Today, I will wrap up my evaluation of a favorable bad faith decision against Safeco. Last week, I began addressing the damages awarded by the court.

The Millers contended that they were entitled to prejudgment interest in the amount of $256,459.92 pursuant to Wis. Stat. § 628.46, which stated:

Insurance claims shall bear interest at the rate of twelve percent per year if not paid within thirty days after the insurer is furnished written notice of the fact and amount of the covered loss.

The Court explained that when an insurer has “reasonable proof” to establish that it is not responsible for payment, payment is not to be deemed “overdue.” “Reasonable proof” is defined as an amount of information that is “sufficient to allow a reasonable insurer to conclude that it may not be responsible for payment of a claim.” In an earlier part of the decision, Safeco unsuccessfully argued that the Millers’ case was fairly debatable. The Court relied upon that prior finding and explained that Safeco lacked reasonable proof of non-responsibility for payment and payment owed to the Millers was deemed overdue for purposes of § 628.46. Additionally, the Court held that any argument that interest should not begin to accrue until a final judgment is entered with respect to the entirety of the case is belied by the statute itself as well as the policy behind it. The Wisconsin Court of Appeals has expressly disavowed the proposition that interest cannot accrue until judgment if final:

Moreover, § 628.46 is unrelated to the tort of bad faith and permits the imposition of interest even where bad faith is not present [citation omitted]…The fact that § 628.46 interest bears no relation to bad faith damages undermines the notion that it would be premature to find payment overdue before the bad faith phase of the case has concluded. Any award for prejudgment interest is based on Safeco’s decision to deny coverage (regardless of whether it was done in bad faith), and any bad faith damages are not determinative of an award of prejudgment interest.

The Court’s analysis was not limited, however, to the language of the statute. An important consideration was the policy behind the prejudgment interest statute:

Wisconsin courts have recognized that prejudgment interest reflects the value of the use of money. [citation omitted] Because Safeco has not paid the Millers what is owed to them under the terms of the Policy, Safeco has benefitted from the value of the use of such monies while the Millers have been deprived of that value. If interest were not awarded, Safeco would effectively have had an interest free loan from the Millers from the time it denied payment without any reasonable basis until judgment is rendered.

After a more detailed analysis of the various dates from which interest could have started accruing, the Court determined that the Millers were entitled to prejudgment interest on $485,100.64 that began accruing on June 29, 2008, thirty days after the Court’s May 30, 2008, decision regarding coverage. The Court’s calculations reflected that the Millers were entitled to a total of $145,295.39 in prejudgment interest.

I would like to congratulate Anthony Murdock, Esquire, with Halloin & Murdock, S.C. and his legal team in Milwaukee, Wisconsin, for their success in this case. I would also like to thank Mr. Murdock for contacting me and sharing this decision with me. I wish the Millers the best of luck with getting their home back in order and moving on with their lives. I hope to hear from other policyholders’ attorneys regarding favorable bad faith decisions against insurance companies.

Please tune in next week for another bad faith discussion.

[Click here to read the entire series on this case]