TRAVELERS PROP. & CAS. v. OLD REPUBLIC INS.

• Citation: 847 A.2d 303
• Decision Date: 10 May 2004
• Docket Number: No. 2002-442-Appeal.,2002-442-Appeal.
• Parties: TRAVELERS PROPERTY AND CASUALTY CORPORATION v. OLD REPUBLIC INSURANCE COMPANY.
• Court: United States State Supreme Court of Rhode Island

847 A.2d 303

TRAVELERS PROPERTY AND CASUALTY CORPORATION v. OLD REPUBLIC INSURANCE COMPANY.

No. 2002-442-Appeal.

Supreme Court of Rhode Island.

May 10, 2004.

Michael DeLuca, Providence, for Plaintiff.

Holly Rao, Warwick, for Defendant.

Present: WILLIAMS, C.J., FLANDERS, GOLDBERG, FLAHERTY, and SUTTELL, JJ.

OPINION

SUTTELL, Justice.

A dispute between two insurance companies over liability for prejudgment interest is the focus of this appeal. We are invited to enter the often-labyrinthine world of insurance law to determine whether the carriers provided "primary" or "excess" coverage. We resist the temptation, however, and resolve the case on more familiar grounds. Because a final judgment is a prerequisite to imposing prejudgment interest, such interest, absent an agreement of the parties, does not accrue when a case is settled before a judgment becomes final, even when the settlement occurs while such claim is on appeal following a jury verdict and Superior Court judgment for damages, prejudgment interest, and costs.

The plaintiff, Travelers Property and Casualty Corporation (Travelers or plaintiff), appeals from a Superior Court grant of summary judgment in favor of defendant, Old Republic Insurance Company (Old Republic or defendant), in a declaratory judgment action. After hearing the arguments and examining the briefs of the parties, we affirm the judgment in favor of Old Republic.

The underlying claim arises from an automobile accident that occurred on February 17, 1997, in Pawtucket, Rhode Island. Elisabete Fernandes (Ms. Fernandes) was riding in the front seat of a car driven by Maria Gomes and owned by José Gomes. Maria Gomes alleged that a truck pulled out in front of the vehicle she was driving, causing her vehicle to strike a telephone pole as she attempted to avoid the truck. As a result, Ms. Fernandes suffered serious injuries.

Anthony Reed (Mr. Reed) was operating the truck that allegedly caused the accident. He was employed by Action Container Corporation (Action Container). At the time of the accident, Action Container leased its trucks from Ryder Truck Rentals, Inc. (Ryder). Ryder was insured by a general accident insurance policy issued by Old Republic, which provided coverage¹ pursuant to the lease agreement between Ryder and Action Container. The policy provided coverage of $500,000. Action Container held two policies through Travelers, one providing $1 million of liability coverage, and the other, an umbrella policy, providing $2 million of catastrophe coverage.²

Eventually, Ms. Fernandes filed suit (Fernandes case) in Superior Court naming Maria and José Gomes, Action Container, Mr. Reed, and Ryder as defendants, and alleging three counts of negligence against each defendant. Ms. Fernandes demanded compensation for injuries and economic losses totaling $2.75 million. Before trial, she made a written offer to settle her claims with all the named defendants. The settlement offer broke down liability according to the limits of each insurance policy. Accordingly, she demanded $100,000 from Maria and José Gomes, $500,000 from Ryder, and $2.15 million from Action Container and Mr. Reed. The offer to settle was rejected, however, and the case proceeded to a jury trial.

As a result, Ms. Fernandes secured a jury verdict totaling $1,822,000 against all defendants. On May 5, 1999, a civil judgment on this verdict was entered in that amount, plus prejudgment interest of $483,405.05 and costs, for a total award of $2,305,404.05, from which Travelers appealed. While the appeal was pending, however, the parties settled, and Ms. Fernandes agreed to release all claims against all parties in consideration of $2 million.

In accordance with the settlement, Travelers paid Ms. Fernandes the full $2 million. Old Republic then reimbursed Travelers $500,000, the policy limit on its policy with Ryder. On December 23, 1999, a satisfaction-of-judgment stipulation was entered in Superior Court.

For some time before the settlement and execution of the release by Ms. Fernandes on October 21, 1999, Travelers had corresponded with Old Republic and its insured, Ryder, concerning responsibility for paying prejudgment interest and costs. On September 14, 1999, Travelers advised Ryder and Old Republic that "the terms of the policy issued to Ryder by Old Republic provide for payment of the pre-judgment interest in the amount of $483,505.00 and costs of $3,105.75." Ryder responded on September 17, 1999, with a facsimile transmission, agreeing to pay the costs, but stating, "It is our position that the interest on the judgment should be paid on a pro rata basis." Ryder then sent a letter dated October 6, 1999, in which it disclaimed any liability for prejudgment interest because final judgment had not been entered in the Fernandes case.

