The vast majority of all civil actions are compromised by agreement of the parties. Litigants would be wise to improve their bargaining position by all available means. The settlement offer statute, § 807.01, Wis. Stats.,[i] if properly used, can be an extremely effective tool. Its application is fraught with traps for the unwary, however. Improper use of the statute can arguably be the basis for a claim of attorney negligence.
Subsections (l)-(3) contain various cost shifting provisions designed to encourage settlement at the risk of forfeiture of otherwise recoverable costs. These sections were not the subject of much litigation in the past, until the enactment of subsection (4), which has the most teeth.[ii] Prior versions did not provide for prejudgment interest. Subsection 807.01(4) allows prejudgment interest at the annual rate of 12% on the amount recovered from the date of an unaccepted offer until the amount is paid.
Pre-litigation interest can be awarded in most liquidated damage claims, but only at the legal rate of 5%. Pre-litigation interest is not available in unliquidated damage claims such as ordinary personal injury tort litigation, despite frequent attempts by the plaintiffs’ bar to change the common 1aw.[iii] Therefore, because of its universal applicability and relatively high interest rate, section 807.01 should be considered in all cases.
II. TIMING, DURATION, AND FORM
The statute is applicable only to offers that are made after issue has been joined, which means the answer has been filed. Pre-litigation offers do not qualify. Nicholson v. Home Ins. Co.[iv]
The common law rule of contracts that an offer can be withdrawn at any time before acceptance applies under section 807.01. The court in Sonnenburg v. Grohskopf,[v] allowed plaintiffs to withdraw an unaccepted offer less than ten days after it was made.
In order for a claimant to be entitled to the interest in 807.01(4), the amount recovered must be equal to or greater than the amount specified in the offer of settlement. This comparison can often be problematic because of the ambiguity of the phrase “amount recovered.” In American Motorists Ins. Co. v. R & S Meats, Inc.,[vi] the verdict exceeded the offer of settlement, so the offeror was entitled to double costs plus 12% interest on the “amount recovered.” The court held that if the total judgment, including costs, meets or betters the offer of settlement, the offeror is entitled to 12% interest on the sum of the verdict plus costs, but that interest does not run on the double costs portion of the judgment.
The court revised its construction of the term, “amount recovered’ in Northridge Co. v. W.R. Grace & Co.[vii] The plaintiff’s offer of settlement was for an amount that turned out to be greater than the verdict, but less than the judgment, when taxable costs were added to the judgment. The plaintiff claimed that costs should be considered as part of the “amount recovered.” The court denied the claim. The court unequivocally held that the offer and the judgment must be compared exclusive of any costs. Section 807.01 interest is only allowed if the amount recovered in the judgment, exclusive of costs, is equal to or greater than the offer, exclusive of costs.
The court reaffirmed this construction of section 807.01 in Broadhead v. State Farm Mut. Auto. Ins. Co.[viii] Citing American Motorists, the plaintiff claimed that she was entitled to interest and double costs because when costs and post-verdict interest were added to her verdict, the amount recovered exceeded her offer to settle. The court did not agree. It said that for a party to be entitled to 12% interest and double costs under the statute, the offer of settlement must be compared to the judgment, exclusive of any costs. The statute applies only if the judgment exceeds the offer before costs are considered.
Subsection (4) allows for interest on the amount recovered from the date of the offer until it the judgment is paid. The meaning of the term, “amount recovered” was disputed again in Majorowicz v. Allied Mutual Ins. Co.,[ix] where punitive damages were assessed against the defendant and were argued to be not subject to the interest provisions of 807.01(4). The court cited the Nelson v. McLaughlin [x] case, where the amount recovered was interpreted to be that portion of the verdict for which the party is responsible. Since the defendant was responsible for the punitive damages in a bad faith claim by its insured, the punitive damages were included in the amount recovered, and interest could be awarded on such damages. See also Pachowitz v. LeDoux,[xi] (holding that when a defendant is sued under a fee shifting statute, that party is on notice that the plaintiff is seeking not only damages but also reasonable attorney fees, and thus, attorney fees should be included in the judgment when measured against the offer).
Formality in the submission of an offer cannot be over-emphasized.
