Timely Payments of Insurance Claims

May 28, 2020

Insurance companies are obligated to make payment on well-documented claims from their insureds within 30 days or face the accrual of simple interest at 7.5% per year.  The “timely payment of claims” statute is found at Wis. Stat. § 628.46.

A body of case law has developed around the statute, and claimants have used it as a tool for pressuring insurance companies to make quick decisions on claims.

Essentially, the statute states that unless otherwise provided by law, an insurance company shall promptly pay every insurance claim.  A claim is overdue if not paid within 30 days after the insurer is furnished with written notice of the facts, the loss is covered by the policy, and the amount of the loss is well documented.  If the insurance company has reasonable proof to establish that it is not responsible for payment of the claim, the claim is not overdue and the statute does not apply.

Claimants have been successful in having the statute applied to third-party claims, for example, liability claims asserted against the insurance company’s own insured.  To recover interest under the timely payment of claims statute in the context of a third-party claim, the third-party claimant must establish that: (1) there is no question of liability on the part of the insured; (2) the amount of damages is in a sum certain amount; and (3) the claimant provided the insurer with written notice of both liability and the sum certain amount owed.  Kontowicz v. Am. Standard Ins. Co., 2006 WI 48, ¶ 48, 290 Wis. 2d 302, 714 N.W.2d 105.

When confronted with third-party claims against their own insureds, insurance companies will often resist any attempt to apply the timely payment of claims statute by pointing out that liability is questionable and the amount of damages claimed are difficult to ascertain with specificity.  These defenses were recently tested in the case of Estate of Payette v. Marx, 2020 WI App 2, 390 Wis. 2d 356, 938 N.W.2d 628.  In this wrongful death lawsuit, the claimants demanded that the insurance company pay a $1,000,000 umbrella policy limit.  2020 WI App 2, ¶ 7.  In their settlement demand, the claimants stated their damages were in the $3,500,000 to $5,000,000 range, with $1,988,779 of that amount in “future damages” for loss of the decedent’s future wages.  Id. ¶¶ 7, 9.  After a jury awarded the claimants $672,806.42 in damages, the trial court awarded interest under the timely payment of claims statute, finding that the $1,000,000 policy limit demand was for a sum certain. Id. ¶ 15.  The court of appeals reversed, finding that the “sum certain” condition is not satisfied where the insurer reasonably concludes it is not certain the amount demanded is the amount it may actually owe the claimant.  Id. ¶ 33.

In the Estate of Payette case, the claimants were ultimately unsuccessful in gaining a significant amount of interest on top of the jury’s award of damages, but the case teaches us that claimants and insurance companies need to be mindful of the application of the timely payment of claims statute when insurance claims are presented and settlement demands are asserted.