Allstate Ins. Co. v. Starke

Decision Date10 September 1990
Docket NumberNo. 88SC581,88SC581
Citation797 P.2d 14
PartiesALLSTATE INSURANCE COMPANY, Petitioner, v. William R. STARKE; Jeffrey Glen Starke; Clifton Gregory Starke; Kate Josephine Starke; Matthew Martin Starke, a Minor Through his Parent and Guardian, William R. Starke; Andrew William Starke, a Minor Through his Parent and Guardian, William R. Starke; and William R. Starke, as Personal Representative of the Estate of Mary Kay Starke, Respondents.
CourtColorado Supreme Court

Zupkus & Ayd, P.C., Robert A. Zupkus and L. Kirk Leggott, Denver, for petitioner.

Law Offices of Daniel W. Dean, Daniel W. Dean, Fort Collins, for respondents.

Creamer and Seaman, P.C., Thomas J. Seaman, Denver, for amicus curiae, Colorado Defense Lawyers Ass'n.

Justice LOHR delivered the Opinion of the Court.

This case presents the issue of whether Allstate Insurance Company ("Allstate") is obligated under an automobile insurance policy to pay interest accruing prior to judgment on bodily injury damages assessed by a jury against Allstate's insured to the extent that the damages and interest exceed Allstate's policy limit for bodily injury liability. The district court, in a garnishment proceeding seeking to reach sums allegedly owed by Allstate to its insured, held that Allstate has no such obligation. The Colorado Court of Appeals reversed. Starke v. Allstate Ins. Co., 771 P.2d 3 (Colo.App.1988). We agree with the district court. 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.


On September 14, 1985, Mary Kay Starke died in an automobile accident in Larimer County, Colorado, resulting from the negligence of Bernard J. Lutter. At the time of the accident, Lutter carried automobile liability insurance with Allstate under a policy providing a $100,000 bodily injury liability limit.

Within ten days of the accident, Allstate tendered its $100,000 policy limit to Mary Kay Starke's family in exchange for a release of all claims against its insured. The Starkes rejected Allstate's offer and brought a wrongful death action against Lutter in Larimer County District Court.

On July 30, 1986, the Starkes obtained a judgment against Lutter in the amount of $241,555.44, plus costs and statutory interest at the rate of nine percent per annum from the date of the accident until paid. On the same day the judgment was issued, Allstate paid the Starkes its $100,000 liability obligation under the policy in partial satisfaction of the judgment. Allstate later paid the costs assessed by the court. The Starkes then sought to recover the balance owed on the judgment.

The Starkes obtained a writ of garnishment directed to Allstate as garnishee. The writ required that Allstate declare whether it possessed any personal property owned by Lutter. Allstate answered, denying that it possessed any such property. The Starkes traversed Allstate's answer to the writ, based on the position that Allstate was obligated for prejudgment interest on the damages assessed against Lutter for bodily injury even though this would require payment in excess of the bodily injury liability limit in the insurance policy. 1

The district court found that the policy limited Allstate's liability to $100,000 in damages for bodily injury per person, with an "additional payments" clause providing, in relevant part, for payment of "all court costs taxed against the insured" and "all interest on any judgment entered [against the insured] 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 district court concluded that Allstate was liable for up to $100,000 in damages under the policy's bodily injury coverage. It also found that the "additional payments" clause obligated Allstate for costs and postjudgment interest in excess of the $100,000 policy limit until Allstate paid that part of the judgment that did not exceed its policy limit, but did not obligate Allstate to pay prejudgment interest over and above the policy limit. Relying on these conclusions, the district court ruled that Allstate's payment of $100,000 on the date the judgment was issued satisfied its obligations under its insurance policy. The court, therefore, denied the Starkes' traverse to Allstate's answer and entered judgment for Allstate.

The court of appeals reversed, holding that the policy's "additional payments" clause was ambiguous in that it did not expressly limit Allstate's liability to postjudgment interest. Under the rule that any ambiguity in an insurance policy must be construed in favor of coverage and against limitations inuring to the benefit of the policy's drafter, the court held that Allstate was obligated to pay all interest, including prejudgment interest in excess of its $100,000 policy limit for bodily injury. Furthermore, Allstate's payment of the $100,000 policy limit following return of a verdict against its insured did not satisfy Allstate's obligation to pay prejudgment interest, and thus did not prevent accrual of postjudgment interest on the balance of the judgment against its insured. Finally, the court of appeals held, Allstate's initial tender of the $100,000 policy limit within ten days of the accident was conditioned upon release of its insured from further liability, and thus was insufficient to relieve Allstate of liability for interest accruing after the tender.