In Sachsenmaier v. Mittlestadt,[xii] the court held that a letter from plaintiff’s attorney suggesting settlement at an amount expressly authorized by the plaintiff did not qualify as a valid statutory settlement offer. The letter did not mention section 807.01 and was not understood by the parties to be a statutory offer. The court said that the statute can only be applied “if the offer of settlement states on its face that it is made pursuant to sec. 807.01.”[xiii] The court left open the question whether an offer that is understood by the parties to be premised on § 807.01,but that does not specifically identify the statute, is effective.[xiv]
Bauer v. Piper Industries, Inc.,[xv] involved an offer on a legal form with the case caption, stating that the plaintiff offered to settle for a certain amount with costs included. The offer made no reference to section 807.01. The court of appeals affirmed the trial court in holding that the offer was valid and that the plaintiff was entitled to double costs and interest upon obtaining a verdict in excess of the offer. Bauer answered the question that had been left open in Sachsenmaier.[xvi] The parties understood the offer to be a § 807.01 offer even though it was not so designated on its face. The court encouraged the inclusion of a statutory reference in the offer.
Upthegrove v. Lumbermans Mut. Ins. Co.,[xvii] involved an offer that identified itself as a section 807.01 offer of settlement, but also contained the phrase: “If acceptance is not received by the plaintiff within the statutory period, the offer is deemed withdrawn.” The offer was ignored by the defendant and was exceeded by the verdict. The trial court awarded interest and double costs. The defendant argued on appeal that language of the offer was inconsistent with the statute and therefore void. The court of appeals rejected this argument and affirmed. The court did not have to decide the question whether an offer can be effective if its language is inconsistent with the statute.
It is imperative that any statutory settlement offer be served on counsel after the answer has been filed and in a conspicuous manner that clearly identifies the offer as section 807.01 offer. Use of the case caption and filing with the court is recommended. The terms must be consistent with the statute. Specification of a certain amount, with costs, is proper.
In Stahl v. Sentry Insurance,[xviii] the plaintiff sought double costs on a judgment that was more favorable than his offer for settlement. Although in the offer he had stated that he would “settle for $100,000, pursuant to Section 807.01(3),Wisconsin Statutes,”[xix] he was denied the benefits of the statute because his offer of settlement did not include the phrase “with costs,” thus leaving the defendant unable to make a full and fair evaluation of the offer. The court reasoned that the defendant should not have to speculate whether costs were included in the offer. The court pointed out that 807.01(3) provides that the term, “with costs” must be included in the offer. Any surplus language, conditions or contingencies run the risk of invalidating the offer.
807.01 imposes time constraints for both the offeror and offeree. The offeror must submit the offer of settlement at least 20 days before the trial. If the offeree wishes to accept the offer, a written notice of acceptance must be served within 10 days of the offer. Any conditions set by either party that conflict with the time constraints of the statute will invalidate the offer. In DeWitt, Ross & Stevens, S.C. v. Galaxy Gaming,[xx] the plaintiff submitted an offer of settlement with an extra condition that payment from the defendant must be received within 15 days of the offer. The defendant argued that the settlement offer was invalid under 807.01 because it included this payment deadline. The court of appeals noted that “the purpose of 807.01 is to encourage settlement and accordingly, secure just, speedy and inexpensive determinations of disputes.” The court explained that an offer is not effective under 807.01 if it imposes an unreasonable condition that conflicts with the time constraints of the statute; but that a deadline for making payment is just one factor in determining whether an offer is unreasonable. The court rejected the defendant’s argument that a settlement offer containing a payment deadline is per se invalid.
III. JOINT OFFERS BY MULTIPLE PLAINTIFFS
A single offer by multiple plaintiffs is guaranteed to be ineffective. In White v. General Cas. Co. of Wis.,[xxi] an injured plaintiff, spouse and children submitted a joint offer of settlement. It was not accepted. The verdict exceeded the offer. The trial court and court of appeals refused to apply the prejudgment interest and double costs provisions of section 807.01, because the plaintiffs’ offer was joint. The court declared that the purpose of the statute is to encourage settlement of cases prior to trial.[xxii] The court held that an offer by each individual plaintiff is required so that the defendant can evaluate the offer on its merits, without being forced to make a group settlement offer which might exceed the amount due any particular plaintiff.
In DeMars v. LaPour,[xxiii] an injured plaintiff, his spouse and worker’s compensation carrier submitted a joint offer that was rejected. After a higher verdict was obtained, the trial court denied the plaintiff’s request for double costs and interest. The supreme court accepted a petition to bypass the court of appeals and affirmed.
The supreme court said that the language of the statute requires separate offers from individual plaintiffs. The court held that the defendants must be given an opportunity to evaluate each plaintiff’s offer individually. Joint offers by multiple plaintiffs make the task of the defendant more difficult and could exert an unreasonable pressure on the defendants to settle. The risk of double costs and prejudgment interest should be a risk assumed only on the basis of a decision to refuse to accept an individual offer.
