Court of Appeals Affirms Insurer’s Payment of Remaining Limits to Court Before Settlement
Author: Rich Orton
The Wisconsin Court of Appeals recently held that an insurer’s payment of its remaining policy limits to the circuit court and subsequent dismissal before a full settlement was reached with two remaining plaintiffs was not in violation of Wisconsin law. Lovelien v. Austin Mutual Ins. Co., No. 2016AP1679 (Wis. Ct. App. Dec. 27, 2017).
Plaintiffs in a personal injury action appealed the dismissal of Austin Mutual Ins. Co. and other claimants from the same action after Austin Mutual settled with some of the claimants and forwarded its remaining policy limits to the circuit court for allocation between the remaining plaintiffs. The remaining plaintiffs argued that Austin Mutual's payment of the remaining policy limit after the partial settlement violated Wisconsin's direct action statute, Wis. Stat. § 632.24 because the funds were not distributed on a pro rata basis according to the damages each claimant sustained. ¶ 1.
The Court of Appeals disagreed, noting that nothing in the language of the statute mandates a “pro rata" distribution when the policy limits are insufficient to satisfy all claimants. ¶ 16. Instead, the statute only mentions the insurer's policy limit, noting that the insurer may be liable "up to the amounts stated in the bond or policy." ¶ 16. Nor did any Wisconsin case law support this interpretation. ¶ 21-23.
Appealing to policy in support of their argument, the plaintiffs claimed that “the only way to harmonize the injured persons' statutory rights to recover damages directly against the insurer, while at the same time limiting the insurer's obligation to the amount of its policy limits, is to require that the insurer pay each injured person their pro rata share of the policy limits based on the damages each person sustained." ¶ 20. The Court of Appeals dismissed this argument as inconsistent with the rights of insurers and claimants to settle. ¶ 20. "Insurers would be forced to try every case in order to determine each claimant's damages, or risk liability greater than the policy limits.” ¶ 20.