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Insurance Case Analysis

If the decision in this case is published, as recommended, it will mark a radical departure from a long-accepted assumption that a partial payment by an insurer to its insured tolls the statute of limitations, regardless of the nature of the claim.

The last time the court of appeals addressed this issue, 12 years ago, it held to the contrary as it did in the case at bar, and considered its holding so self-evident that the decision was not even published. General Casualty Company of Wisconsin v. Gleason, 166 Wis.2d 1050, 481 N.W.2d 707, 1992 WL 50162 (Wis.App.Jan.8, 1992).

In Gleason, Gleason was insured by General Casualty with a policy that, like the one in the case at bar, gave the insured two years to file suit, rather than the one year provided by statute. A fire damaged property owned by Gleason on Oct. 12, 1987. On Jan. 28, 1988, it submitted a proof of loss for just over $100,000. On Oct. 13, 1988, General Casualty made an initial payment of almost $56,000, plus subsequent payments, the last being Mar. 24, 1989.

General Casualty refused to pay any more, Gleason demanded appraisal, and General Casualty filed an action for declaratory judgment.

Ruling in favor of Gleason, the court of appeals held, "We agree with Gleason that the limitation period set forth in the policy was extended by operation of sec. 893.12, Stats. General Casualty’s period payments to Gleason were ‘payment[s] made … to another .. for injury to or destruction of property.’ Section 885.285(1)(b), Stats. Therefore, the limitation for commencement of any action was extended under sec. 893.12."

The court’s holding is not merely contrary to long-settled expectations, it is also not required by the plain language of the statute.

Because an action by an insured against his insurer lies in contract, rather than tort, the six-year statute of limitations provided in sec. 893.43 generally applies to such actions.

However, sec. 631.83 creates various exceptions to that rule, one of which is subsection (1)(a), at issue in the case at bar, which establishes the statute of limitations at one year for actions on fire insurance policies. Chapters 600 through 646 and Chapter 655 provide other assorted exceptions for various types of actions.

Subsection (2), however, provides, "Except for the prescription for time periods under sub. (1) or elsewhere in chs. 600 to 646 and 655, the general law applicable to limitation of actions as modified by ch. 893 applies to actions on insurance policies."

There are two plausible constructions of this subsection. One is that adopted by the court — Chapter 893 does not apply to any type of insurance policy explicitly governed by subsection (1). This interpretation is problematic, however, inasmuch as Chapter 893 contains a variety of generic provisions that clearly should apply.

Sections 893.02 and 893.10 merely concern service of process, for example.

The court’s interpretation renders all these provisions inapplicable to actions on fire insurance, even though there is no apparent reason why they should not apply.

The second construction of the subsection is that, with the sole exception of the shortened statute of limitations, from six years to one for actions on fire insurance, or as otherwise proscribed elsewhere in the statutes for other actions, the general laws governing Chapter 893 do apply, including the tolling provision in sec. 893.12.

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The legislature made clear that this was its intent in the comments to the statute, which state, "Sub. (2) makes limitation of actions on insurance policies subject to general law."

Both constructions are plausible, but the legislature has indicated the latter is intended. Accordingly, attorneys representing parties adversely affected by this decision should preserve this issue for review in the Wisconsin Supreme Court.

They should also be aware that, unless the Supreme Court does reverse this decision, it has ramifications for other tolling provisions. Section 893.16 tolls the statute of limitations for people under disability; sec. 893.22 tolls it for persons who die.

Taking the court’s decision to its logical conclusion, neither of these provisions apply to any other actions excepted from Chapter 893 by sec. 631.83(2). However, medical malpractice claims may be subject to the chapter, because of the Supreme Court’s application of ch. 893 to ch. 655 in Landis v. Physicians Ins. Co. of Wisconsin, Inc., 2001 WI 86, 245 Wis.2d 1, 628 N.W.2d 893.

– David Ziemer

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David Ziemer can be reached by email.

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