These holdings have been followed in subsequent cases, so that the question is no longer subject to dispute.[xxiv]Separate offers by each plaintiff are mandatory. The rule applies to all principal and derivative claims. Every settlement offer should identify specifically the party and the claim that is the subject of the offer.
IV. OFFERS TO MULTIPLE PLAINTIFFS
It is doubtful that the offer of settlement statute, §807.01, can be used effectively with a lump sum offer to multiple plaintiffs jointly. The rationale of DeMars and White suggests that a single offer to multiple plaintiffs would be void because it would deprive them of the opportunity to evaluate their claims individually.
The disposition of subrogation claims absolutely must be described in an offer of settlement, and it does not matter whether the subrogated party is named as a plaintiff or a defendant. In Staehler v. Beuthin,[xxv] the court applied the double cost-shifting provisions of section 807.01 in favor of a defendant, whose offer to a plaintiff and her subrogated insurer, also a plaintiff, was not exceeded by a verdict in plaintiff’s favor. The plaintiff argued that the offer was ambiguous, because it contained only one offer to the plaintiff and subrogated insurer, with the condition that the plaintiff indemnify or otherwise satisfy any existing related subrogation claims. The court upheld the validity of the offer because the plaintiff had the means to calculate what portion of the offer would go to herself and the subrogated insurer.
V. JOINT OFFERS BY MULTIPLE DEFENDANTS
The proper form of an offer by or to multiple defendants depends upon the theory of liability. The court of appeals distinguishes between defendants who are alleged to be jointly and severally liable to the plaintiff, and defendants who are only severally liable.
In Denil v. Integrity Mut. Ins. Co.,[xxvi] defendants who were alleged to be jointly and severally liable to the plaintiff submitted a joint offer. The plaintiff recovered a verdict that was less than the offer of settlement. The trial court awarded costs to the defendants. The court of appeals affirmed. The court distinguished the rationale of the White and DeMars cases and approved the offers. Under circumstances where there are multiple defendants, jointly and severally liable to the plaintiff, the court held that a joint offer can validly be made to an individual plaintiff. A plaintiff should only be concerned with the value of the claim without regard to the source of the settlement proceeds.
The court stressed that defendants who are severally but not jointly liable should not be entitled to the cost shifting features of section 807.01 by submission of a joint settlement offer. Defendants who are severally liable are required to submit separate offers so that the plaintiff can evaluate independently his claims against each.
VI. OFFERS TO MULTIPLE DEFENDANTS
Offers to multiple defendants seem to be governed by the same rules as offers by multiple defendants. The issue arose in Smith v. Keller.[xxvii] The defendant struck the plaintiff in the face in response to derogatory statements that the plaintiff had made about the defendant’s wife. The suit against the perpetrator was for battery and negligence, and included the defendant’s wife and the homeowner’s insurer on the negligence claim. The plaintiff’s offer to the multiple defendants was ignored. The verdict on the negligence theory exceeded the offer. The trial court awarded double costs and interest. The court of appeals reversed. The court held that the offer was invalid because it was an offer to multiple defendants who were not jointly, but rather severally liable. The court concluded that in order to trigger the sanctions of the statute, an offer involving claims against multiple defendants on multiple theories that include several but not joint liability must be drafted separately for each defendant.
Claims against an insured tortfeasor and insurer can require a contribution from the insured, if properly worded. Knoche v. Wisconsin Mut. Ins. Co.,[xxviii] involved a suit against an insured tortfeasor and his liability insurer for personal injuries. Before trial the insured filed a bankruptcy petition. There were some assets in the bankruptcy estate available to the plaintiff. The plaintiff submitted an offer to the insured and his insurer, requiring each to pay separate amounts, and offering to dismiss the action against both if the entirety was paid. Both defendants declined to settle. The plaintiff obtained a favorable verdict. The trial court awarded double costs and interest. The insurer argued on appeal that the offer was invalid because it could not have been accepted by the insurer alone, and was contingent upon acceptance by the bankrupt insured to the extent of the assets available in the estate. The court of appeals disagreed, and approved the offers. The court held that the contingency of the offer did not make it invalid. The court commented that if the insurer had offered to pay its share, the insurer would not have been liable for double costs and interest even if the insured had refused the offer to him.
A similar ruling was made in Blank v. USAA Property & Casualty Insurance Co.,[xxix] The plaintiff sustained catastrophic injuries due to the negligence of an intoxicated motorist, who was covered by only $100,000 of liability insurance. The plaintiff offered to settle for the insurer’s policy limit without releasing the insured defendant from liability. The insurer rejected the offer, believing that an acceptance would subject the company to a bad faith claim from the insured. After a multi-million dollar judgment was awarded to the plaintiff, the court awarded 12% interest to be paid by the insurer only on the $100,000 policy limit, rather than the full amount of the judgment. The court construed the “amount recovered” language in section 807.01 to mean the amount recovered from the individual defendant who improvidently refused the offer. The court ruled that although the offer was valid, the insurer was not liable for interest on the entire judgment, since its policy only required it to pay interest on any award up to its policy limits.
