that discusses it, as a catch-all for what it says and how it can be used. Kontowicz v. American Standard Ins. Co., 2005 WI App 22.
Those attorneys who don’t handle many personal injury claims may not be adding Kontowicz language to settlement demand letters involving insurance companies. Before you go any further, pick up your Wisconsin Statutes book or grab your computer and read the short statute and decision.
Prior to 2005, Wisconsin’s Timely Payment of Claims Statute (Section 628.46 Wis. Stats.) was thought to apply only to first party claims (i.e. claims for underinsured or uninsured motorist coverage). With the Kontowicz decision in 2005, this statute is no longer limited to first party claims, but rather applies equally to third party insurance claims. Currently, insurance companies are required to respond, with a partial or full payment, to all claims within 30 days of receipt of a “written notice” or face interest at 12 percent per year.
Simply said, this statute is incorporated into every insurance policy by operation of law. Poling v. Wisconsin Physicians Serv., 120 Wis.2d 603, 612, 357 NW 2d 293 (Ct. App. 1984).
What is written notice? That is one reason that this statute is the tort issue of the year. Most argue that it can be as simple as medical bills and records. If this written notice and proof does not support payment of the entire claim, the insurance company must pay any partial amount. If these partial or full payments are not paid within 30 days after the written notice is furnished to the insurer then the partial or full amount is overdue and the overdue payment “shall bear simple interest at the rate of 12% per year.” (As a practice tip, be sure to ask the insurance company for a written response to any denial of payment.)
Why is an “old” statute and a case from 2005 of such importance in 2010? It’s the “trickle up” effect. (Maybe that isn’t actually an official effect. But at least give me some leeway for my attempt at an obscure 80’s reference.) Most personal injury firms have incorporated the Kontowicz case into their demand letters. Over the past year many circuit courts have finally been hearing motions and making decisions on whether discovery was allowed with these claims. As you can imagine, discovery is key to these claims.
Word seems to now be “trickling” back to insurance adjusters that Section 628.46 is something to be taken seriously. In years past, insurance adjusters would not really know how to respond to the language in demand letters. This year, I have personally heard insurance adjusters state “I know what you are trying to do” when I asked that they simply act in a “timely” manner.
What will happen in the years to come? Look for this statute to influence how general practitioners make a “demand” for payment under a homeowner’s insurance policy. Insurance companies themselves may use it to their advantage in subrogation and indemnification claims.
As a practice tip be sure to remember to be timely in your use of the “Timely Payment of Claims Statute,” because prejudgment interest of 12 percent in today’s economy is nothing to sneeze at. It’s about time that insurance companies realize that claims need to be settled in a timely manner. What may not be a lot of money for some is life or death for those on the wrong side of a tort.
This article was originally published in the Wisconsin Law Journal in the January 3, 2011 issue. (www.wislawjournal.com)