Kontowicz v. American Standard Insurance Co. of Wisconsin

2006 WI 48, 714 N.W.2d 105, 290 Wis. 2d 302, 2005 Wisc. LEXIS 1103

• Court: Wisconsin Supreme Court
• Decided: May 18, 2006
• Docket: 2003AP2177 & 2003AP2534
• Status: Published

Opinions

N. PATRICK CROOKS, J.

¶ 1. Debra Kontowicz (Kontowicz) and Larry Buyatt (Buyatt) appeal a published decision of the court of appeals reversing the decisions of two different branches of the Waukesha County Circuit Court. The cases were consolidated on appeal. In each case, the circuit court awarded the plaintiffs/petitioners interest under Wis. Stat. § 628.46 (2001-02).¹ The issue before this court is whether § 628.46, which imposes a 12 percent simple interest rate for overdue payment of an insurance claim, applies to the insurance company of a negligent tortfeasor and, thus, allows the recovery of interest by a third-party claimant, such as the plaintiffs/petitioners here, injured by such tortfeasor.

¶ 2. We reverse the decision of the court of appeals. We conclude that when there is clear liability, a sum certain owed, and written notice of both, the plain language of Wis. Stat. § 628.46, incorporating by reference Wis. Stat. § 646.31(2), imposes 12 percent simple interest on overdue payments to third-party claimants in such personal injury claims and actions. However, we limit our holding to only those situations in which three conditions to trigger the interest are met. First, there can be no question of liability on the part of the insured. Second, the amount of damages must be in a sum certain amount. Third, the claimant must provide written notice of both liability and the sum certain amount owed. We further hold that claims concerning the issue of interest due under § 628.46 may be bifurcated under Wis. Stat. § 805.05(2), and that in the case of Buyatt, the award of interest should be in accord with Wis. Stat. § 807.01(4), rather than § 628.46.

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DEBRA KONTOWICZ

¶ 3. On August 30, 2000, Debra Kontowicz's spinal cord was severed and she was rendered a quadriplegic as a result of an automobile accident. Kontowicz's van was struck from behind by a vehicle operated by Daniel Jeffers (Jeffers), a 16-year-old insured by American Standard Insurance Co. of Wisconsin (American Standard). Based on the skid marks left by his car, police concluded that Jeffers had been traveling between 88 and 90 miles per hour (m.p.h.) in a 35 m.p.h. zone. Kontowicz's vehicle went off the road, striking a utility pole. She was taken to the hospital by Flight for Life. At the time of the accident, Jeffers' policy with American Standard included a $500,000 per person liability limit.

¶ 4. By September 7, 2000, American Standard was aware of Kontowicz's quadriplegic injuries, and Jeffers' almost certain liability. The head of American Standard's legal department met with the claims adjuster assigned to the Kontowicz claim on that date, and decided that "[o]nce the paraplegic injuries are confirmed, we should post the $500,000 limits with what appears at this time to be clear liability on the part of Dan Jeffers."

¶ 5. Kontowicz and her family filed suit against American Standard and Jeffers on November 8, 2000. On December 28, 2000, both American Standard and Jeffers filed separate answers to Petitioners' complaint. In his answer, Jeffers admitted that he was negligent with respect to the operation of his motor vehicle. One week later, on January 5, 2001, the Kontowiczs' attorney wrote counsel for American Standard, enclosing a copy of the hospital discharge summary documenting Kontowicz's severed spinal cord and quadriplegia, and an itemization of her related medical bills, along with copies of the actual billing statements, in the amount of $238,379.53.

¶ 6. American Standard did not agree to tender its limits until June 1,2001. Its offer to the Kontowiczs was conditioned upon "a full release of all defendants," even though American Standard was not required to secure a full release of its insureds as a condition of paying limits.²

¶ 7. On July 30, 2001, the attorney for the Kon-towiczs wrote American Standard demanding the payment of policy limits, together with Wis. Stat. § 628.46 interest. American Standard responded on October 18, 2001, reiterating its position that it would pay policy limits only in return for a release of American Standard and its insureds.

¶ 8. American Standard agreed to pay its policy limits in return for only a partial release of its insureds on February 2, 2002. Three weeks later, on February 19, 2002, the Kontowiczs reached a settlement with Jeffers, whereby Jeffers agreed to pay $78,000 over and above the $500,000 liability limit.

¶ 9. On February 20, 2002, American Standard sent a check to the Kontowiczs for $500,000. The Kontowiczs reserved their right to bring a claim against American Standard for interest pursuant to Wis. Stat. § 628.46.

¶ 10. Following a motion hearing, Waukesha County Circuit Court Judge Donald E Hassin made an oral ruling awarding the Kontowiczs interest pursuant to Wis. Stat. § 628.46. The circuit court ruled that a claim was made against American Standard for at least $238,000 when, on January 5,2001, the Kontowiczs sent the company a copy of the hospital discharge summary and itemized medical bills. In addition, the circuit court ruled that American Standard was presented with a claim for the full $500,000 policy limit on July 30, 2001, when the Kontowiczs' counsel demanded payment of the limits. An order was entered on January 2, 2003, awarding the Kontowiczs $49,643.15 in statutory interest.³ American Standard appealed.