The Wisconsin Supreme Court clarified this issue further in Nelson v. McLaughlin.[xxx] The court held that upon rejecting a valid offer within the policy limits, that is exceeded by a judgment against the insured, a liability insurer is only required to pay section 807.01 interest on that portion of the judgment that equals its policy limit. While recognizing that some policies might require that the insurer pay for interest on the portion of a judgment that exceeds the policy limits, the court ruled that the instant policy unambiguously restricted the insurer’s obligation to pay interest on an amount not in excess of the limits. The court reasoned that the term, “amount recovered” must be construed to mean the amount for which an offeree is liable, rather than the full amount of the verdict or judgment. To hold otherwise would expose insurers to a risk that they did not contemplate or undertake in their contract.
In Wilber v. Fuchs,[xxxi] the plaintiff submitted a single offer of settlement directed to all defendants. Some were allegedly jointly and severally liable, and others only severally liable. Compensatory damages were sought against all, but punitive damages were sought against only a few. The offer was extended to each defendant individually, purporting to settle the entire case if any defendants settled, and to allow any such defendant full contribution rights against non-settling defendants. The verdict exceeded the amount of the settlement offer. The trial court denied the plaintiff’s request for double costs and interest. The court of appeals affirmed. The critical flaw in the offer was that it was addressed to multiple defendants on multiple claims, not all of which were joint and several. The court distinguished Denil on the grounds that some claims were against the defendants severally and this deprived them of a fair opportunity to evaluate fully their potential individual liability to the plaintiff.
In order to satisfy the requirements of section 807.01, the offer must reasonably enable the offeree to ascertain the amount of the offer. In Cue v. Carthage College,[xxxii] the plaintiff sued his school, two football coaches, and the insurer of the school, whose policy covered all the defendants. The plaintiff submitted two separate offers to settle, each for $100,000. One offer was sent to the insurer and one offer was sent to the insured defendants, jointly. There was never any response. When the court awarded the plaintiff a more favorable judgment, he moved for the double costs and prejudgment interest. The court denied his claim. The offers were deemed to be invalid on the premise that the defendants could not reasonably have evaluated whether the plaintiff had been willing to settle for $100,000 or $200,000.
The plaintiff’s argument was based on Testa v. Farmers Ins. Exchange,[xxxiii] where a single offer was made to all defendants and their insurer, whose limits were adequate to cover the offer. In that case, the offer was deemed valid because the offer was clear as to its amount and the insurer had the right and ability to settle for everyone. The plaintiff in Cue argued that since the insurer covered all the defendants in the case, it had the right to settle for everyone. The court ruled, however, that the offer was invalid because the insurer was only named on one offer and thus could not have been expected to understand whether the amount of the offer was for $100,000 or $200,000. But see Pachowitz v. LeDoux,[xxxiv] (where the defendant-insurer and its defendant-insured disputed coverage for the plaintiff’s claims, thereby invalidating the plaintiff’s single offer of settlement to multiple defendants).
The responsibility of a party to clarify an ambiguous offer was recognized in Prosser v. Leuck.[xxxv] The supreme court liberalized somewhat its attitude toward offers of settlement that are not crystal clear. The offer was sent from the plaintiff to the liability insurer for a sum certain, plus costs. There was no offer to the insured. The offer stated that if accepted, the plaintiff would dismiss any liability of the defendant insurer. The offer was not accepted. When the verdict against both defendants exceeded the offer, the plaintiff sought pre-verdict interest and double costs. The court of appeals denied the claim. It perceived that the individual defendants had been unable to evaluate their separate exposure. It bought the insurer’s argument that the offer was ineffectual, because it was ambiguous, in that it was addressed only to the insurer, without specifying whether claims against the insured would also be released upon acceptance of the offer. Ignoring prior case law that had cruelly penalized sloppy draftsmanship of offers, the Wisconsin Supreme Court did an about-face, reversed the court of appeals, and upheld the validity of the offer. The Supreme Court shifted the burden to the offeree to request clarification if the offeree is unsure about the intent of the offer. This anomalous result is predicated on the unique relationship between an insurer and its insured. The court took great pains to stress that part of any liability insurer’s duty to its insured is the responsibility to investigate the opportunity for settlement. That responsibility includes taking affirmative steps to seek clarification of what might seem to be an ambiguous offer to settle from the plaintiff.
