Bolman v. Plymouth Rock Assurance Corp.

• Decision Date: 12 July 2012
• Docket Number: No. 11–P–237.,11–P–237.
• Citation: 971 N.E.2d 300,82 Mass.App.Ct. 135
• Parties: Diane P. BOLMAN, executrix, v. PLYMOUTH ROCK ASSURANCE CORPORATION.
• Court: Appeals Court of Massachusetts

82 Mass.App.Ct. 135

971 N.E.2d 300

Diane P. BOLMAN, executrix,¹

v.PLYMOUTH ROCK ASSURANCE CORPORATION.

No. 11–P–237.

Appeals Court of Massachusetts, Essex.

Argued Nov. 1, 2011.

Submitted July 12, 2012.

Lori A. Cianciulli, Beverly, for the plaintiff.

Christopher J. O'Rourke, Wellesley, for the defendant.

Andrew M. Abraham, Boston, & J. Michael Conley, Braintree, for Massachusetts Academy of Trial Attorneys, amicus curiae, submitted a brief.

Present: TRAINOR, MILKEY, & AGNES, JJ.

TRAINOR, J.

This is an appeal from a corrected judgment of the Superior Court confirming an award following the arbitration of a claim by the plaintiff, Diane P. Bolman, as executrix of the estate of Natalie S. Parker, for damages against the defendant, Plymouth Rock Assurance Corporation (Plymouth Rock). The claim sought underinsured motorist benefits pursuant to a Massachusetts automobile insurance policy (the Plymouth Rock policy) issued to Parker.

Background. The claim arises out of a motor vehicle accident that occurred on January 4, 2002, which resulted in serious injuries to Parker. Before her death on June 9, 2003, Parker reached a settlement agreement with the tortfeasor's insurer, Liberty Mutual Insurance Company (Liberty Mutual), for $100,000, the bodily injury per person liability coverage limit. Parker herself was insured under the Plymouth Rock policy. After Parker's death, the plaintiff, as executrix of Parker's estate, brought an underinsured motorist benefits claim against Plymouth Rock to recover the excess damages which Parker had sustained in the accident.

After making a demand upon Plymouth Rock for payment of first party underinsurance benefits, the parties were unable to agree on the amount of damages sustained by Parker and her estate. As a result, the plaintiff filed an application to compel arbitration in the Superior Court on December 31, 2007. The dispute was arbitrated, on March 18 and 29, 2010, to determine the total damages exclusive of interest and offsets. There was no written arbitration agreement between the parties beyond the Plymouth Rock policy, nor was there a written submission of issues to the arbitrator.

On May 7, 2010, the arbitrator issued a decision awarding the plaintiff $150,000 in gross damages. The parties agreed that they would resolve among themselves any offsets from the amount of gross damages. The arbitrator also wrote in the final paragraph of his decision: “The parties further agree that any question of interest will be determined by the court.” Though the parties disagree on the exact nature of the agreement referenced by the arbitrator, there is no evidence on the record of the intent of the parties regarding interest beyond the text of the arbitrator's decision. A plain reading of the arbitrator's decision indicates that the interest issue was reserved to a Superior Court judge.

On or about May 27, 2010, Plymouth Rock tendered a check to Parker's estate in the amount of $42,000, after deducting $108,000 from the arbitrator's gross award to account for Parker's receipt of $100,000 as payment for bodily injury from Liberty Mutual, as well as $8,000 as payment under the personal injury protection (PIP) provision in the Plymouth Rock policy. The plaintiff does not dispute the amounts deducted, but contends that deductions or offsets are not appropriately made until after the addition of preaward interest to the arbitrator's award of gross damages.²

Following the arbitrator's decision, the plaintiff filed a motion to confirm the arbitrator's award, seeking postaward interest as well as preaward interest from December 31, 2007, the date of the filing of the application to compel arbitration, through May 7, 2010, the date of the gross damages award. The plaintiff also sought to have preaward and postaward interest calculated on the $150,000 gross award. Plymouth Rock opposed the motion on the grounds that the plaintiff is not entitled to preaward interest and that any interest awarded should be calculated on the $42,000 net award.