LARRY BUYATT

¶ 11. On June 21, 1999, Larry Buyatt was injured in a motor vehicle collision caused by the negligence of Jason Schoessow (Schoessow). Schoessow was driving west on Highway 59 at approximately 45 m.p.h. when he failed to stop at a red light, striking Buyatt's truck on its front right fender as it traveled north through the intersection. At the time of the accident, Schoessow was covered by a Metropolitan Property and Casualty Insurance Co. (Metropolitan) liability insurance policy.

¶ 12. On January 29, 2001, Buyatt sent Metropolitan a letter and documentation detailing the collision and his resulting injuries. Buyatt's medical bills and lost wages, at the time, totaled $6,361. In this letter, Buyatt offered to settle his claim for $35,000.

¶ 13. In response, Metropolitan admitted that at least a portion of Buyatt's medical bills were reasonable and necessary for treatment as a result of injuries he suffered in the collision. However, Metropolitan offered only $6,400 to settle fully Buyatt's claim. Buyatt filed suit against Metropolitan and Schoessow for damages arising from his accident, as well as Wis. Stat. § 628.46 interest.

¶ 14. On June 8, 2001, Metropolitan admitted that Schoessow's negligence was the sole cause of the injuries Buyatt suffered in the collision. However, Metropolitan refused to tender any amount in partial payment of Buyatt's claim, and conditioned any payment upon acceptance of a full settlement.⁴

¶ 15. Buyatt filed an offer of settlement, on April 16, 2003, for $21,000 pursuant to Wis. Stat. § 807.01(3). On May 14, 2003, a jury awarded Buyatt $24,081 in damages, including past medical expenses, past wage loss, and past and future pain, suffering, and disability.

¶ 16. Buyatt then moved the circuit court for interest under Wis. Stat. § 628.46, and the court granted Buyatt's motion. Waukesha County Circuit Court Judge Lee S. Dreyfus, Jr. found that Metropolitan had written notice of Buyatt's claim on June 8, 2001, that Schoessow was causally negligent for the injuries Buyatt suffered as a result of the collision, and that Buyatt was not con-tributorily negligent. The court further determined that, based on the information in its possession and its own admissions, as of June 8, 2001, Metropolitan knew or reasonably should have known that it was responsible for at least a portion of Buyatt's claims. Because the circuit court found that § 628.46 applies to third-party insurance claims, it granted Buyatt's motion for § 628.46 interest.⁵ Metropolitan appealed the portion of the judgment imposing § 628.46 interest.

COURT OF APPEALS

¶ 17. The court of appeals consolidated the cases. Concluding that there were "two incompatible, yet reasonable, interpretations" of the statute, the court determined that Wis. Stat. § 628.46 was ambiguous, and therefore went on to explore extrinsic sources in order to discern legislative intent. Kontowicz v. Am. Standard Ins. Co., 2005 WI App 22, ¶ 10, 278 Wis. 2d 664, 693 N.W.2d 112 (citation omitted). The court of appeals concluded that the legislature did not intend that the interest penalty should apply to third-party bodily injury claims and reversed both circuit court decisions. Id., ¶ 24. Kontowicz and Buyatt appealed, and this court granted their petition for review on April 6, 2005.

II

¶ 18. Statutory interpretation is an issue of law which we review independently of lower court decisions. While our review is de novo, this court benefits from the analyses of the circuit court and the court of appeals. State v. Anderson, 2005 WI 54, ¶ 23, 280 Wis. 2d 104, 695 N.W.2d 731 (citing State v. Waushara County Bd. of Adjustment, 2004 WI 56, ¶ 14, 271 Wis. 2d 547, 679 N.W.2d 514).

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¶ 19. American Standard and Metropolitan (Respondents) make three arguments in support of their position that Wis. Stat. § 628.46 does not apply to third-party liability claims. First, Respondents argue that the plain language and context of the statute make it clear that § 628.46 only applies to first-party claims. For additional support, they look to precedent examining the statute and legislative history. Second, Respondents argue that the 1999 amendments to Wis. Stat. § 646.31 were intended to eliminate third-party property damage and bodily injury claims from that statute, and by reference, from § 628.46. Third, Respondents urge that it is bad policy to apply the statute to third-party claims. If this court rejects the position that § 628.46 interest does not apply to third-party bodily injury claims, Respondents suggest that such interest should not be imposed based upon the particular facts of these cases. We will examine each argument in turn.

¶ 20. We first examine the applicability of Wis. Stat. § 628.46 to third-party claims. Kontowicz and Buyatt (Petitioners) maintain the statute is unambiguous, the language plainly requiring insurers to "promptly pay every insurance claim." Wis. Stat. § 628.46(1). Further, § 628.46(3)⁶ clearly states, they argue, that the statute applies to classes of claims enumerated in Wis. Stat. § 646.31(2), which includes third-party claimants who are residents of the state. Petitioners emphasize the language in § 646.31(2)(d).⁷

¶ 21. American Standard and Metropolitan argue that the court of appeals correctly determined that Wis. Stat. § 628.46 is ambiguous. The ambiguity, Respondents suggest, arises from the fact that the statute was intended to apply only to first-party claims, yet incorporates by reference Wis. Stat. § 646.31(2) which seems to include third-party liability claims. Respondents maintain that because of the ambiguity, it was appropriate for the court of appeals to look to extrinsic sources, and in doing so, the court of appeals correctly resolved the ambiguity.