In Ritt v. Dental Care Associates,[xxxvi] the rights of a subrogated party were discussed as they apply to offers of settlement. The plaintiff sued multiple defendants who were jointly and severally liable. He also named as a defendant a government agency that had paid his medical expenses, and was subrogated against the other defendants. He submitted a settlement offer addressed to all defendants. Despite recovering an amount at trial that exceeded the offer, the court held that the offer was invalid, and that he was not entitled to interest under section 807.01. The offer was ineffective because it failed to indicate whether the subrogation claim would be satisfied out of the settlement proceeds, or whether the other defendants would still be exposed to the claim.
VII. EFFECT OF OTHER RULES ALLOWING FOR INTEREST
Common law or statutory rules allowing for the recovery of prejudgment interest occasionally affect section 807.01. Examples include statutes allowing for interest at the legal rate under section 138.04 on liquidated debts,[xxxvii] interest in consumer credit transactions,[xxxviii] interest on overdue insurance claims,[xxxix] and interest on overdue worker’s compensation awards.[xl] Finally, the statutes involving interest on verdicts,[xli] and interest on judgments,[xlii] must be considered.
Upthegrove v. Lumbermans Ins. Co.,[xliii] discusses the application of the overdue insurance claims statute,[xliv] in addition to interest under the settlement offer statute.[xlv] In Upthegrove, the plaintiff owned a hardware store that burned to the ground. He sent his proof of loss to the defendant insurer with a demand for payment, under section 628.46, Stats., which was refused. He then filed suit. After issue was joined but more than 20 days before the trial, he submitted a section 807.01 offer to settle which was not accepted. The verdict for compensatory and punitive damages exceeded the offer. Following motions after verdict, appeal, remand, new orders by the trial court, and a second appeal, the plaintiff was allowed to recover essentially three elements: (1)interest on the original claim from 30 days after the date of the pre-litigation section 628.46 demand to the date of the section 807.01 offer; (2) interest on the damages awarded at 12% between the date of the section 807.01(4) offer and the date of payment; and (3)the full verdict plus double costs under section 807.01(3). The court did not allow the plaintiff to recover compound interest. The court held that interest under section 628.46 terminates when interest under section 807.01(4) begins.
Erickson by Wightman v. Gundersen,[xlvi] involved the question whether to “stack” the statutory, prejudgment, 12% interest under section 807.01 on top of the 5% legal rate of prejudgment interest on liquidated claims, under Wis. Stats. section 138.04. The court ruled that since neither common law, prejudgment interest nor statutory section 807.01(4) interest is punitive in nature, they may not be applied together. Therefore, the 5% rate applies on liquidated claims until the date of a valid, unaccepted statutory offer, and only the 12% rate applies for the time period from the date of the offer of settlement until the judgment is paid.
Interest under section 807.01(4) always terminates when interest on the verdict begins.[xlvii] Interest on a judgment will include the damages awarded, plus, pre-litigation interest, if applicable, and interest under sections 807.01(4) and 814.04(4).[xlviii] Interest under section 807.01(4) is not an item of costs.[xlix] If the total judgment, excluding costs, meets or exceeds the offer of settlement, 12% interest runs on the amount of the judgment, but interest does not run on the double costs portion of the judgment.[l] To determine whether section 807.01 interest and double costs provisions apply, the court will compare the amount of the offer of settlement to the amount of the judgment, with both exclusive of costs.[li]
Interest under section 807.01 is available on punitive damages, if awarded.[lii]
Depending on the language in its policy, an insurer that improvidently refuses to accept a valid offer at or below the policy limits may be responsible for interest under section 807.01(4) on the full amount of the judgment against the insured, even when the judgment exceeds the policy limits. In most cases, however, the policy provides that the insurer will only pay interest taxed against its insured up to the amount of the policy limits. Such a clause will be upheld to limit the insurer’s interest exposure to interest on the policy limits, rather than interest on the amount recovered against the insured.[liii]
VIII. APPLICABILITY IN FEDERAL COURT
Section 807.01 probably does not apply in a federal question case under 28 U.S.C. 1331.The question has arisen, however, whether the statute applies in a federal diversity case under 28 U.S.C. 1332.
