Opinion
No. 1:02-cv-01875-LJM-WTL.
June 30, 2004
ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
This matter comes before the Court on Cross-Motions for Summary Judgment by Plaintiff, Sentry Select Insurance Company, f/k/a John Deere Insurance Company ("Sentry"), and Defendant, TIG Insurance Company ("TIG"). The above-captioned declaratory judgment action derives from a wrongful death suit that was filed in Indiana state court against a trucking company. The underlying wrongful death suit went to trial, and a jury returned a verdict against the trucking company for $2.8 million. During the pendency of an unsuccessful appeal, $442,609.87 of post-judgment interest accrued. Sentry was the trucking company's primary insurer, and TIG was the trucking company's excess or umbrella insurer. In the instant motions, both companies seek a ruling that the other company owes all of the post-judgment interest. For the reasons stated herein, the Court GRANTS Sentry's Motion for Summary Judgment, and DENIES TIG's Motion for Summary Judgment.
I. BACKGROUND A. THE UNDERLYING LAWSUIT AND APPEALS
The following facts are undisputed. On July 28, 1999, Jimmy Ollis ("Ollis"), while acting within the scope of his employment with Underwood and Weld, Co., Inc., and Underwood Trucks, Inc. (collectively "Underwood" or the "insured"), was operating a tractor trailer combination on behalf of and under the motor carrier operating authority of Underwood when he was involved in an accident with Cynthia Knecht ("Knecht") near Laurel, Indiana (the "Accident"). Id. ¶ 5. As a result of the accident, Knecht died. Id. Subsequently, the Estate of Knecht filed a wrongful death action against Underwood and Ollis in the Decatur County (Indiana) Superior Court under Cause Number 16D01-9909-CT-97 (the "Lawsuit"). Id. ¶ 6.At all relevant times, Sentry had in full force and effect a policy of insurance issued to Underwood under which Sentry insured Underwood against third-party liability claims arising out of motor vehicle accidents (the "Sentry Policy"). Pl.'s Stmt. of Facts ¶ 1. The limit of insurance provided to Underwood pursuant to the terms of the Sentry Policy is $1 million per "accident." Id. ¶ 2. At all times relevant to this action, TIG had in full force and effect an umbrella or excess liability policy issued to Underwood under which TIG insured Underwood against third-party liability claims arising out of motor vehicle accidents. Id. ¶ 3. The limit of insurance provided to Underwood pursuant to the terms of the TIG Policy is $2 million per "occurrence" in excess of primary insurance. Id. ¶ 4.
During the pendency of the Lawsuit, Underwood and Ollis were represented by attorney William K. Deer ("Attorney Deer"), retained by Sentry on behalf of Underwood and Ollis. Id. ¶ 7. During the pendency of the Lawsuit, the Estate of Knecht was represented by attorney J. Lee McNeely ("Attorney McNeely"). Id. ¶ 8. Prior to the jury trial, mediation was conducted. Id. ¶ 10. At the mediation, Sentry offered its $1 million policy limits to the plaintiff. Id. Attorney McNeely and the Estate of Knecht rejected the offer. Id.
From the day of the mediation forward, the Estate of Knecht had a standing offer from Sentry to pay its $1 million policy limits. Id. ¶ 12. In addition, the day prior to trial, Sentry offered its $1 million policy limits and TIG offered $500,000.00 to settle the Lawsuit. Id. ¶ 14. Attorney McNeely and the Estate of Knecht deemed the offer inadequate and rejected it. Id. During the May 2000 trial, Sentry offered its $1 million policy limits and TIG offered $800,000 to settle the case. Id. Attorney McNeely considered the offer inadequate and rejected it. Id. ¶ 15. The jury returned a verdict in the amount of $2.8 million, and the court entered a corresponding judgment on May 18, 2000. Id. ¶ 16.
Michael Roggen ("Roggen") was an insurance adjuster employed by TIG, and was primarily responsible for the handling of the Lawsuit on behalf of TIG and its insured, Underwood, during the pendency of the Lawsuit and following the entry of judgment until approximately the middle of 2001. Id. ¶ 17. On June 14, 2000, Roggen sent an e-mail to his supervisor, Kenneth R. Jensen("Jensen"), in which he stated he was "inclined to put it to bed and pay the $1.8 million TIG share." Id. ¶ 21. Roggen further noted that additional delays in payment of the Judgment could subject TIG to post-judgment interest. Id.
