Allstate Ins. Co. v. Allen

• Decision Date: 10 September 1990
• Docket Number: No. 89SC451,89SC451
• Citation: 797 P.2d 46
• Parties: ALLSTATE INSURANCE COMPANY, Petitioner, v. Patrick N. ALLEN, Respondent.
• Court: Colorado Supreme Court

Page 46

797 P.2d 46

ALLSTATE INSURANCE COMPANY, Petitioner, v. Patrick N. ALLEN, Respondent.

No. 89SC451.

Supreme Court of Colorado En Banc.

Sept. 10, 1990.

Zupkus & Ayd, P.C., Robert A. Zupkus, Stefan Kazmierski, Denver, for petitioner.

Hecox, Tolley, Keene & Beltz, P.C., W. Thomas Beltz, H. William Mahaffey, Colorado Springs, for respondent.

Wilcox & Ogden, Ralph Ogden, Denver, for amicus curiae The Colorado Trial Lawyers Ass'n.

Justice LOHR delivered the Opinion of the Court.

We granted certiorari to review the unpublished decision of the Colorado Court of Appeals in Allen v. Chromy, No 88CA0254 (June 1, 1989). In Allen, the court of appeals reversed without discussion the district court's determination that Allstate Insurance Company ("Allstate") was not liable as garnishee for statutory prejudgment interest in excess of policy limits on a judgment against its insured. The court of appeals relied on its decision in Starke v. Allstate Ins. Co., 771 P.2d 3 (Colo.App.1988), rev'd, 797 P.2d 14 (1990). In Starke, the court of appeals held that Allstate was obligated under an automobile insurance policy for prejudgment interest on bodily injury damages awarded against its insured in excess of Allstate's policy limit for bodily injury liability. We reversed, holding that Allstate had no such liability under its policy, which was identical in pertinent part to the insurance policy involved in this case. Our decision in Starke is controlling in the present case unless a different result is compelled by an additional argument advanced here by the plaintiff, Patrick N. Allen. Allen contends that Allstate's policy must be construed to allow prejudgment interest in excess of the bodily injury liability limit in order to comply with the requirements of the Colorado Auto Accident Reparations Act, §§ 10-4-701 to -723, 4A C.R.S. (1987 & 1989 Supp.). We are not persuaded by this argument. Accordingly, we reverse the judgment of the court of appeals and return the case to that court with directions to reinstate the judgment for Allstate.

I.

On September 22, 1985, Patrick N. Allen received severe bodily injuries when his motorcycle collided with an automobile driven by Doris A. Chromy. The following month, Allen filed a personal injury action in El Paso County District Court against Doris A. Chromy, and later joined Donald G. Chromy, her husband and the co-owner of the automobile, as a defendant.

At the time of the accident, the Chromys maintained the minimum amount of automobile insurance coverage for bodily injury allowed by law. The policy provided, as relevant, a $25,000 liability limit for "all damages which the insured shall be legally obligated to pay because of bodily injury sustained by any person," and additional coverage for "all interest on any judgment entered in such suit until Allstate has paid, tendered or deposited in court that part of the judgment which does not exceed the limit of Allstate's liability thereon." (Emphasis added.)

On February 7, 1986, Allstate offered Allen its $25,000 policy limit, conditioned on a release of all claims against the Chromys. Allen rejected the offer. On November 18, 1986, Allen in turn proposed a settlement, conditioning release of his claims against the Chromys on payment of Allstate's $25,000 policy limit, plus prejudgment interest "on the verdict expectancy" accrued to date. Allstate refused, explaining that in its view, prejudgment interest was not covered by the policy. Allen made a somewhat modified offer on January 5, 1987, but this too was rejected.

On May 13, 1987, after trial to a jury, judgment was entered against the Chromys for $473,000, plus costs and accrued prejudgment interest at nine percent per annum from the date of the accident pursuant to section 13-21-101, 6A C.R.S. (1987), ¹ for a total of $543,287.84. The judgment also provided that postjudgment interest would accrue from April 29, 1987--the date the jury's verdict was returned--"as provided by law." On the same day judgment was entered, Allstate paid Allen its $25,000 policy limit in partial satisfaction of the judgment. Later, Allstate paid the costs assessed by the court.