Under traditional federal diversity methodology,[liv] a federal court sitting in a diversity case will apply the state substantive law and federal procedural law. If there is a Federal Rule of Civil Procedure sufficiently broad in scope to cover the question, then state procedural rules are ignored.[lv]
Two federal district court decisions held that section 807.01 does not apply in a federal diversity case, because the statute is a rule of state procedure and not substantive law.[lvi]
In Datapoint Corp. v. M & I Bank of Hilldale,[lvii] the United States District Court for the Western District of Wisconsin disagreed with these cases and held that Section 807.01 does apply in a federal diversity case. The court said that in all diversity cases the outcome should be the same in federal as in state court. Moreover, there is no Federal Rule of Civil Procedure sufficiently broad in scope to cover the same circumstances as section 807.01. Federal Rule 68, which applies only to offers of judgment by a defendant, does not address the situation where the plaintiff makes a settlement offer and seeks interest on any unaccepted offer which is exceeded at trial.
The Seventh Circuit Court of Appeals applied Section 807.01 in a diversity case in Healy Co. v. Milwaukee Metropolitan Sewage District.[lviii] The court said that when there is no direct conflict between the state procedural statute regarding the plaintiff’s settlement demands and any federal procedural law, the state’s statute applies. Fed. R. Civ. P. Rule 68 does not create a conflict, since it only applies to offers made by a defendant to a plaintiff, and there is no federal rule comparable to or in conflict with Section 807.01.
In Duello v. Board of Regents of the University of Wisconsin,[lix] the court held that 807.01(1) is procedural in nature and that it is appropriate for Wisconsin courts to apply the statute to federal claims brought in state court, unless its application would defeat a substantive federal right.
IX. WHAT CONSTITUTES A “JUDGMENT”?
807.01 is expressly made applicable when a party recovers a “judgment” greater than or equal to the offer of settlement. What constitutes a “judgment” under the statute is sometimes debatable. In Prosser v. Leuck,[lx] an offer of settlement was submitted to the defendant and was not accepted. Some time later, after further discovery, the parties entered into a stipulated judgment for more than the previous offer of settlement. The court held that such stipulated judgment sufficed as a “judgment” under 807.01, and awarded 12% interest and double costs to the plaintiff.
There were similar facts in Osman v. Phipps.[lxi] Osman submitted an offer of settlement for the defendant-insurer’s policy limits of $25,000. The insurer refused at first, but after discovery and mediation (and well after the 10 day time limit), the insurer agreed to tender its limits to the circuit court. Osman’s counsel requested the limits be deposited into his trust account, and the court issued an order providing that if the insurer failed to timely pay the $25,000, judgment in that amount would be entered against it. The insurer paid the limits and judgment was never entered. Osman then sought 12% interest and double costs under 807.01. The court denied Osman’s claim and held that no judgment had been entered within the meaning of the statute; only an order providing that judgment would be entered if the insurer did not pay the limits.
This issue was again revisited in Tomsen v. Secura.[lxii] In that case, the injured motorist submitted an offer to the insurer, which was not accepted. Thereafter, the insurer made an offer to the motorist greater than the motorist’s previous offer. The motorist accepted the offer, entered into a stipulated judgment for the offered amount, and then sought 12% interest and double costs. The insurer defended this claim by citing Osman, while the motorist relied on Prosser. The court distinguished Osman by pointing out that there was no judgment in that case, rather an order requiring the insurer to pay. The court held that Prosser was controlling under these facts because here, as in that case, the parties reached a stipulated judgment greater than the motorist’s earlier offer. The court rejected the insurer’s argument that a judgment on the merits must involve litigation and submission to the court and result in a verdict.
807.01 does not apply to arbitration awards. See Lane v. Williams,[lxiii] (holding that 807.01 expressly applies in anticipation of a “trial,” not arbitration).
X. CONCLUSION
Statutory settlement offers can be used in almost every case to force the adverse party to evaluate the claim early, and bear the economic consequences of an erroneous decision not to settle. The benefit to the plaintiff of using the statute wisely is pre-judgment interest at the rate of 12% on the amount recovered, retroactive to the date of the offer, plus double the amount of taxable costs. This is often a windfall to the plaintiff. The penalty to the plaintiff for not submitting an appropriate offer, or not accepting the defendant’s offer, is the loss of interest and shifting of costs. This is often a foregone opportunity to overcome the loss of use of money due and owing. The potency of this statute makes a thorough understanding of its procedural technicalities essential for litigation attorneys.
FOOTNOTES
[i] (l) After issue is joined but at least 20 days before the trial, the defendant may serve upon the plaintiff a written offer to allow judgment to be taken against the defendant for the sum, or property, or to the effect therein specified, with costs. If the plaintiff accepts the offer and serves notice thereof in writing, before trial and within10 days after receipt of the offer, the plaintiff may file the offer, ‘with proof of service of the notice of acceptance, and the clerk must thereupon enter judgment accordingly. If notice of acceptance is not given, the offer cannot be given as evidence nor mentioned on the trial. If the offer of judgment is not accepted and the plaintiff fails to recover a more favorable judgment, the plaintiff shall not recover costs but defendant shall recover costs to be computed on the demand of the complaint.
