807.01 Settlement offers.

(1) 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 within 10 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 an annual rate equal to 1 percent plus the prime rate in effect on January 1 of the year in which the judgment is entered if the judgment is entered on or before June 30 of that year or in effect on July 1 of the year in which the judgment is entered if the judgment is entered after June 30 of that year, as reported by the federal reserve board in federal reserve statistical release H. 15, 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.

History: Sup. Ct. Order, 67 Wis. 2d 585, 741 (1975); Sup. Ct. Order, 67 Wis. 2d vii (1975); 1975 c. 218; 1979 c. 271; 1981 c. 314; 1983 a. 253; 1985 a. 340; 2011 a. 69.

Cross-reference: For tender of payment, see s. 895.14.

Sub. (3) applies to cases of both liquidated and unliquidated damages. Graves v. Travelers Ins. Co. 66 Wis. 2d 124, 224 N.W.2d 398 (1974).

Subs. (3) and (4) do not apply to a rejected joint settlement offer made on behalf of individual plaintiffs. White v. General Casualty Company of Wisconsin, 118 Wis. 2d 433, 348 N.W.2d 614 (Ct. App. 1984).

Defendants who are jointly and severally liable may submit joint offers of judgments to an individual plaintiff under sub. (1). Denil v. Integrity Mutual Insurance Co. 135 Wis. 2d 373, 401 N.W.2d 13 (Ct. App. 1986).

Offers under sub. (3) are revocable. Sonnenburg v. Grohskopf, 144 Wis. 2d 62, 422 N.W.2d 925 (Ct. App. 1988).

Under sub. (3), a plaintiff suing multiple defendants under multiple theories, one of which involves several liability, must make separate settlement offers. Smith v. Keller, 151 Wis. 2d 264, 444 N.W.2d 396 (Ct. App. 1989).

Sub. (4) provides for simple, rather than compound, interest to accrue on the amount recovered. The relationship between sub. (4) and s. 628.46 (1) is discussed. Upthegrove v. Lumbermans Ins. Co. 152 Wis. 2d 7, 447 N.W.2d 367 (Ct. App. 1989).

While the inclusion of a reference to this section is preferable, a settlement offer that should reasonably be understood as an offer pursuant to s. 807.01 is sufficient to invoke its provisions. Bauer v. Piper Industries, Inc. 154 Wis. 2d 758, 454 N.W.2d 28 (Ct. App. 1990).

A plaintiff's offer of settlement addressed to multiple defendants reciting one aggregate settlement figure for all claims did not allow the defendants to individually assess their own exposure and is not valid for sanctions purposes. Wilber v. Fuchs, 158 Wis. 2d 158, 461 N.W.2d 803 (Ct. App. 1990).

A plaintiff's single offer of settlement to two individual defendant's and the insurer of both, within the policy limits, invoked sanctions under this section as the insurer was the only party interested in the settlement and could fully evaluate its exposure. Testa v. Farmers Ins. Exchange, 164 Wis. 2d 296, 474 N.W.2d 776 (Ct. App. 1991).

When damages are subject to a statutory limit, costs and interest awarded under this section are in addition to the damage award. Gorman v. Wausau Ins. Cos. 175 Wis. 2d 320, 499 N.W.2d 245 (Ct. App. 1993).

An insurer was not subject to sanctions under this section when, after initially rejecting the plaintiff's offer to settle, new facts resulted in the insurer's submitting its own offer to settle in the same amount. Oliver v. Heritage Mutual Insurance Co. 179 Wis. 2d 1, 505 N.W.2d 452 (Ct. App. 1993).

Separate offers to the defendant and the defendant's insurer in the same amount, which left unclear whether acceptance by the insurer also released the insured, did not invoke sanctions under this section when the verdict exceeded the amount of the individual offers. Cue v. Carthage College, 179 Wis. 2d 175, 507 N.W.2d 109 (Ct. App. 1993).

Common law prejudgment interest and 12 percent interest under sub. (4) are not to be combined. Erickson v. Gunderson, 183 Wis. 2d 106, 515 N.W.2d 293 (Ct. App. 1994).

Interest under sub. (4) does not accrue on an award of double costs under sub. (3). American Motorists Insurance Co. v. R & S Meats, Inc. 190 Wis. 2d 197, 526 N.W.2d 791 (Ct. App. 1994).

A party making a settlement offer must do so in clear and unambiguous terms. A party's mere offer to settle for a specified sum when a part of the party's claim had been admitted and already reduced to judgment was ambiguous. Stan's Lumber, Inc. v. Fleming, 196 Wis. 2d 554, 538 N.W.2d 849 (Ct. App. 1995), 94-1258, 95-0004.

In a case involving a subrogated defendant, failure of an offer to specify whether payment to the subrogated defendant would be made from the settlement proceeds left the defendants unable to fully evaluate their exposure so that the offer was not valid for purposes of sub. (3). Ritt v. Dental Care Associates, S.C. 199 Wis. 2d 48, 543 N.W.2d 852 (Ct. App. 1995), 94-3344.