¶ 22. When interpreting a statute, we first look to its plain meaning. "[Statutory interpretation 'begins with the language of the statute. If the meaning of the statute is plain, we ordinarily stop the inquiry.'" State ex rel. Kalal v. Circuit Court, 2004 WI 58, ¶ 45, 271 Wis. 2d 633, 681 N.W.2d 110 (citations omitted). "Where statutory language is unambiguous, there is no need to consult extrinsic sources of interpretation, such as legislative history." Id., ¶ 46 (citations omitted).

¶ 23. Wisconsin Stat. § 628.46 Timely payment of claims states, in relevant part:

(X)Unless otherwise provided by law, an insurer shall promptly pay every insurance claim. 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. If such written notice is not furnished to the insurer as to the entire claim, any partial amount supported by written notice is overdue if not paid within 30 days after such written notice is furnished to the insurer. Any part or all of the remainder of the claim that is subsequently supported by written notice is overdue if not paid within 30 days after written notice is furnished to the insurer. 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. For the purpose of calculating the extent to which any claim is overdue, payment shall be treated as being made on the date a draft or other valid instrument which is equivalent to payment was placed in the U.S. mail in a properly addressed, postpaid envelope, or, if not so posted, on the date of delivery. All overdue payments shall bear simple interest at the rate of 12% per year.

(2) Notwithstanding sub. (1), the payment of a claim shall not be overdue until 30 days after the insurer receives the proof of loss required under the policy or equivalent evidence of such loss. ...

(3) This section applies only to the classes of claims enumerated in s. 646.31(2).

Wis. Stat. § 628.46 (emphasis added).

¶ 24. Wisconsin Stat. § 646.31 Eligible claims states, in relevant part:

(2) Classes of claims to be paid. No claim may be paid under this chapter unless the claim is in one of the following classes:

(d) Third-party claimants . A claim under a liability or workers' compensation insurance policy, if either the insured or the 3rd party claimant was a resident of this state at the time of the insured event.

Wis. Stat. § 646.31(2)(emphasis added).

¶ 25. Wisconsin Stat. § 628.46 begins "[ujnless otherwise provided by law, an insurer shall promptly pay every insurance claim." Wis. Stat. § 628.46(1). American Standard and Metropolitan maintain that although that first sentence seems broad and encompassing, the statutory language that follows that statement clearly indicates that the "timely payment of claims" statute was meant to apply exclusively to first-party claims. Respondents explain that a typical "insur-anee claim" occurs when an insured suffers personal injury or property damage, and the insured submits "proof of loss" to the insurer. In contrast, Respondents argue that a third-party lawsuit for personal injury damages filed against an insurance company is not an "insurance claim." It is a negligence claim against a defendant who happens to have insurance. In addition, Respondents focus on the phrase "under the policy" in subsection (2) suggesting that the terminology has a distinctly first-party focus. By way of example, they cite Wis. Stat. § 645.68 which distinguishes between claims "under policies" and claims "against the insurer that are not under policies and that are for liability for bodily injury...." Wis. Stat. §§ 645.68(3) and (3m). Further, Respondents argue that the phrases "claim ... under the policy," "proof of loss," and "covered loss" relate historically to first-party claims, with the language of the statute coming from the standard fire insurance policy annexed to Wis. Stat. § 203.01(1) (1973-74).

¶ 26. Respondents further reason that the inclusion of "third-party claimants" via Wis. Stat. § 646.31(2)(d) applies only to third-party claimants standing in the shoes of first-party claimants (third-parties making first-party claims). For example, if an insurance contract provides coverage for passengers of the insured, the passenger would be a third-party in that he or she is a "stranger" to the insurance contract as they are not an insured and not a party to the insurance contract, yet that third-party could still bring a first-party claim as a provision of the contract. The court of appeals agreed with Respondent insurers that Wis. Stat. § 628.46 was intended to apply to first-party claims and distinguished first-party claims "under the policy" from claims by third-parties "against the policy." We find these arguments strained and, ultimately, unconvincing.

¶ 27. Petitioners maintain, and we agree, that Wis. Stat. § 628.46 unambiguously includes third-party claimants. The broad language of the phrase "an insurer shall promptly pay every insurance claim" means just that — every insurance claim. The statute is not limited in its application only to "first-party" claims by "insureds." A claim must be paid within 30 days of an insurer receiving written notice of "the fact of a covered loss and the amount of the loss." Wis. Stat. § 628.46(1) (emphasis added). Furthermore, Respondents' reliance on the phrase "proof of loss" in subsection (2) to prove that the statute applies only to first-party claims is unsupportable. Even if "proof of loss" is typically used in a first-party context, the statute requires either "proof of loss required under the policy or equivalent evidence of such loss." Wis. Stat. § 628.46(2)(emphasis added).