(2) After issue is joined but at least 20 days before trial, the defendant may serve upon the plaintiff a written offer that if the defendant fails in the defense the damages be assessed at a specified sum. If the plaintiff accepts the offer and serves notice thereof in writing before trial and within 10 days after receipt of the offer and prevails upon the trial, either party may file proof of service of the offer and acceptance and the damages will be assessed accordingly. If notice of acceptance is not given, the offer cannot be given as evidence nor mentioned on the trial. If the offer is not accepted and if damages assessed in favor of the plaintiff do not exceed the damages offered, neither party shall recover costs.
(3) After issue is joined but at least 20 days before trial, the plaintiff may serve upon the defendant a written offer of settlement for the sum, or property, or to the effect therein specified, with costs. If the defendant accepts the offer and serves notice thereof in writing, before trial and within 10 days after receipt of the offer, the defendant may file the offer, with proof of service of the notice of acceptance, with the clerk of court. If notice of acceptance is not given, the offer cannot be given as evidence nor mentioned on the trial. If the offer of settlement is not accepted and the plaintiff recovers a more favorable judgment, the plaintiff shall recover double the amount of the taxable costs.
(4) If there is an offer of settlement by a party under this section which is not accepted and the party recovers a judgment which is greater than or equal to the amount specified in the offer of settlement, the party is entitled to interest at the annual rate of 12% on the amount recovered from the date of the offer of settlement until the amount is paid. Interest under this section is in lieu of interest computed under ss. 814.04(4)and 815.05(8).
(5) Subsections (1) to (4) apply to offers which may be made by any party to any other party who demands a judgment or setoff against the offering party.
[ii] Laws 1979, Ch. 271, eff. May 11, 1980.[iii] Johnson v. Pearson Agri-Systems, Inc., 119 Wis.2d 766, 350 N.W.127 (1984); Nelson v. Travelers Ins. Co., 102 Wis.2d 159, 306 N.W. 2d 71 (1971); Laycock v. Parker,103 Wis. 161, 79 N.W. 327 (1899).
[iv] 137 Wis.2d 581, 405 N.W. 2d 327 (1987).
[v] 144 Wis.2d 62, 422 N.W.2d 925 (Ct. App. 1988).
[vi] 190 Wis.2d 196, 526 N.W.2d 791 (Ct. App. 1994).
[vii] 205 Wis. 2d 267, 556 N.W.2d 345 (Ct. App. 1996).
[viii] 217 Wis. 2d 231, 579 N.W.2d 761 (Ct. App. 1998).
[ix] 212 Wis.2d 513, 569 N.W.2d 472 (Ct. App. 1997).
[x] 211 Wis. 2d 487, 565 N.W.2d 123 (1997).
[xi] 666 N.W.2d 88 (Ct. App. 2003)
[xii] 145 Wis.2d 781, 429 N.W. 2d 532 (Ct. App. 1988).
[xiii] Id. at 790, 429 N.W. 2d at 535
[xiv] Id. at 792, 429 N.W. 2d at 537.
[xv] 154 Wis.2d 758, 454 N.W. 2d 28 (Ct. App. 1990).
[xvi] 145 Wis.2d 781, 429 N.W. 2d 532 (Ct. App. 1988).
[xvii] 146 Wis.2d 470, 431 N.W 2d 689 (Ct. App. 1988); appeal after remand, 152Wis.2d 7, 447 N.W. 2d 367 (Ct.App.1989).
[xviii] 180 Wis. 2d 299, 509 N.W.2d 320 (Ct. App. 1993).
[xix] Id. at 323, 509 N.W.2d 320
[xx] 670 N.W.2d 74 (Ct. App. 2003)
[xxi] 118 Wis.2d 433, 348 N.W. 2d 614 (Ct. App. 1984).
[xxii] Id. at 438, 348 N.W. 2d at 617
[xxiii] 123 Wis.2d 366, 366 N.W. 2d 891 (1985).
[xxiv] Ritt v. Dental Care Associates., S.C., 199 Wis.2d 48, 543 N.W.2d 852 (Ct. App. 1995); Gonzales v. City of Franklin, 128 Wis.2d 485, 383 N.W. 2d 907 (Ct. App.1986), aff’d, 137 Wis.2d 109, 403 N.W.2d 747 (1987); Schwochert v. American Family Mut. Ins. Co., 139 Wis.2d 335, 407 N.W. 2d 525 (1987); Peissig v. Wisconsin Gas Co., 155 Wis.2d 686, 456 N.W. 2d 348 (Ct. App. 1990).
