*Case recommended for publication.
In Payette v. Marx (2018AP627), the Court of Appeals District III held that insurers do not owe prejudgment damages under Wis. Stat. § 628.46 when a third party demands general damages and the insurer is not certain it actually owes the demanded sum.
Defendant David Marx struck and killed plaintiff Payette while Payette was biking on a county highway. Marx had a $500,000 automobile insurance policy with SECURA and $1 million in additional coverage with 1st Auto.
Payette’s estate estimated damages related to the accident at $3.5 million to $5 million and sent 1st Auto a demand package seeking the full $1 million policy limit. The demand package listed:
- $7,806.42 in medical and funeral expenses,
- $1,988,779 in future damages, and
- an unspecified amount of damages for Payette’s conscious pain and suffering.
When 1st Auto declined to comply with the demand package, the Estate filed this lawsuit against 1st Auto. The jury awarded the Estate a total of $672,806.42 in damages. SECURA had already paid the Estate its $500,000 policy limit, leaving 1st Auto owing $172,806.42.
Before the appeals court in this case was the question of whether 1st Auto owed prejudgment interest on that amount under § 628.46. Section 628.46 requires insurers to pay interest on overdue insurance claims. (Note that this case occurred before 2017 Act 235 decreased the interest rate on overdue claims from 12 percent to 7 percent.) Previous case law (Kontowicz v. American Standard Insurance Co., 2006 WI 48) holds that prejudgment interest is due when:
- There is no question of the insured’s liability.
- There is a sum certain amount of damages.
- Written notice is provided to the insurer.
At issue here was the second condition.
1st Auto argued that the Estate’s demands for damages for conscious pain and suffering and pecuniary losses of Payette’s children were general damages that were not sum certain. The court agreed with 1st Auto that those general damages requested by the Estate did not satisfy the sum certain condition. Therefore, the Estate was not entitled to § 628.46 prejudgment damages.
The court declined to go as far as to say that general damages can never satisfy the sum certain condition, but in this case Payette’s conscious pain and suffering was unknown and Payette’s children needed to prove their pecuniary loss before it was owed by 1st Auto.
Overall, the court found that third parties are not entitled to § 628.46 prejudgment damages when an insurer is overdue on a claim of general damages that the insurer is not certain it actually owes.
The Wisconsin Insurance Alliance and Wisconsin Association for Justice filed amicus briefs in this case.