TIG authorized Attorney Deer to appeal the Judgment. Id. ¶ 25. TIG's appeal was denied by the Indiana Court of Appeals, which affirmed the May 18, 2000, judgment, and denied a subsequent petition for rehearing. Id. ¶ 29. Attorney Deer then filed a Petition for Transfer with the Indiana Supreme Court. Id. ¶ 30. The Petition, however, was denied on February 22, 2002, exhausting the appellate process. Id.
The Judgment accrued post-judgment interest at a rate of 8% per year, amounting to $613.70 per day. Id. ¶ 31. On or about April 29, 2002, Sentry paid the Estate of Knecht $964,566.30, the remaining monies available under the limit of insurance of the Sentry Policy. Id. ¶ 32. On or about May 10, 2002, TIG paid the Estate of Knecht $1,835,434.00, the remaining principal balance of the Judgment. Id. ¶ 33. Subsequently, in order to avoid exposing the insureds to further legal action and threatened proceedings supplemental, TIG and Sentry agreed to pay the post-judgment interest owed on the Judgment in equal shares, each party paying $221,304.93, and reserving the right to resolve the dispute between the two insurers as to who owed the post-judgment interest through litigation, if necessary. Id. ¶ 34.
B. THE SENTRY POLICY
The Sentry Policy, in its "Supplementary Payments Clause," provides in relevant part:
2. COVERAGE EXTENSIONS
a. Supplementary Payments
In addition to the Limit of Insurance, we will pay for the "insured":
. . .
6. All interest on the full amount of any judgment that accrues after entry of the judgment in any "suit" against the "insured" we defend; but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance.
Ex. A to comp.
C. THE TIG POLICY
The TIG Policy contains a similar supplemental payments clause, which provides in pertinent part:
WE will pay the following with respect to any claim or SUIT WE defend:
. . .
f. all interest on that part of any judgment which accrues after entry of the judgment and before WE have paid, offered to pay, or deposited in court that part of the judgment which does not exceed the limit of liability of this policy.
Def.'s Ex. B.
The TIG Policy also provides:
If YOU or any of YOUR underlying insurers elect not to appeal a judgment in excess of the limits of liability afforded by the UNDERLYING INSURANCE or any OTHER INSURANCE available to YOU, WE may elect to appeal. OUR limit of liability shall not be increased because of the appeal, except that WE will make the appeal at OUR cost and expense.
Def.'s Ex. B.
II. SUMMARY JUDGMENT STANDARD
As stated by the Supreme Court, summary judgment is not a disfavored procedural shortcut, but rather is an integral part of the federal rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). See also United Ass'n of Black Landscapers v. City of Milwaukee, 916 F.2d 1261, 1267-68 (7th Cir. 1990). Motions for summary judgment are governed by Rule 56(c) of the Federal Rules of Civil Procedure, which provides in relevant part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Once a party has made a properly-supported motion for summary judgment, the opposing party may not simply rest upon the pleadings but must instead submit evidentiary materials which "set forth specific facts showing that there is a genuine issue for trial." FED.R.CIV.P. 56(e). A genuine issue of material fact exists whenever "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The nonmoving party bears the burden of demonstrating that such a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Oliver v. Oshkosh Truck Corp., 96 F.3d 992, 997 (7th Cir. 1996). It is not the duty of the Court to scour the record in search of evidence to defeat a motion for summary judgment; rather, the nonmoving party bears the responsibility of identifying the evidence upon which she relies. See Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996). When the moving party has met the standard of Rule 56, summary judgment is mandatory. See Celotex, 477 U.S. at 322-23; Shields Enters., Inc. v. First Chi. Corp., 975 F.2d 1290, 1294 (7th Cir. 1992).