In this certiorari review proceeding, Allstate argues that the court of appeals erroneously categorized prejudgment interest as a form of interest rather than an element of compensatory damages subject to the $100,000 limit for bodily injury liability under its automobile insurance policy with Lutter. We agree.


A party bringing a tort action seeking damages for personal injuries may claim interest on any compensatory damages eventually awarded from the date the action accrued until satisfaction of the judgment. § 13-21-101(1), 6A C.R.S. (1987). The trial court entering judgment for a prevailing plaintiff who timely made such claim must add interest for the prescribed period at the statutory rate to the amount of damages awarded by the fact-finder, and include it as a part of the judgment. Id. 2 The judgment entered against Lutter in the present case complied with these requirements, providing for damages "of $241,555.44 plus interest at the rate of 9% per annum from and after September 14, 1985 [the date the claim accrued] until paid." This case requires that we decide to what extent Allstate is obligated under its insurance contract to satisfy this judgment against its insured.

Allstate's insurance policy with Lutter provides $100,000 in liability coverage for "all damages which the insured shall be legally obligated to pay because of ... bodily injury sustained by any person ... arising out of the ownership, maintenance or use ... of the owned automobile or a non-owned automobile." The policy also states that "the [$100,000] limit of bodily injury liability ... as applicable to ... 'each person' is the limit of Allstate's liability for all damages arising out of bodily injury sustained by one person in any one occurrence." (Emphasis added.)

The policy also contains an "additional payments" clause, whereby Allstate contracted to pay "all court costs taxed against the insured," and "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.)

Allstate maintains that any interest claimed on damages for personal injuries accruing prior to entry of judgment against the insured is part of those damages, and therefore recoverable under the bodily injury liability coverage provisions up to the $100,000 limit of the policy rather than as interest under the "additional payments" clause. In adopting this position, Allstate concedes that notwithstanding the policy's silence on this matter, it is liable for interest accruing before judgment to the extent that the damages awarded for bodily injury plus the prejudgment interest on such award do not exceed the policy limit for damages. The Starkes, on the other hand, argue that prejudgment interest falls within the "additional payments" clause provision for payment of "interest on any judgment," which is not subject to any limitation on coverage. The central issue in this appeal, then, is whether Lutter's personal obligation to pay prejudgment interest exceeding the policy limit for bodily injury should be paid by Allstate by virtue of the policy's terms.


Insurance policies are contracts, and must be construed to carry out the intent of the parties. E.g., Marez v. Dairyland Ins. Co., 638 P.2d 286, 288-89 (Colo.1981); Jennings v. Brotherhood Acc. Co., 44 Colo. 68, 77, 96 P. 982, 984 (1908); Beeson v. State Auto. and Cas. Underwriters, 32 Colo.App. 62, 69, 508 P.2d 402, 406, aff'd, 183 Colo. 284, 516 P.2d 623 (1973). Whenever possible, the parties' intent must be ascertained from the policy language alone. Columbian Nat. Life Ins. Co. v. McClain, 115 Colo. 458, 461, 174 P.2d 348, 350 (1946); Benham v. Mfrs. and Wholesalers Indem. Exch., 685 P.2d 249, 253 (Colo.App.1984). In construing a policy, words should be given their plain meaning according to common usage, Mandles v. Guardian Life Ins. Co. of Am., 115 F.2d 994 (10th Cir.1940); Kane v. Royal Ins. Co. of Am., 768 P.2d 678 (Colo.1989), and strained constructions should be avoided, see Standard Life & Acc. Ins. Co. of Detroit, Mich. v. McNulty, 157 F. 224 (8th Cir.1907); Johnson v. American Family Life Assur. Co. of Columbus, 583 F.Supp. 1450 (D.Colo.1984); Standard Marine Ins. Co. v. Peck, 140 Colo. 56, 342 P.2d 661 (1959).

We conclude that the "additional payments" provision of Allstate's policy with Lutter is incapable of supporting the construction urged by the...

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