¶ 28. In fact, the only limitation in the statute occurs in subsection (3), which confines the statute's applicability "only" to those classes of claims enumerated in Wis. Stat. § 646.31(2). Wis. Stat. § 628.46(3). As noted previously, § 646.31(2)(d), eligible claims includes third-party claimants making "[a] claim under a liability .. . insurance policy, if either the insured or the 3rd party claimant was a resident of this state at the time of the insured event." Wis. Stat. § 646.31(2)(d).

¶ 29. Because we have already determined that the plain language of Wis. Stat. § 628.46 is not ambiguous, we would normally not look to extrinsic sources. Kalal, 271 Wis. 2d 633, ¶ 51. However, since the court of appeals relied heavily on extrinsic sources for its analysis, it is appropriate to review the court of appeals' analysis, including relevant case law.

¶ 30. Our case law has consistently construed Wis. Stat. § 628.46 as applying to all insurers and all claims that fall within Wis. Stat. § 646.31(2). In Wisconsin Physicians Service Insurance Corp. v. Mitchell, the court of appeals considered whether § 628.46 applied to service insurance corporations.⁸ Wisconsin Physicians Serv. Ins. Corp. v. Mitchell, 114 Wis. 2d 338, 338 N.W.2d 326 (Ct. App. 1983). In holding that it did apply, the court acknowledged that:

[the] phrases "covered loss," "amount of the loss" and "proof of loss" are usually identified with indemnity-type insurance companies, not service insurance corporations because service insurance corporations do not receive any notice or proof of loss from insureds, but rather pay the health care providers directly for services rendered to insureds.⁹

Id. at 343. Despite this fact, the court of appeals was swayed by the plain, broad language of the statute. "In light of the all-inclusive first sentence requiring all insurance companies to pay all claims, we conclude that the legislature intended to apply the thirty-day requirement to service insurance corporations." Id. at 344. Critically, the court noted "[i]f the legislature had intended to grant an additional exemption to service insurance corporations, it would have done so." Id. at 344-45. "[S]ince no exemption [was] contained in the statute's language," the court of appeals held that § 628.46 applies to service insurance corporations. Id. at 345.

¶ 31. Moreover, in Poling v. Wisconsin Physicians Service, the court of appeals again held that Wis. Stat. § 628.46 applied to a group health insurer. Poling v. Wisconsin Physicians Serv., 120 Wis. 2d 603, 612-13, 357 N.W.2d 293 (Ct. App. 1984). Awarding prejudgment interest on plaintiffs' breach of contract award, the court explained that § 628.46 is "an additional provision of the insurance contract incorporated into it by operation of law." Id. at 612 (citation omitted). There was no statutory provision that allowed an insurance company to delay payment of a claim. Id. at 613. "The only escape clause for avoidance of this interest assessment is when the insurer has reasonable proof that it is not responsible for the payment." Id.

¶ 32. Lending further support to a broad, inclusive reading is the Seventh Circuit's analysis in Allison v. Ticor Title Insurance Co. The federal appellate court construed the interplay of Wis. Stat. § 628.46 with Wis. Stat. § 646.31(2) and determined that the classes of claims to be paid under § 628.46 include "residents, certain nonresidents, owners of property interests, third party claimants, and assignees." Allison v. Ticor Title Ins. Co., 979 F.2d 1187, 1202 (7th Cir. 1992). Significantly, the Seventh Circuit held that § 628.46 applied to title insurers, even though title insurers are exempt from the Wisconsin Insurance Security Fund (WISF).¹⁰ See Wis. Stat. § 646.01(l)(b)2.

¶ 33. Respondent insurance companies argue that these appellate court cases are not controlling, as they all deal with first-party claims under the statute. While we recognize that the cases may be distinguishable on that point, they do reinforce the breadth of the statute's scope, as well as the idea that the statute would similarly apply to third-party claimants.

¶ 34. Further, American Standard and Metropolitan argue that the context, objective, and statutory background of Wis. Stat. § 628.46(2) serve to confirm the statute's first-party focus. In 1981, the legislature moved and renumbered the statute, taking it from the "Claims Adjustment" chapter and inserting it into the "Insurance Marketing" chapter.¹¹ American Standard and Metropolitan maintain that the provision's current location suggests it was meant to regulate how insurers market their policies to potential customers, but was not meant to regulate litigation between an insurer and a third-party claimant. Therefore, Respondents argue that the statutory context of the section proves it only applies to first-party claimants.

¶ 35. We recognize that a title can be "persuasive evidence of statutory interpretation." Mireles v. LIRC, 2000 WI 96, ¶ 60 n.13, 237 Wis. 2d 69, 613 N.W.2d 875. Yet Respondents' argument is, ultimately, unpersuasive. The purposes of the chapter include encouraging improvement of professional competence of insurance intermediaries, providing maximum freedom of marketing methods of insurance, and regulating insurance marketing practices in conformity with the general provisions of the Insurance Code. See Wis. Stat. § 628.01. One could certainly question what a provision to dissuade an insurance company from failing to make payment promptly on claims it knows it is responsible for has to do with marketing to potential customers. Timely payment of claims is a statutory requirement imposed by the legislature, apparently in response to the real or perceived problem of insurance companies failing to make payment promptly on claims that they were hable to pay. The location of that requirement does not lead to the conclusion that only first-party claims were intended to be covered by the statutory requirements.