In evaluating a motion for summary judgment, the Court should draw all reasonable inferences from undisputed facts in favor of the nonmoving party and should view the disputed evidence in the light most favorable to the nonmoving party. See Estate of Cole v. Fromm, 94 F.3d 254, 257 (7th Cir. 1996). The mere existence of a factual dispute, by itself, is not sufficient to bar summary judgment. Only factual disputes that might affect the outcome of the suit in light of the substantive law will preclude summary judgment. See Anderson, 477 U.S. at 248; JPM Inc. v. John Deere Indus. Equip. Co., 94 F.3d 270, 273 (7th Cir. 1996). Irrelevant or unnecessary facts do not deter summary judgment, even when in dispute. See Clifton v. Schafer, 969 F.2d 278, 281 (7th Cir. 1992). "If the nonmoving party fails to establish the existence of an element essential to [her] case, one on which [she] would bear the burden of proof at trial, summary judgment must be granted to the moving party." Ortiz v. John O. Butler Co., 94 F.3d 1121, 1124 (7th Cir. 1996).
III. DISCUSSION
Sentry argues that it owes no post-judgment interest in connection with the judgment, and that TIG must reimburse it for its share. According to Sentry, TIG's supplemental payments provision obligated it to pay all of the post-judgment interest on the jury verdict because it took over the defense of the Lawsuit after Judgment by electing to appeal. In addition, Sentry maintains that its duty to pay post-judgment interest terminated pursuant to its Policy due to its numerous offers to pay the plaintiff the policy limits. Sentry also contends that the equities weigh in favor of it because TIG unilaterally elected to appeal, which led to the accrual of the interest. TIG makes a series of arguments in response. First, citing a Massachusetts state law case, TIG argues that Sentry's offers to the plaintiff were "offers to settle," not unconditional "offers to pay" as contemplated by the Sentry Policy. Second, TIG asserts that the supplemental payments provision in the TIG Policy only applies when it is the primary insurer. Finally, TIG avers that the equities weigh in its favor because Sentry, as the primary insurer, received a much larger annual premium from Underwood than TIG did.
The plain language of the Sentry Policy supports Sentry's position that its obligation to pay post-judgment interest terminated when it offered to pay the policy limits. The Sentry Policy ties the obligation to pay post-judgment interest to the insurer's duty to defend, but the contract clearly limits that obligation to pay interest when Sentry offers to pay its part of any judgment. In particular, the Sentry Policy provides:
In addition to the Limit of Insurance, we will pay for the "insured":
. . .
(6) All interest on the full amount of any judgment that accrues after entry of judgment in any "suit" we defend; but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance.
Ex. A to complaint (emphasis added). Sentry "offered to pay" the Estate of Knecht the Limit of Insurance on numerous occasions. Sentry offered its policy limits during mediation and, according to Attorney McNeely, the plaintiff's lawyer in the underlying suit, the Estate of Knecht had a standing offer from Sentry to pay its policy limit. Consistent with the language in the Sentry Policy, Sentry's duty to pay interest ended when it offered to pay the Estate of Knecht its policy limits.
As noted by Sentry, the Seventh Circuit's decision in Overbeek v. Heimbecker, 101 F.3d 1225 (7th Cir. 1996) reinforces this interpretation of the Sentry Policy. In Overbeek, an insurance company offered to settle a personal injury case against one of its insureds for the policy limits on numerous occasions. See Overbeek, 101 F.3d at 1226. The plaintiff in Overbeek rejected every offer, proceeded to trial, and was awarded a substantial compensatory damage verdict in excess of the policy limits. See id. Even though the insured was judgment-proof for the excess over the policy limit, the plaintiff's lawyer appealed the jury's decision to deny punitive damages. See id. at 1227. Years later, the plaintiff filed suit against the insurance company in federal court to recover post-judgment interest on the entire jury award. See id.
The Seventh Circuit denied the plaintiff's appeal for post-judgment interest for several reasons. See id. at 1227-28. First, the Court of Appeals pointed out that plaintiff's position conflicted with Wisconsin state law. See id. at 1228. Second, the court noted that an applicable insurance policy provision terminated the insurer's obligation to pay post-judgment interest once the insurance company offered to pay the policy limits. See id. The court rejected the plaintiff's argument that the insurance company had to formally tender a check to the clerk's office to toll the interest obligation, holding that the insurance company's repeated offers to pay the policy limits terminated its duty to pay post-judgment interest. See id. In addition, the court reasoned that the purpose of post-judgment interest — to encourage prompt payment and compensate a plaintiff for another party's use of its money — supported the insurance company's position because it had offered the plaintiff the policy limits on numerous occasions, even before he filed suit. See id.