[xxv] 206 Wis.2d 609, 557 N.W.2d 487 (Ct. App. 1996).
[xxvi] 135 Wis.2d 373, 401 N.W. 2d 13 (Ct. App. 1986).
[xxvii] 151 Wis.2d 264, 444 N.W. 2d 396 (Ct. App. 1989).
[xxviii] 151 Wis.2d 754, 445 N.W. 2d 740 (Ct. App. 1989).
[xxix] 200 Wis.2d 280, 546 N.W.2d 512 (Ct. App. 1996).
[xxx] 211 Wis.2d 487, 565 N.W.2d 123 (1997)
[xxxi] 158 Wis.2d 158, 461 N.W. 2d 803 (Ct. App. 1990)
[xxxii] 179 Wis. 2d 175, 507 N.W.2d 109 (Ct. App. 1993).
[xxxiii] 164 Wis.2d 296, 474 N.W.2d 776 (1991)
[xxxiv] 666 N.W.2d 88 (Ct. App. 2003)
[xxxv] 225 Wis. 2d 126, 592 N.W.2d 178 (1999)
[xxxvi] 199 Wis. 2d 48, 543 N.W.2d 852 (Ct. App. 1995)
[xxxvii] See Olquin v. Allstate Ins. Co., 71 Wis.2d 160, 237 N.W. 2d 694 (1976); State ex rel. Schilling & Klingler v. Baird, 65 Wis.2d 394, 222 N.W.2d 666(1974); Laycock v. Parker, 103 Wis. 161, 79 N.W. 327 (1899).
[xxxviii] Wis. Stats. Sec. 422.01
[xxxix] Wis. Stats. Sec. 628.46
[xl] Wis. Stats. Sec. 102.22
[xli] Wis. Stats. Sec. 814.04(4)
[xlii] Wis. Stats. Sec. 815.05
[xliii] 152 Wis.2d 7, 447 N.W. 2d 367 (Ct. App. 1989).
[xliv] Wis. Stats. Sec. 628.46 (1997-98). This statute provides for 12% annual interest on certain unpaid insurance claims beginning 30 days after notice and proof of loss.
[xlv] Wis. Stats. Sec. 807.01
[xlvi] 183 Wis.2d 106, 515 N.W.2d 293 (Ct. App. 1994).
[xlvii] Wis. Stats. Sec. 814.04(4) (1997-98); Wis. Stats. Section 807.01(4)
[xlviii] Wis. Stats. Section 815.05(8)
[xlix] Knoche v. Wisconsin Mut. Ins. Co., 151 Wis.2d 754, 761, 445 N.W. 2d 740,744 (Ct. App. 1989).
[l] American Motorists Ins. Co. v. R & S. Meats, Inc., 190 Wis.2d 197, 526N.W.2d 791 (Ct. App. 1994).
[li] Northridge Co. v. W.R. Grace & Co., 205 Wis.2d 265, 556 N.W.2d 345 (Ct. App. 1996).
[lii] Majorowicz v. Allied Mut. Ins. Co., 212 Wis.2d 513, 569 N.W.2d 472 (Ct. App.1997).
[liii] Compare Nelson v. McLaughlin, 211 Wis.2d 487, 565 N.W.2d 123 (1997) and Blank v. USAA Property Cas. Ins. Co., 200 Wis.2d 270, 546 N.W.2d 512 (Ct. App. 1996) with McPhee v. American Motorists Ins. Co., 57 Wis.2d 669, 205 N.W.2d 152(1973).
[liv] Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938).
[lv] Walker v. Armco Steel Corp., 446 U.S. 740 (1980).
[lvi] Hutchison v. Burning Hills Steel Co., Inc., 559 F. Supp. 553 (E.D. Wis.1983) and Klawes v. Firestone Tire & Rubber Co., 572 F. Supp. 116, 119 (E.D.Wis. 1983).
[lvii] 665 F. Supp. 722 (W.D. Wis. 1987).
[lviii] 60 F.3d 305 (7th Cir. 1995), cert. denied, 516 U.S. 1010 (1995).
[lix] 220 Wis. 2d 554, 583 N.W.2d 863 (Ct. App. 1998)
[lx] 225 Wis. 2d 178, 592 N.W.2d 178 (1999)
[lxi] 256 Wis. 2d 589, 649 N.W.2d 700 (Ct. App. 2002)
[lxii] 668 N.W.2d 794 (Ct. App. 2003)
[lxiii] 240 Wis. 2d 255, 621 N.W.2d 922 (Ct. App. 2000)