¶ 36. The court of appeals' analysis that the legislature did not intend Wis. Stat. § 628.46 to apply to third-party claimants was based largely upon what it deemed the "historical context for development of the interest penalty.. . ." Kontowicz, 278 Wis. 2d 664, ¶ 17. Looking to case law of that period, the court of appeals noted a distinct "focus on the fiduciary relationship between insurer and insured, and the goal of protecting the rights of the insured." Id. From this general context of the period in which the statute was first enacted, the court of appeals concluded that § 628.46 "arose from the legislature's intent to protect the insured from improper claims settlement practices," not to protect third-parties. Id. (emphasis added).

¶ 37. The flaw in the court of appeals' analysis is that it likens the timely payment of claims statute to tort claims for bad faith. The cases the court relied on involve bad faith on the part of insurance companies. For example, the court cites Kranzush v. Badger State Mutual Casualty Co., 103 Wis. 2d 56, 73, 307 N.W.2d 256 (1981), for the proposition that an " 'insurer's duty of good faith and fair dealing arises from the insurance contract and runs to the insured'" and not to the third-party claimant. Kontowicz, 278 Wis. 2d 664, ¶ 15 (citation omitted). While this may be true, Wis. Stat. § 628.46 "is unrelated to the tort of bad faith and permits the imposition of interest even where bad faith is not present." Poling, 120 Wis. 2d at 613 (citation omitted).

¶ 38. We now turn to the second major argument presented by the Respondents, that the 1999 amendments to Wis. Stat. § 646.31 were intended to eliminate third-party property damage and bodily injury claims from the statute.

¶ 39. Wisconsin Stat. § 646.31 lists eligible claims under the WISF. The purpose of the WISF, created by Wis. Stat. ch. 646, is to protect an insured in the event that his or her insurance company becomes insolvent. Fireman's Fund v. Pitco Frialator, 145 Wis. 2d 526, 532, 427 N.W.2d 417 (Ct. App. 1988). Section 646.31 is a stand-alone statute, detailing eligible claims under the WISF, and is independent of Wis. Stat. § 628.46. Subsection (2) lists classes of claims to be paid by the fund, including "third party claimants." Wis. Stat. § 646.31(2) (d).

¶ 40. The WISF, in what is substantially its current form, was created by statute in 1979.¹² Included in the classes of claims that were eligible to be paid by the fund were:

(d) Third party claimants. A claim under a liability or workers' compensation insurance policy, if:

1. Either the insured or the 3rd party claimant was a resident of this state at the time of the insured event;

2. The claim is for bodily or other personal injuries suffered in this state or by a person who suffered the injuries while a resident of this state; or

3. The claim is for damage to property situated in this state at the time the damage occurred.

Wis. Stat. § 646.31(2)(d)(1979-80).

¶ 41. In 1999, the legislature amended the section of the statute relating to third-party claimants. 1999 Wis. Act 30. The amendments consolidated the introduction and subsection 1, and repealed subsections (d)2 and (d)3. The amended version of the statute reads: "Third party claimants. A claim under a liability or workers' compensation insurance policy, if either the insured or the 3rd party claimant was a resident of this state at the time of the insured event." Wis. Stat. § 646.31(2)(d) (1999-2000).

¶ 42. Respondents maintain, and the court of appeals reasoned, that the 1999 amendments eliminated third-party personal injury claims from the WTSF. Kontowicz, 278 Wis. 2d 664, ¶ 18. The court reasoned that by removing reference to "bodily injury" and "property damage" from the section on third-party claimants, 1999 Wis. Act 30 removed those types of claims from coverage under Wis. Stat. § 646.31, and by reference Wis. Stat. § 628.46. Agreeing with the court of appeals, American Standard and Metropolitan argue that the 1999 amendments removed bodily injury and property damage claims from the prejudgment interest provisions in § 628.46 and the WISF. We disagree with this argument.

¶ 43. Additionally, we do not agree with Petitioners' position that the amendments were made solely for the purpose of eliminating redundancy in the statute, the amended version maintaining its original scope. By eliminating Wis. Stat. § 646.31(2)(d), it clearly appears that the legislature effected a substantive change in the statute by eliminating claims of non-residents who were injured while in Wisconsin from being paid by the fund.¹³ We do, however, agree with Petitioners that the 1999 amendments were not intended to, nor did they have the effect of, eliminating the bodily injury claims of third-party claimants who were residents of Wisconsin at the time of the event at issue from coverage under the WISE¹⁴