A judgment against a defendant to whom an offer to settle was made that is equal to or larger than the offer entitles the plaintiff to interest under sub. (4) on the amount recovered against the party to whom the offer was made. Blank v. USAA Property & Casualty Ins. Co. 200 Wis. 2d 270, 546 N.W.2d 512 (Ct. App. 1996), 95-1806.

Under sub. (3), the offer and judgment must be compared exclusive of any costs. Northridge Co. v. W.R. Grace & Co. 205 Wis. 2d 267, 556 N.W.2d 345 (Ct. App. 1996), 95-1193.

A single offer made to the plaintiff on condition that the plaintiff “indemnify or otherwise satisfy any existing related subrogated claims" invoked sub. (1) when the plaintiff knew the amount of the only subrogated claims and could fully and fairly evaluate the offer. Staehler v. Beuthin, 206 Wis. 2d 610, 557 N.W.2d 487 (Ct. App. 1996), 95-3295.

In sub. (4), “amount recovered" means that portion of a verdict for which a party is responsible. Nelson v. McLaughlin, 211 Wis. 2d 487, 565 N.W.2d 123 (1997), 95-3391.

Sub. (1) is procedural in nature and may be applied in federal claims brought in state court unless it defeats a substantial federal right. Duello v. Board of Regents, 220 Wis. 2d 554, 583 N.W.2d 863 (Ct. App. 1998), 97-2608.

An insurer has a fiduciary duty to clarify a settlement offer made to it that is ambiguous with respect to whether the offer applies to only the insurer or to both the insurer and the insured. Failure to clarify the ambiguity results in a valid offer under this section. Prosser v. Leuck, 225 Wis. 2d 126, 592 N.W.2d 178 (1999), 97-0686.

Sub. (3) provides no exceptions for assessments of double costs. Costs associated with determining coverage are subject to doubling under sub. (3). Prosser v. Leuck, 225 Wis. 2d 126, 592 N.W.2d 178 (1999), 97-0686.

The 10-day period in sub. (1) was tolled when a stay was entered one day after a settlement offer was served. Briggs v. Farmers Insurance Exchange, 2000 WI App 40, 233 Wis. 2d 163, 607 N.W.2d 670, 99-1123.

A party with multiple claims is not required to itemize a settlement offer in order to invoke the double costs and interest provisions of this section. Batteries Plus, LLC v. Mohr, 2000 WI App 153, 237 Wis. 2d 776, 615 N.W.2d 196, 99-1319.

Attorney's fees and costs, regardless of why they are awarded, are not part of the “amount recovered" under sub. (4) but rather are a shifting of the costs of litigation, and separate from the recovery. Dobbratz Trucking & Excavating v. PACCAR, Inc. 2002 WI App 138, 256 Wis. 2d 205, 647 N.W.2d 315, 01-1091.

Interest under sub. (4) and double costs under sub. (3) cannot be awarded when no judgment is entered in a case. Osman v. Phipps, 2002 WI App 170, 256 Wis. 2d 589, 649 N.W.2d 701, 01-1248.

When a defendant is sued under a fee-shifting statute, the defendant is on notice that the plaintiff is seeking not only damages but also reasonable attorney fees. Accordingly, when making an offer of judgment, the defendant is to include such fees and to so inform the plaintiff. The trial court should also include attorney fees in the judgment when it measures the offer against the judgment under sub. (1). Pachowitz v. LeDoux, 2003 WI App 120, 265 Wis. 2d 631, 666 N.W.2d 88, 02-2100.

It is not necessary that a judgment under sub. (4) must involve litigation and result in a verdict. A stipulated judgment greater than the plaintiff's earlier settlement offer entitled the plaintiff to double costs and interest. Tomsen v. Secura Insurance, 2003 WI App 187, 266 Wis. 2d 491, 668 N.W.2d 794, 03-0245.

The test for whether a given provision may be included in a settlement offer valid under this section is not reasonableness, but whether the provision specifies a remedy that could be imposed by the court. An offer demanding payment within 15 days of the offer was invalid because a judge could not enter a judgment requiring that the defendant tender payment within 15 days. DeWitt Ross & Stevens, S.C. v. Galaxy Gaming and Racing Limited Partnership, 2004 WI 92, 273 Wis. 2d 577, 682 N.W.2d 839, 02-0359.

“Taxable costs" in sub. (3) means those costs allowed as items of cost under s. 814.04. “Costs" in the first part of sub. (3) means “taxable costs." Costs recoverable under s. 814.04 include fees allowed by law, which includes attorney's fees allowed by law that represent a necessary cost of litigation to which a prevailing party is entitled under s. 814.04 (2). Alberte v. Anew Health Care Services, Inc. 2004 WI App 146, 275 Wis. 2d 571, 685 N.W.2d 614, 03-2674.