The action for declaratory judgment ensued, in which Travelers asked that Old Republic be held liable for the entire sum of interest³ on judgment. Travelers advanced three grounds to support its complaint. First, Old Republic improperly refused to pay the interest in derogation of the provisions of its policy with Ryder. Second, Old Republic is responsible for the interest because it was the primary insurer of Action Container. Third, Old Republic should pay the interest pursuant to G.L.1956 § 27-7-2.2⁴ because judgment was entered before Old Republic made a settlement offer.

After a bout of disputatious discovery, the parties filed cross-motions for summary judgment, with legal memoranda, objections thereto, and replies. Old Republic argued, inter alia, that because the underlying claims had been settled before disposition of the appeal, there was no "final judgment" capable of triggering the imposition of prejudgment interest. After considering the parties' respective positions on a number of issues, the hearing justice granted' Old Republic's motion for summary judgment on the ground that the resolution of the prior lawsuit by settlement operated as a waiver of "all interest questions." In response to Travelers' arguments, the hearing justice concluded:

"My view of the case is that 27-7-2.2 is not involved in this issue because this was a settled case. * * * Sure, there was a verdict, but that verdict was immediately wiped out once Travelers went upstairs on appeal. * * * Neither side is entitled to a judgment for interest. Summary judgment for the Plaintiff is denied. Summary judgment on the cross motion is granted."

The parties then filed respective motions for entry of final judgment. The summary judgment for Old Republic was entered on June 4, 2002, and Travelers timely filed a notice of appeal.

Discussion

On appeal Travelers argues that the Superior Court's grant of summary judgment was in error because it failed to find that the Travelers policy was an excess policy and that the primary coverage on the lease between Ryder and Action Container was provided by the Old Republic policy. Moreover, as an excess insurer, Travelers asserts that it did not have a duty to respond to a settlement demand under § 27-7-2.2 until the Old Republic policy was exhausted. Finally, Travelers argues that the hearing justice erred in determining that a final judgment had not been entered, and that the "post-judgment settlement" precluded the application of G.L. 1956 § 9-21-10 and § 27-7-2.2. Not only did the hearing justice misinterpret applicable law, Travelers contends, but also he overlooked Old Republic's response to a request for admission that "prejudgment interest amounts to $178,000."

In response, Old Republic first argues that it could not have settled Ms. Fernandes' demand on November 25, 1998, to release the claim against Ryder for the full policy limit of $500,000 without violating its duty of good faith and fair dealing owed to its other two insureds, Action Container and Anthony Reed. Next, Old Republic argues that the Travelers policy covering Action Container and Mr. Reed was a "primary" policy and not an "excess" or "umbrella" policy. Therefore, Travelers had the duty to settle on their behalf within the total policy limit of $3 million. Further, Old Republic argues that no final judgment was entered in the Fernandes case that would invoke the prejudgment interest provisions of §§ 9-21-10 and 27-7-2.2. Finally, Old Republic argues that calling the difference between a settlement amount and a jury verdict "pre-judgment interest" in response to a request for admissions does not dispose of the issues in this case.

As we conclude that the judgment in question had not become final when Ms. Fernandes settled her claims, we need not examine the respective policies to determine whether they provided primary or excess coverage. Nor do we address the liability, if any, of each carrier for failing to settle within policy limits under the provisions of § 27-7-2.2. We resolve the issues, rather, in accordance with the well-settled principle "that the term `judgment' referred to in § 9-21-10 contemplates a final judgment, one that finally adjudicates the rights of the parties, whether it is a judgment from which no appeal is taken or a judgment that is affirmed by this court after consideration and rejection of the appellant's contentions." Welsh Manufacturing, Division of Textron, Inc. v. Pinkerton's Inc., 494 A.2d 897, 898 (R.I.1985) (Welsh Manufacturing hereafter).

In reviewing the parties' cross-motions for summary judgment, we examine the matter de novo. Delta Airlines, Inc. v. Neary, 785 A.2d 1123, 1126 (R.I. 2001). "Summary judgment is appropriate when, viewing the facts and all reasonable inferences therefrom in the light most favorable to the nonmoving party, the court determines that there are no issues of material fact in dispute, and the moving party is entitled to judgment as a matter of law." Id. (citing Woodland Manor III Associates v. Keeney, 713 A.2d 806, 810 (R.I.1998)). An examination of our cases reveals that as a matter of law "final judgment" had not...