¶ 44. Moreover, the court of appeals relied on the argument that the 1999 amendments were in response to, or at a minimum informed by, two Dane County Circuit Court decisions which had ruled that Wis. Stat. § 628.46 allowed third-party claimants to collect interest under the statute. Kontowicz, 278 Wis. 2d 664, ¶ 21.¹⁵ There is no indication in the legislative history that the legislature was even aware of, much less influenced by, the Dane County Circuit Court cases cited by the court of appeals. The court of appeals inappropriately relied on extremely limited legislative history, in order to support an interpretation contrary to the plain language of the statutes.¹⁶

¶ 45. We therefore disagree with the court of appeals' interpretation, and Respondents' position, that the 1999 amendments eliminated claims for bodily-injury or property damage, narrowing the eligibility of third-party claimants to "third parties whose claims arise under the policy in the same manner and under the same provisions as the named insured. . .Id., ¶ 18. As we noted more than 25 years ago, "[t]his court has consistently viewed automobile liability insurance policies as more than indemnity contracts between insurer and insured; there is a strong public policy favoring compensation of injured third parties." Simonds v. Bouton, 87 Wis. 2d 302, 307, 274 N.W.2d 666 (1979) (citations omitted). The court of appeals' interpretation is in direct conflict with that strong public policy.

¶ 46. The plain language of the statute is not overcome by Respondents' policy arguments against applying Wis. Stat. § 628.46 interest to third-party claims. Respondents suggest that allowing § 628.46 to be applied to third-party claimants like the Petitioners, so that they are able to receive § 628.46 interest, will undermine the fiduciary relationship between insurer and insured. Such application, Respondents argue, imposes a penalty on an insurer who attempts to fulfill its duty to defend its insured. Moreover, Respondents argue that allowing such interest on third-party claims would have a chilling effect upon settlement negotiations, increase litigation, and is contrary to the adversarial nature of third-party litigation.

¶ 47. We disagree with these arguments. The purpose of Wis. Stat. § 628.46 is to discourage insurance companies from creating unnecessary delays in paying claims owed. This purpose is advanced if the injured party is a third-party claimant just as much as if he or she is the insured. We also note that our case law has reasoned that the purpose of § 628.46 is not to penalize insurers, but to compensate claimants for the value of the use of their money. Upthegrove v. Lumbermans Ins. Co., 152 Wis. 2d 7, 13, 447 N.W.2d 367 (Ct. App. 1989). "Prejudgment interest generally is considered compensation for the time value of money and a means of preventing defendants from prolonging litigation and benefitting (sic) from the delay." Allison, 979 F.2d at 1201 (citations omitted). This purpose is furthered by a general application of the statute to ensure timely payments are made to all, not just first-party, claimants.

¶ 48. We hold that Wis. Stat. § 628.46 does apply to third-party liability claims for personal injury. However, we limit our holding to only those situations in which three conditions to trigger interest are met. First, there can be no question of liability on the part of the insured. Second, the amount of damages must be in a sum certain amount. Third, the claimant must provide written notice of both liability and the sum certain amount owed. If the insurer has "reasonable proof' it is not responsible, the statute does not apply. "Reasonable proof1 means 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. Our case law has generally equated "reasonable proof' of non-responsibility under § 628.46 with whether the "coverage issue was fairly debatable." Allstate Ins. Co. v. Konicki, 186 Wis. 2d 140, 160, 519 N.W.2d 723 (Ct. App. 1994)(citation omitted). If coverage is fairly debatable, "the insurer must be considered to have had the required 'proof of non-responsibility." Id.

¶ 49. Finally, we hold that claims concerning the issue of interest due under Wis. Stat. § 628.46 may be bifurcated pursuant to Wis. Stat. § 805.05(2), when "conducive to expedition or economy," for convenience, or to avoid prejudice. Wis. Stat. § 805.05(2). In Waters v. Pertzborn, we held that bifurcation under § 805.02 is limited to claims, not issues. Waters v. Pertzborn, 2001 WI 62, ¶ 35, 243 Wis. 2d 703, 627 N.W.2d 497. However, we also noted that the legislative history of the "statute reveal[ed] that the rule barring bifurcation of issues does not apply to issues regarding insurance coverage." Dahmen v. Am. Family Mut. Ins. Co., 2001 WI App 198, ¶ 9, 247 Wis. 2d 541, 635 N.W.2d 1 (citing Waters, 243 Wis. 2d 703, ¶¶ 21, 23)(emphasis in original).

IV

¶ 50. Having concluded that Wis. Stat. § 628.46 does apply to third-party claimants, we address Respondents' position that the imposition of the interest penalty is inappropriate in either of these cases, as the insurance companies had neither proof of loss nor knew the amount of loss. As noted previously, the statute applies to claims 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." Wis. Stat. § 628.46(1). Once the insurer has had written notice of the "fact of a covered loss" and the "amount of the loss," it must pay within 30 days, unless it has "reasonable proof' that it is not, in fact, responsible for the payment.

¶ 51. Respondents argue that one cannot have the knowledge of liability required to make payment without a judgment or settlement. Nor, they argue, can an insurance company know what it actually owes without a resolution endorsed by a court. We disagree.

