Wisconsin Court of Appeals Provides a Lesson in Documenting the Settlement

22 September 2014 Wisconsin Appellate Law Blog

A recent case from the Wisconsin Court of Appeals demonstrates the necessity of properly documenting the details of a settlement after agreement is reached on the amount. In Singler v. Zurich American Insurance Co., 2014AP391, Robert Singler and Zurich American Insurance Co. agreed to settle Singler’s personal injury claims for $1.9 million on the eve of trial. It does not appear that the parties signed a formal settlement agreement, but instead documented the settlement in an exchange of letters between their counsel. In one communication, Zurich’s attorney indicated that it “would take at least a month to get the check authorized out of Australia,” but the parties never agreed on a specific date by which Zurich would provide the payment.

When Zurich still had not paid six weeks later, Singler asked the circuit court to assess interest under Wis. Stat. § 628.46(1), which lets claimants collect 12% interest if an insurer does not pay a claim within 30 days. The circuit court agreed and awarded Singler $23,112.42 in interest, on top of the settlement amount.

On appeal, the Court of Appeals held that § 628.46(1) does not apply to litigation settlements with insurance companies, but the court still allowed Singler to recover interest for the late payment. Because the settlement agreement had no deadline for payment, Zurich’s performance was due within “a reasonable time,” which the circuit court had implicitly found to have been 30 days.  A reasonable time for payment could be much shorter with a U.S.-based defendant or a smaller settlement sum—the circuit court’s initial reaction in Singler was that Zurich should have paid in just 7 days.

The court then applied Wis. Stat. § 138.04, the 5% default interest statute, to the settlement agreement. Interest started to accrue as soon as Zurich’s implied deadline had passed, essentially penalizing Zurich for its delay.

The lesson here is clear: Counsel for settling parties should not overlook details such as when the settlement payment is due. Before any promises are made (or not made) on timing, the paying party’s attorney should confirm exactly how long it will take to process the settlement payment, including whether any additional forms such as a W-9 are necessary, and should ensure that the deadline is set accordingly, perhaps with a few extra days to be safe. These steps will help prevent adding the insult of additional interest to the injury of paying to settle the claim. Of course, 5% interest may not be a bad deal after the cost of funds once again exceeds that rate, which will leave the payee party to negotiate a higher rate in addition to a specific deadline.

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