Insured Wisconsin property owners have an opportunity to collect interest on their insurance claim. Interest is important because pursuing a disputed insurance claim comes with the cost of not having money properly in the hands of insured property owners.
The purpose of Wisconsin’s interest statute applied to insurance claims is found in its name: “Timely Payment of Claims”. This statute is found in Section 628 of the Wisconsin statutes. https://docs.legis.wisconsin.gov/statutes/statutes/628/iii/46. The point is to penalize insurers who fail to pay within a certain timeframe. The point is not to assess interest on all claims, especially claims where reasonable people can agree to disagree on the amount owed. The point is that when there is clarity on the amount to be paid interest should begin to run.
Interest Calculation
Best practice to trigger interest is for Wisconsin property owners to send the insurer a proof of loss. I think it is best practice because the property owner is complying with a policy requirement. Yet a proof of loss is not required under the interest statute. Rather, a property owner may instead supply “equivalent evidence”. What is “equivalent evidence”? I would say it is the same amount of information as would be supplied with a proof of loss. I think that includes a line-item estimate. I do not think state law would require Xactimate style printouts, but it would require enough detail per trade so the insurer understands the scope of repair. A contractor experienced with insurance claims will know of Xactimate, or equivalent software, and can generate an appropriate estimate.
With a valid proof of loss, interest can begin if payment is not received in 30 days. Payment by the insurance company is overdue if not paid within 30 days of written notice of the damage. When a property owner gives notice of hail, wind, fire, or any kind of insured claim, and sends along an estimate for the cost of repair, the insurer has 30 days to issue payment. The interest rate is 7.5% percent.
Property owners will often search for the first written acknowledgment of the claim from the insurance company is the date that triggers interest. This is not how interest operates in Wisconsin. The date that triggers interest is something in writing from the property owner or its agent (contractor, public adjuster, etc.).
Insurer Defenses
Insurers that have a legitimate defense to an insurance claim do not need to pay interest under Wis. Stat. Sec. 628.46. What is legitimate is unstated in the statute, but certainly one defense is that the property owner has significantly over valued the claim. Another scenario might be the argument that a different insurance policy is the primary layer of insurance, thus the insurer for a secondary coverage can wait to pay until after the association’s insurer has adjusted the claim. One example of this could be when a townhome unit owner’s insurer wants to wait to pay until an association’s insurer issues an adjustment. That could be a reason to avoid interest on the unit owner’s policy if the association’s policy is the primary layer of insurance.
The statute also allows an insurer to avoid interest in the scenario it is unable to determine what person is to receive the insurer’s payment. For example, if an insured has died or is incarcerated, the insurer may argue there was a necessary delay in determining where to send the check.
There are other scenarios where an insurer can avoid paying interest. Interest does not accrue where there is a settlement of the claim, or the insurer can show some other legitimate reason for a delay. E-mail me if you have questions about interest on your insurance claim at ed@beckmannlawfirm.com