The pendency of a motion to dismiss part of a plaintiff's claim did not absolve the plaintiff from having to act on a statutory offer. The plaintiffs could have fully and fairly evaluated the offer despite the pending motion. If an offer is plain on its face and offers to settle the entire claim, it is an offer to do so despite the vagaries of suit. Mews v. Beaster, 2005 WI App 53, 279 Wis. 2d 507, 694 N.W.2d 476, 04-1147.

When the court of appeals reversed the trial court to reinstate a jury verdict that was clearly less than the defendant's original offer of settlement that the plaintiff rejected, the trial court was ordered to offset the costs in favor of the defendant against the judgment awarded to the plaintiff under this section and to enter the new judgment for the balance, under s. 814.12. Hamdan v. Dawicki, 2006 WI App 209, 296 Wis. 2d 623, 724 N.W. 2d 234, 05-1821.

A child recipient of an offer was unable to fully and fairly evaluate the terms of the offer when 1) it imposed an obligation for medical expenses upon a minor, when the legal obligation rested with the parent; 2) it employed overly broad language that imposed responsibility for any and all claims, rather than existing claims; and 3) the context in which the offer was made, specifically in light of requests for clarification and a contemporaneous offer to the child's parent, created confusion as to the child's obligations under the offer. Bockin v. Farmers Insurance Exchange, 2006 WI App 220, 296 Wis. 2d 694, 723 N.W. 2d 741, 05-3040.

Sub. (4) makes no distinction between pre- and postjudgment interest. It specifies that interest is calculated on a single amount, “the amount recovered," over one period of time, from the date of the offer of settlement until the amount is paid. The defendant's 2-stage calculation of interest, utilizing two time periods and two amounts recovered, could not be reconciled with the language of sub. (4). Sub. (4) provides for simple, not compound, interest. Morrison v. Rankin, 2008 WI App 158, 314 Wis. 2d 376, 760 N.W.2d 441, 08-0422.

When the case involves a subrogated party with a separate claim against the defendants, the plaintiff's offer of settlement must account for that separate claim. Because each separately owns part of the claim against the tortfeasor, a settlement between the insured and the tortfeasor that does not involve the subrogated insurer as a party, or provide for payment of the subrogated interest, leaves unsatisfied the part of the claim owned by the subrogated party. Hadrian v. State Farm Mutual Automobile Insurance Company, 2008 WI App 188, 315 Wis. 2d 529, 763 N.W.2d 215, 08-0527.

A single offer of settlement from an insured and its subrogated carrier was enforceable because it was clear that it encompassed both the insured's and its subrogated carrier's claims. Industrial Risk Insurers v. American Engineering Testing, Inc. 2009 WI App 62, 318 Wis. 2d 148, 769 N.W.2d 82, 08-0484.

Under Prosser, an insurer has a duty to clarify an ambiguous settlement offer when the ambiguity related to the settlement offer's failure to address a subrogated claim. The insurer's fiduciary duty regarding settlement mandates that the insurer must clarify an ambiguous offer in order to fully protect its insured's interests. Kubichek v. Kotecki, 2011 WI App 32, 332 Wis. 2d 522, 796 N.W.2d 858, 09-2331.

The right of a party making an offer of settlement to recover interest under sub. (4) accrues and becomes legally enforceable only after the recovery of a judgment. Therefore, awarding the statutory rate of interest in effect when the judgment was recovered, was not a retroactive application of sub. (4). The party that made the settlement offer did not have a vested right in the interest rate in effect at the time the offer was made. The party's right under former sub. (4) was inchoate, not perfected, not ripened, nor accrued. Lands' End, Inc. v. City of Dodgeville, 2016 WI 64, 370 Wis. 2d 500, 881 N.W.2d 702, 15-0179.

The party who presents the offer must do so in clear and unambiguous terms. Any ambiguity in the offer is construed against the drafter. A settlement offer cannot be fully and fairly evaluated when not all of the terms are included in the offer. The offer in this case was ambiguous because it was based on the execution of a Pierringer release that had yet to be drafted. It is not reasonable for a party receiving an offer to have to make assumptions as to the specific terms that the release will include. Wosinski v. Advance Cast Stone Co. 2017 WI App 51, 377 Wis. 2d 596, 901 N.W.2d 797, 14-1961.

Subs. (3) and (4) may be utilized in diversity actions in federal courts. Dillingham-Healy v. Milwaukee Metropolitan Sewerage District, 796 F. Supp. 1191 (1992).

The new Wisconsin rules of civil procedure: Chapters 805-807. Graczyk, 59 MLR 671.

Offers of Judgment in Wisconsin Courts. Crinion. Wis. Law. Feb. 1991.

Meeting Head On: Offers of Settlement and an Insurer's Potential Bad Faith. Warch. Wis. Law. Oct. 1996.