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BENCH BLOG: Calculating interest in settlements

By: Jean DiMotto//November 7, 2014

BENCH BLOG: Calculating interest in settlements

By: Jean DiMotto//November 7, 2014

Jean DiMotto is a retired Milwaukee County Circuit Court judge. She served for 16 years, and was on the criminal bench for 12 of those years.
Judge Jean DiMotto retired in 2013 after 16 years on the Milwaukee County Circuit bench and now serves as a reserve judge. She also serves of counsel with Nistler & Condon SC. She can be reached at [email protected].

Appeals court weighs in on 5 versus 12 percent rate

How long should it take for an insurer’s check to arrive after a settlement has been reached? Does it matter on which continent the insurer is located? The Court of Appeals recently analyzed these questions.

The underlying facts in Singler v. Zurich American Insurance Co. are not complicated. Singler, a personal injury plaintiff, settled with the defense shortly before a seven-day jury trial was scheduled to begin. Singler had rejected two prior offers.

Defense counsel warned plaintiff’s counsel that it would take at least a month for the settlement check to arrive because the insurer was located in Australia. After waiting 40 days, Singler brought a motion for the imposition of 12 percent interest on the unpaid settlement amount.

Motion hearing

Singler argued that sec. 628.46(1) applied, which requires an insurer to pay 12 percent annual interest on any undisputed claim if the claim is not paid within 30 days after the insurer receives written notice of it.

Zurich, on the other hand, argued that sec. 628.46(1) was inapplicable because the case did not involve failure to pay an undisputed claim but failure to pay the settlement of a disputed claim. Thus, it was not an insurance claim issue but a contract issue.

As to the time it was taking to get the settlement check, Zurich explained to the court that the Australian corporation had a $2 million self-insured retention. The settlement figure was $1.9 million. Therefore it was struggling with determining, between it and the excess carrier, who would pay how much of the settlement and who would pay defense costs.

Outagamie County Circuit Judge Michael Gage ruled that the obligation to pay accrued on the date the settlement was reached. Payment should be made within a reasonable time thereafter, which Gage found to be one week.

He reasoned that Zurich settled on the eve of trial after making offers of $1.5 million and $1.75 million within two months of the final settlement offer. It settled on the eve of trial and would have been expecting to pay a sum in the range of its settlement offers after a seven-day trial. Moreover, it was in the business of covering losses.

Accordingly, Gage imposed 12 percent interest beginning one week after the settlement. The settlement check arrived two weeks after Gage’s ruling, making the interest payment nearly $38,000.

Revising the order

Several months later, Singler moved for a revision in the order, to wit: starting the interest accrual at the 30-day post-settlement mark, consonant with the time period specified in sec. 628.46(1). Zurich argued that no interest should be imposed, but if it was, it should be 5 percent pursuant to sec. 138.04.

Gage reluctantly agreed with Singler and recalculated the 12 percent interest to start 30 days after the settlement was reached. The new interest total was just over $23,000.
Zurich appealed.

Court of Appeals weighs in

District 3 Court of Appeals Judge Lisa Stark wrote the unanimous opinion.

She first embarked on a statutory analysis of sec. 628.46(1). Recovery under that statute is allowed if: (1) there is no question of liability; (2) damages are in a sum certain amount; and (3) claimant has provided the insurer notice of both liability and the sum certain amount owed.

Singler argued those requirements were met because: (1) liability was not in dispute; (2) after the settlement, Zurich owed a sum certain of $1.9 million; and (3) Singler provided written notice of the settlement agreement to Zurich on the day of the agreement.

But the appeals court noted that the language of sec. 628.46(1) limits it to the payment of a claim within 30 days. Here, Zurich failed to pay a contractual settlement of a claim within 30 days. Additionally, although liability was undisputed, damages were disputed and the settlement represented a compromise in the amount of damages.

Lastly the court noted that there were circumstances where parties may want payment more than 30 days after the settlement (e.g., periodic instead of lump sum payments, payments from other sources). Nothing in sec. 628.46(1) limits parties’ ability to mutually agree to contract terms in settling a disputed claim.

Affirmed and reversed

Having said this, the court nonetheless agreed with Gage’s imposition of a 30-day deadline to pay the settlement. The agreement did not specify a time limit for payment so “a reasonable time is implied.”

Zurich argued that it had given Singler notice that it would take at least one month to get the settlement check. But it did not explain on appeal why this was so. Accordingly, Gage’s 30-day time limit was not clearly erroneous and was amply supported in his analysis.

This much of Gage’s decision was affirmed.

But the percentage of interest calculation was reversed. Although Singler argued that 12 percent was the amount specified under sec. 628.46(1), the court already found the statute inapplicable.

Zurich argued that the correct statute was sec. 138.04: “The rate of interest upon any loan or forbearance of any money, goods or things in action shall be $5 upon $100 for one year.”

The court noted two cases where the Wisconsin Supreme Court and the Court of Appeals had applied this rate of interest when the rate was unspecified in an agreement. Therefore, the case was remanded to Gage to recalculate interest at 5 percent.


This was a tough case for the defense when its Australian client could not be persuaded to pay the settlement amount quickly and resolve later who – it or the excess carrier – was to pay what amount of the combined settlement and defense costs.

As such, this well-written opinion is an important contribution to the body of law on interest rates to be applied to settlements.

It is nothing short of a wonder that the 12 percent interest rate is still on the books given the lengthy period of time that this amount has been incongruous with the economy. Thus, the ruling in this case on the applicability of the 5 percent rule is refreshing both legally and at a common-sense level.


Should Justice Protasiewicz recuse herself on gerrymandering cases that go before the Wisconsin Supreme Court?

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