Allen then attempted to recover prejudgment interest by obtaining a writ of garnishment naming Allstate as garnishee. Allstate answered by denying that it held or possessed any personal property belonging to its insured. Allen traversed Allstate's answer. In its brief in the district court on the issues presented by the traverse, Allstate asserted that the prejudgment interest awarded Allen was a part of the damages assessed against the Chromys, and therefore payment of the $25,000 policy limit for damages fulfilled its obligations for prejudgment interest under the Chromys' policy. Allen, however, took the position that Allstate remained liable for prejudgment interest under the policy's "additional payments" provision for payment of "all interest on any judgment entered" against its insureds. In addition to urging this result on the basis of the language of the policy itself, Allen asserted that a contrary construction would cause Allstate's policy to be a non-complying policy under section 10-4-706(1)(a), 4A C.R.S. (1987), by failing to provide a minimum of $25,000 in bodily injury liability coverage, "exclusive of interest and costs," id., and hence void as against public policy.

The trial court denied Allen's traverse. It ruled:

The policy states that in addition to policy limits, the insurer will pay, "All interest on any judgment entered in such suit until Allstate has paid, tendered or deposited in court that part of the judgment which does not exceed the limit of Allstate's liability thereon." The judgment in this case was $543,287.84; Allstate's liability was $25,000. Since Allstate tendered that amount on the date of judgment, Allstate has no further obligation, other than costs, which were paid. The Colorado Statute, C.R.S. 13-21-101 language is clear; the policy language is clear and in this case, Allstate has done all that it is required to do.

The court of appeals reversed without discussion apart from citation of its recent decision on the same issue in Starke v. Allstate Ins. Co., 771 P.2d 3 (Colo.App.1988), rev'd, 797 P.2d 14 (Colo.1990).

II.

In Allstate Ins. Co. v. Starke, 797 P.2d 14 (Colo.1990), we held that Allstate was not liable for prejudgment interest in excess of its bodily injury liability limit for damages under its insurance policy. The policy obligated it to pay, among other things, "all damages which the insured shall be legally obligated to pay because of ... bodily injury sustained by any person," and contained an "additional payments clause" requiring it to pay "all interest on any judgment entered in such suit until Allstate has paid, tendered or deposited in court that part of the judgment which does not exceed the limit of Allstate's liability thereon." In contrast to the bodily injury coverage provisions, the "additional payments" clause contained no limit on liability. We reasoned that the agreement in the "additional payments" clause to pay "interest on any judgment" could not be construed to include prejudgment interest. Therefore, under the well-settled rule that prejudgment interest is an element of damages, see, e.g., Davis Cattle Co., Inc. v. Great W. Sugar Co., 393 F.Supp. 1165 (D.Colo.1975), aff'd, 544 F.2d 436 (10th Cir.1976), cert. denied, 429 U.S. 1094, 97 S.Ct. 1109, 51 L.Ed.2d 541 (1977); Bankers Trust Co. v. International Trust Co., 108 Colo. 15, 113 P.2d 656 (1941); Omaha & Grant Smelting & Refining Co. v. Tabor, 13 Colo. 41, 21 P. 925 (1889); Browne v. Steck, 2 Colo. 70 (1873), Allstate's payment of its policy limit for damages discharged it from liability for any prejudgment interest exceeding that amount.

The insurance policy at issue in the present case contains bodily injury liability and "additional payments" clauses identical to those present in Starke. Our decision in Starke, therefore, establishes that, contrary to the holding of the court of appeals, Allstate is not liable for prejudgment interest in excess of its policy limit unless a different result is required by the Colorado Auto Accident Reparations Act, §§ 10-4-701 to -723, 4A C.R.S. (1987 & 1989 Supp.) ("no-fault act").

III.

The no-fault act mandates that every owner of a motor vehicle operated on Colorado's public highways obtain a complying automobile insurance policy. § 10-4-705(1), 4A C.R.S. (1987). The requirements for a complying policy are set forth in section 10-4-706, 4A C.R.S. (1987). As relevant to the present case, the policy must include "[l]egal liability coverage for bodily injury or death arising out of the use of the motor vehicle to a limit, exclusive of interest and costs, of twenty-five thousand dollars to any one person in any one accident.... " § 10-4-706(1)(a) (emphasis added).

Allen argues that Allstate's policy with the Chromys fails to comply with the no-fault act unless the policy is construed to provide the requisite minimum of $25,000 in liability coverage, plus costs, prejudgment interest and postjudgment interest. We...