LAW NOTES from the Law Offices of
Kay & Andersen, LLC

November, 2014
What Every Insurer Should Know . . . . . . . . . . . . . . . 
          ABOUT POTENTIAL LIABILITY FOR INTEREST ON SETTLEMENTS THAT
                                                                                             ARE NOT TIMELY PAID

​​Disclaimer: The information contained on this page is not legal advice. The information provided on this website is for general informational purposes and is not necessarily updated to account for changes in the law. You should consult with an attorney for legal advice regarding your individual circumstances.

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Settlement agreements will typically specify a time for payment of the settlement amount. A recent Wisconsin Court of Appeals case highlighted the perils of failing to specify a payment date in a settlement agreement. In Singler v. Zurich American Insurance Company, 2014 WI App 108 (recommended for publication), Singler and Zurich agreed to settle Singler’s personal injury claim for $1.9 million. The agreement was confirmed by letter and Zurich’s attorney represented that it would “take at least a month to get the check.” Thirty eight days after the settlement was reached, Singler filed a motion seeking an order requiring Zurich to pay 12% interest on the settlement amount, relying on Wis. Stat. §628.46(1), which provides that 12% interest shall be paid by an insurer on a claim if not paid within 30 days after written notice is furnished to the insurer. The circuit court concluded that payment was due within a reasonable time, which was found to be within 30 days. Accordingly, the circuit court ordered Zurich to pay Singler $23,112.42, reflecting 12% interest on the settlement amount for the period beginning 30 days after the settlement date until the settlement was ultimately paid. On appeal, the Court of Appeals reversed the circuit court’s determination that Wis. Stat. §628.46 applied to the claim. The Court of Appeals noted that Zurich had not failed to pay an insurance claim, but rather a contractual settlement of an insurance claim. Id, ¶19. That amount did not reflect the actual amount of damages in the claim, but rather an agreed upon settlement amount. Id, ¶20. Finally, determining that Wis. Stat. §628.46 applied to all settlements would deny parties flexibility, insofar as there may be situations where the parties would deliberately arrange for payments to be made more than 30 days after the date of settlement. Id, ¶21. The Court of Appeals agreed with Singler, however, that the circuit court’s imposing a 30-day time limit to pay the settlement amount was appropriate. Id, ¶22. Because the settlement agreement did not contain a time limit for performance, a reasonable time was implied, and the circuit court’s finding that 30 days was a reasonable period was supported by the record. Id, ¶¶22-24. The Court of Appeals then reversed the circuit court’s finding that 12% interest was appropriate insofar as Wis. Stat. §628.46 did not apply. Instead, Wis. Stat. §138.04, which provides for a 5% interest rate on all claims unless otherwise agreed, would apply to the delinquent settlement payment. Id, ¶¶27-28. The clear lesson of this case is that parties entering into a settlement agreement should always try to specify a deadline by which payment of the settlement amount will be made. The failure to do so will leave the door open for a court to determine a reasonable payment period, which may differ substantially from the parties’ expectations and thereby render the payer of the settlement liable for additional interest.

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