The Seventh Circuit's rationale in Overbeek militates in favor of Sentry's position in the instant case. Like the insurance contract in Overbeek, the Sentry Policy provides that its duty to pay interest ends when it offers to pay its policy limits. Like the insurance company in Overbeek, Sentry made repeated offers to pay its policy limits, which terminated its duty to pay post-judgment interest pursuant to the contractual provision. Although TIG criticizes Sentry for not formally tendering its policy limits to the clerk of the court, the language of the Sentry Policy does not require Sentry to formally tender a check to the court in order to terminate its duty to pay interest. Ex. A ("our duty to pay interest ends when we have paid, offered to pay, or deposited in court the part of the judgment that is within our Limit of Insurance") (emphasis added). On this point, the Seventh Circuit's discussion in Overbeek warrants repeating:
Once General Casualty offered the policy limits, it was no longer on the hook for any interest. While [plaintiff] complains that General Casualty did not formally tender a check to the clerk's office, we are convinced, given the circumstances of this case, that General Casualty had a check at the ready, and its repeated offers were sufficient to toll the accrual of interest.Overbeek, 101 F.3d at 1228.
Relying on Davis v. Allstate Insurance Company, 747 N.E.2d 141 (Mass. 2001), TIG argues that Sentry only made an "offer to settle," not an "offer to pay." To the extent the Massachusetts court's interpretation of the phrase "offer to pay" conflicts with the Seventh Circuit's analysis in Overbeek, this Court will follow the guidance from the Seventh Circuit. Furthermore, the equitable considerations that influenced the Davis majority actually support Sentry's position that TIG should pay all of the post-judgment interest. In Davis, Allstate made an offer to the plaintiff, but subsequently decided to appeal the judgment. Because Allstate authorized and controlled the appeal, it had the power to stop the accrual of interest by abandoning the appeal and settling the case. In the instant case, on the other hand, Sentry offered the plaintiff its policy limits, but TIG authorized and controlled the appeal.
The plain language from the appeals provision of the TIG Policy also supports Sentry's position. With regard to appeals, the TIG Policy provides:
If YOU or any of YOUR underlying insurers elect not to appeal a judgment in excess of the limits of liability afforded by the UNDERLYING INSURANCE or any OTHER INSURANCE available to YOU, WE may elect to appeal. OUR limit of liability shall not be increased because of the appeal, except that WE will make the appeal at OUR cost and expense.
Def.'s Ex. B (italics added). TIG elected to appeal the jury verdict, and post-judgment interest is a "cost" of the appeal that it must pay pursuant to the above-cited appeal provision of its contract with Underwood. Although TIG argues that the appeals provision would have explicitly mentioned interest if TIG and Underwood intended for post-judgment interest to be included as a "cost" of TIG's election to appeal, post-judgment interest is a common cost of a defendant's decision to appeal a damages verdict. Furthermore, TIG drafted the contract, and ambiguities are construed against the drafter. See Woodbridge Place Apartments v. Washington Square Capital, Inc., 965 F.2d 1429, 1439 (7th Cir. 1992).
TIG maintains that the supplemental payment provision of the TIG Policy was never triggered because TIG was not "defending" the claim. According to TIG, it was Sentry's duty to defend the claim even post-judgment because Sentry was the primary insurer. This argument ignores the realities of the situation. It was TIG that authorized and controlled the appeal. The Estate of Knecht had a standing offer from Sentry for its policy limits, and nothing in the record suggests that Sentry supported TIG's decision to appeal. Because TIG effectively "defended" the claim by electing to appeal the jury verdict, the TIG supplementary payment clause was triggered.
TIG's reliance on Hartford v. Aetna, 547 N.E.2d 114 (Ill. 1989) is misplaced. In Hartford, a suit between a primary insurer and an excess insurer over post-judgment interest, the Illinois Supreme Court held that the primary insurer was liable for all of the post-judgment interest on the plaintiff's verdict. See id. at 116. However, the court specifically noted that the primary insurer did not limit its obligation to pay "all interest accruing after entry of judgment." Id. at 115. In the instant case, on the other hand, the Sentry Policy terminated its obligation to pay interest when it "offered to pay" its portion of any judgment. Furthermore, the primary insurer in Hartford prosecuted the appeal. In the instant case, TIG, the excess insurer, prosecuted the appeal.
