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Kontowicz v. American Standard Insurance Co. of Wisconsin1/19/2005
rties will be covered under the policy and the insurer has set premiums and issued coverage accordingly.
. Courts have also extended protections to third-party claimants in worker 's compensation cases. The rationale behind the worker 's compensation system is that workers accept smaller recoveries in return for coverage regardless of fault; by contrast, a third-party tort victim "is not the object of a sweeping statutory scheme designed to promote the compensation of injuries in a routine, largely non-adversarial manner." See Kranzush, 103 Wis. 2d at 65. The legislature's extension of the Wis. Stat. § 628.46 interest penalty to third-party worker's compensation claimants is consistent with the special relationship created between claimant and insurer under the worker's compensation statutes.
. The legislature's elimination of the bodily injury or personal injury claimant from eligibility under Wis. Stat. § 646.31(2)(d) in 1999 is noteworthy for its timing. In the case of Leister v. General Casualty Insurance Co., Dane County Circuit Court Case No. 98-CV-3182, a circuit court took up the issue for the first time. Calling Leister's request for Wis. Stat. § 628.46 interest a "novel claim," the circuit court ruled that the statute allowed third-party claimants such as Leister to claim the interest. Leister, No. 98-CV-3182 (Memorandum Decision and Order on Motion to Dismiss, at 1). Shortly thereafter, another circuit court issued a similar ruling in Coker v. American Family Mutual Insurance Co., Dane County Circuit Court Case No. 99-CV-2949 (Decision and Order). Just as this novel issue was emerging in the trial courts, the legislature acted to eliminate the personal injury and bodily injury language from the statute.
. Finally, Kontowicz and Buyatt argue that we should adopt their interpretation of Wis. Stat. § 628.46 on public policy grounds. They point out that it is a fundamental public policy of this state to encourage the settlement of insurance claims, see Bersch v. VanKleeck, 112 Wis. 2d 594, 598, 334 N.W.2d 114 (1983), and that § 628.46 is the "statutory embodiment" of the policy against dilatory tactics by insurers.
. The practical effect of this interpretation, however, is to create a conflict of interest for the insurer. As previously established, the insurer owes a duty of good faith and fair dealing to its insured. The policyholder pays premiums as consideration for not only coverage, but also the insurer's duty to defend. See Elliott v. Donahue, 169 Wis. 2d 310, 321, 485 N.W.2d 403 (1992) ("Indemnification and defense for claims falling within the parameters of the insurance policy are the two primary benefits received by the insured from a contract of insurance. The nature of the insurance contract ... contemplate that indemnification and defense is provided to the insured in exchange for the insured's premium payments."). Were we to interpret Wis. Stat. § 628.46 to include third-party tort actions, we would undermine the purpose of the insurance contract and the duties of the insurer. We conclude that our legislature did not intend to compromise the insurer's duty to its insured in such a manner. See Jennings, 259 Wis. 2d 523, (we will reject an interpretation that would lead to an absurd or unreasonable result and that does not reflect the legislature's intent). Restricting the § 628.46 interest penalty to a first-party context, with narrow third-party application, promotes the legislature's intent to protect policyholders from dilatory tactics by insurers. Further, this comports with the legal distinctions drawn by our courts to clarify an insurer's duty of good faith and fair dealing concerning first-party claims in contrast to third-party tort claims
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