¶ 52. In Fritsche v. Ford Motor Credit Co., the court of appeals rejected this argument, holding "[a] claim is statutorily deemed overdue if not paid within thirty days after a proof of loss or equivalent evidence of the loss. That time can be far in advance of a judgment or award." Fritsche v. Ford Motor Credit Co., 171 Wis. 2d 280, 305, 491 N.W.2d 119 (Ct. App. 1992) (citation omitted). Even acknowledging the fact that "uninsured motorist claims, which often involve nebulous damages, are difficult to evaluate," the Fritsche court still concluded that:

It may be that the risk of mis-evaluation outweighs the risk of paying sec. 628.46, Stats., interest. But [the insurance company] has had the use of $25,000 which became owing to the Fritsches as a result of an accident which occurred October 11, 1985. Presumably, [the insurance company] has received a return on that amount since then. We see nothing illogical in interpreting a broad statute to require [the insurance company] to pay for the use of $25,000 from the date by which it had received evidence of the loss equivalent to a proof of loss.

Id. at 307 (footnote omitted).

¶ 53. American Standard argues that Kontowicz fell short of the statutory notice requirements, and therefore, it should not be liable for 12 percent interest on her claims. We conclude that Kontowicz met all the statutory requirements necessary to trigger Wis. Stat. § 628.46 interest as of January 5, 2001. On that date Kontowicz sent written notice of the amount of her medical expenses through November 2, 2000, totaling $238,379.53, along with her October 27, 2000 discharge summary showing her spinal cord had been severed, and the resulting quadriplegia. There was no question of the liability of American Standard's insured. American Standard knew about the accident involving Jeffers and Kontowicz by September 7, 2000, that Jeffers was at fault, and that Kontowicz was apparently paralyzed. Jeffers conceded liability in his answer to the interrogatories on December 28, 2000. American Standard had investigated the accident, and determined that once Kontowicz's severe injury was confirmed, in light of the admitted liability on the part of Jeffers, that it was hable under its policy.¹⁷ We, therefore, hold consistent with the determination of the circuit court, that as of January 8, 2001,¹⁸ § 628.46 the statutory 30-day period after which interest would accrue began running on $238,379.53 of Kontowicz’s claim, and on August 2, 2001, the 30 days began to run on the full $500,000 claim.

¶ 54. With regard to Buyatt's claim, Metropolitan argues that even if the court finds that the statute allows prejudgment interest to third-party claimants, the courts below did not determine whether Metropolitan had a reasonable basis for denying the claim. In Buyatt's case, we hold that Metropolitan had knowledge of clear liability for the accident by January 29, 2001. However, in this case, because Metropolitan had information that there were pre-existing injuries of a similar nature, as well as similar injuries subsequent to the Schoessow accident, and it was fairly debatable as to whether the wage loss and medical specials were all attributable to the Schoessow accident, we determine that Metropolitan had reasonable proof to establish that it was not responsible for at least a portion of Buyatt's claim. The amount that it was responsible for could not be determined with any certainty. Therefore, interest under Wis. Stat. § 628.46 is not appropriate in Buyatt's case. However, because Metropolitan rejected Buyatt's April 16, 2003 settlement offer, and the jury awarded Buyatt an amount greater than that offer, we determine that Buyatt is entitled to interest under Wis. Stat. § 807.01(4), which began accruing on April 16, 2003, the date of his settlement offer.¹⁹ Interest under § 807.01(4) is in lieu of, not in addition to, interest under § 628.46(1). See Upthegrove, 152 Wis. 2d at 14-15. However, we note that, in order to get interest pursuant to § 807.01(4), a full trial must first take place, and an award of damages must be made.

V

¶ 55. We reverse the decision of the court of appeals. We conclude that when there is clear liability, a sum certain owed, and written notice of both, the plain language of Wis. Stat. § 628.46, incorporating by reference Wis. Stat. § 646.32(2), imposes 12 percent simple interest on overdue payments to third-party claimants in personal injury claims and actions. However, we limit our holding to only those situations in which three conditions to trigger the interest are met. First, there can be no question of liability on the part of the insured. Second, the amount of damages must be in a sum certain amount. Third, the claimant must provide written notice of both liability and the sum certain amount owed. We further hold that claims concerning the issue of interest due under § 628.46 may be bifurcated under Wis. Stat. § 805.05(2), and that, in the case of Buyatt, the award of interest should be in accord with Wis. Stat. § 807.01(4), rather than § 628.46.

By the court. — The decision of the court of appeals is reversed, and the matter remanded to the appropriate branch of the circuit court for entry of orders consistent with this decision.

¶ 56. JON E WILCOX, J., took no part.

1 All subsequent references to the Wisconsin Statutes are to the 2001-02 version unless otherwise indicated.

2 American Standard's policy, however, contained a pay- and-walk provision, which provided that "WE WILL NOT DEFEND ANY SUIT AFTER OUR LIMIT OF LIABILITY HAS BEEN OFFERED OR PAID."

3 Interest owed was calculated as follows: Twelve percent simple interest on $238,379.53 from January 8, 2001, to July 30, 2001, in the amount of $15,920.65 ($238,379.53 x .000329 percent per day x 203 days); plus twelve percent simple interest from July 30, 2001, to February 20, 2002, in the amount of $33,722.50 ($500,000 x .000329 percent per day x 205 days).