The TIG supplementary payment provision provides, in relevant part:
WE will pay the following with respect to any claim or SUIT WE defend:
. . .
f. all interest on that part of any judgment which accrues after entry of the judgment and before WE have paid, offered to pay, or deposited in court that part of the judgment which does not exceed the limit of liability of this policy.
Def.'s Ex. B. Nothing in the record indicates that TIG "paid, offered to pay, or deposited in court that part of the judgment which does not exceed the limit of liability of this policy." Consequently, the language at issue is "[TIG will pay] all interest on that part of any judgment which accrues after entry of judgment." Although the provision could be clearer, it appears that by adding "on that part of" to "any judgment,"TIG is only contractually obligated to pay interest on its share of the judgment (approximately 2/3 of the postjudgment interest).
Reading the supplementary payment provisions of the two insurance contracts together, Sentry has no obligation to pay any post-judgment interest because it offered to pay its policy limits, and TIG is only obligated to pay interest on that part of the judgment it would be obligated to pay under the excess policy (approximately 2/3 of the interest). The issue is who will pay the post-judgment interest on the portion of the $2.8 million judgment that Sentry was obligated to pay (approximately 1/3 of the interest).
In the Court's view, TIG should pay the remaining interest. First, the appeals provision of the TIG Policy provides that TIG will pay the "cost" of any appeal that TIG takes without the support of the insured or the primary insurer. Where, as here, the primary insurer's obligation to pay post-judgment interest has terminated, the full amount of the post-judgment interest is a "cost" of the appeal. Second, policy considerations also weigh in favor of Sentry. The main rationale behind post-judgment interest is to encourage prompt payment of money judgments to plaintiffs. With that rationale in mind, it makes little sense to make Sentry pay the post-judgment interest on the jury verdict because Sentry offered to pay its policy limits on numerous occasions. It was TIG, the excess insurer, that authorized the appeal that deprived the Estate of Knecht of the judgment, and there is no evidence that Sentry wanted to do anything other than settle the case after judgment. TIG controlled the appeal and had the power to stop the running of post-judgment interest by settling the case or by simply paying its portion of the judgment. TIG bound itself to pay post-judgment interest on the entire judgment when it exercised its right to appeal. Accordingly, the Court GRANTS Plaintiff's Motion for Summary Judgment and DENIES Defendant's Motion for Summary Judgment.
PRE- AND POST-JUDGMENT INTEREST
In its complaint, Sentry requested pre- and post-judgment interest on the $221,304.93 award. For civil actions in federal court, 28 U.S.C. § 1961 automatically awards post-judgment interest. On the other hand, the propriety of pre-judgment interest is a matter of state law. See Travelers Ins. Co. v. Transport Ins. Co., 846 F.2d 1048, 1051 (7th Cir. 1988) (pre-judgment interest is proper in Indiana where the damages are "ascertainable").In the instant case, Sentry and TIG temporarily settled their dispute over post-judgment interest on the personal injury verdict by splitting the difference, and the companies reserved their rights to subsequently litigate the matter. The Court does not know if the parties' temporary settlement addressed the issue of pre- and/or post-judgment interest on the respective $221,304.93 shares. The Court requests that the parties advise it with respect to that issue. If the settlement did not address the issue of pre- and/or post-judgment interest, the Court would like the parties to submit limited briefs (with affidavits or other evidence if necessary) on: (1) the propriety of awarding pre-judgment interest in this case; (2) the date upon which that interest began to accrue; and (3) the applicable interest rate for pre-judgment interest. As noted above, 28 U.S.C. § 1961 automatically awards post-judgment interest.
IV. CONCLUSION
For the reasons stated herein, the Court GRANTS Plaintiff's Motion for Summary Judgment and DENIES Defendant's Motion for Summary Judgment. With regard to the pre- and post-judgment issue mentioned above, the Court requests briefing on the following schedule: Plaintiff's briefis due on or before July 15, 2004, and Defendant's brief is due on or before July 26, 2004.IT IS SO ORDERED.