4 Buyatt had suffered somewhat similar injuries in an automobile accident that occurred five years prior to the accident at issue. Metropolitan had information that Buyatt failed to follow through on medical treatment recommendations and medical reports that Buyatt had complained, before the accident occurred, of pain in the area of the body where he claimed he was injured in the accident with Schoessow. In addition, Metropolitan had information that Buyatt suffered somewhat similar injuries subsequent to the accident involving Schoessow.

5 The transcript of the hearing before the circuit court on July 22, 2003, shows that Judge Dreyfus calculated Wis. Stat. § 628.46 interest owed Buyatt as follows. On or about May 9, 2001, Buyatt served on Metropolitan Requests for Admission. Because Metropolitan did not respond to those Requests for Admission, they were deemed admitted 30 days later. Therefore, on June 8, 2001, Metropolitan had effectively admitted that Schoessow was liable for the accident and that Buyatt was not contributorily negligent. By that date, Metropolitan also had written notice of the amount of Buyatt's medical specials and lost wages. Section 628.46 interest begins accruing 30 days after the statutory requirements are met, therefore on July 8, 2001, 12 percent simple interest began accruing. Judge Dreyfus determined, therefore, that interest accrued during the 647 days between July 8, 2001 and April 16, 2003 — the date of Buyatt's final offer of settlement. Judge Dreyfus calculated the interest owed based upon the $24,081 jury verdict for Buyatt, which resulted in a § 628.46 award of $5,169.53. The court did not grant interest under Wis. Stat. § 807.01(4), but did grant double costs in accord with § 807.01(3).

6 Wisconsin Stat. § 628.46(3) states: "This section applies only to the classes of claims enumerated in s. 646.31(2)."

7 Wisconsin Stat. § 646.31(2)(d) provides: "Third party claimants . A claim under a liability or workers' compensation insurance policy, if either the insured or the 3rd party claimant was a resident of this state at the time of the insured event."

8 Wisconsin Physicians Service Insurance Corp. v. Mitchell, 114 Wis. 2d 338, 338 N.W.2d 326 (Ct. App. 1983) considered the scope of Wis. Stat. § 636.10 (1979-80), the predecessor to Wis. Stat. § 628.46 (2001-02). The statute was renumbered and relocated in 1981. 1981 Wis. Act 38, §§ 22, 24.

9 Respondents suggest that because Wis. Stat. § 628.46 was found to be ambiguous by the court of appeals in Mitchell, we must also do so. We disagree, for the reasons set forth herein.

10 Wisconsin Stat. §646.31(2), which Wis. Stat. §628.46 incorporates by reference, lists classes of claims eligible for payment under the Wisconsin Insurance Security Fund (WISF). The WISF was created to protect insureds in the event of the insolvency of their insurance company.

11 1981 Wis. Act 38 §§ 22, 24.

12 Although an Insurance Security Fund existed prior to 1979, the 1979 Act repealed and recreated Wis. Stat. ch. 646 of the statutes, making "major changes in the security fund law...." L. 1979, c. 109, § 14.

13 The eliminated portions of the statute included claims "for bodily or other personal injuries suffered in this state or by a person who suffered the injuries while a resident of this state...." Wis. Stat. § 646.31(2)(d)2 (1979-80) (emphasis added).

14 The revisor's notes accompanying 1999 Act 30 are silent as to the legislature's motives in revising Wis. Stat. § 646.31(2)(d).

15 The court of appeals' decision cited Leister v. General Casualty Insurance Co., Dane County Circuit Court Case No. 98-CV-3182 (Memorandum Decision and Order on Motion to Dismiss), and Coker v. American Family Mutual Insurance Co., Dane County Circuit Court Case No. 99-CV-2949 (Decision and Order). Kontowicz v. Am. Standard Ins. Co., 2005 WI App 22, ¶ 21, 278 Wis. 2d 664, 693 N.W.2d 112.

16 Petitioners note that all five circuit court cases known to have addressed the issue of whether Wis. Stat. § 628.46 applies to third-party liability claims and insurers determined that § 628.46 does apply.

17 We note that Kontowicz apparently was not wearing a seat belt at the time of the accident. In Gaertner v. Holcka, this court examined the codification of the common law "seat belt" defense into Wis. Stat. § 347.48(2m)(c)(1997-98). We concluded that the legislature intended to ensure that defendants received a possible reduction in plaintiffs recoverable damages of not more than 15 percent if plaintiff failed to use a seat belt. Gaertner v. Holcka, 219 Wis. 2d 436, 452, 580 N.W.2d 271 (1998). However, due to the severity of the injury suffered by Kontowicz even the maximum reduction allowed by law would not appear to be sufficient to bring her claim below the $500,000 policy limit.

18 Since both the January 5, 2001 claim for $238,379.53 and the July 30, 2001 claim for $500,000 were made in writing and served upon American Standard by mail, the circuit court added three days for service by mail.

19 Wisconsin Stat. § 807.01(4) (2003-04) states, in relevant part:

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.