In a corrected judgment entered on January 20, 2011, a Superior Court judge confirmed the $150,000 gross award, but ordered it reduced to $42,000 as a result of the offsets. The judge awarded postaward interest calculated on the net award of $42,000, and declined to award preaward interest.

The plaintiff now appeals. She does not dispute the $42,000 net award, but argues that she is entitled to preaward interest, and that such interest should be calculated on the gross award of $150,000.

Discussion. Massachusetts law authorizes two types of arbitrationagreements: (1) a written agreement to submit an existing controversy to arbitration, and (2) a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties. ³G.L. c. 251, § 1. See Chase Commercial Corp. v. Owen, 32 Mass.App.Ct. 248, 252, 588 N.E.2d 705 (1992). The agreement at issue in this case is of the second type. Such an agreement is regarded as valid and enforceable, and is subject to the same rules of law and equity for the revocation of any contract. Ibid.

General Laws c. 175, § 113L, provides the requirements for uninsured and underinsured motorist coverage. See G.L. c. 175, § 113L(1), (2) & (4); Cardin v. Royal Ins. Co. of America, 394 Mass. 450, 452, 476 N.E.2d 200 (1985); Chenard v. Commerce Ins. Co., 56 Mass.App.Ct. 576, 579–582, 778 N.E.2d 1031 (2002), S. C.,440 Mass. 444, 799 N.E.2d 108 (2003). Generally, § 113L addresses the provision of compensation due an injured party in the absence or insufficiency of the insurance carried by the person legally responsible for the injury. See Amica Mut. Ins. Co. v. Bagley, 28 Mass.App.Ct. 85, 88, 546 N.E.2d 184 (1989). Under the Plymouth Rock policy, as required by G.L. c. 175, § 111D, when the insurer and the insured cannot agree after an injury on the amount of damages owed, the issue shall be submitted to arbitration.⁴

We must decide five issues. First, whether preaward interest is authorized by the Plymouth Rock policy and by Massachusetts law as part of the arbitration award. Second, whether the interest issue can be reserved by the parties and the arbitrator for determination by a Superior Court judge. Third, if the interest issue is properly before us, whether preaward interest should have been awarded. Fourth, whether the postaward interest and preaward interest, if any, should be calculated on the amount of gross damages as determined by the arbitrator, or on the amount of net damages as determined by the judge. Fifth, whether postaward interest should be calculated on the net award alone, or on the net award plus preaward interest, if any.

1. Preaward interest. The Supreme Judicial Court has held that “the entitlement of a party to preaward interest is a decision that is within the purview of the arbitrators.” Connecticut Valley Sanitary Waste Disposal, Inc. v.Zielinski, 436 Mass. 263, 271, 763 N.E.2d 1080 (2002). Generally, preaward interest “compensates the prevailing party for loss of the use of money that party, as determined by the judgment, should have had in the first place and not been obliged to chase. In that way compensatory damages are truly compensatory and, in monetary terms, the winner is no less well off for the chase.” City Coal Co. of Springfield v. Noonan, 434 Mass. 709, 716, 751 N.E.2d 894 (2001), quoting from Makino, U.S.A., Inc. v. Metlife Capital Credit Corp., 25 Mass.App.Ct. 302, 320–321, 518 N.E.2d 519 (1987).

Preaward interest clearly is permitted by our case law, and such interest can be part of the damages a plaintiff “is legally entitled to recover” under G.L. c. 175, § 111D, inserted by St.1959, c. 438, § 2.

2. Reservation of interest issue. Having determined that preaward interest can be awarded to a plaintiff in the arbitration of an underinsurance benefits claim, we turn to the issue whether the interest issue can be reserved for consideration by a Superior Court judge.

Generally, in a proceeding to confirm an arbitration award, a judge may not alter an arbitrator's decision that allows, denies, or fails to mention preaward interest. See Reilly v. Metropolitan Property & Liab. Ins. Co., 412 Mass. 1006, 1007, 588 N.E.2d 628 (1992); Blue Hills Regional Dist. Sch. Comm. v. Flight, 10 Mass.App.Ct. 459, 472–473, 409 N.E.2d 226 (1980); S. C., 383 Mass. 642, 421 N.E.2d 755 (1981); Sansone v. Metropolitan Property & Liab. Ins. Co., 30 Mass.App.Ct. 660, 661–663, 572 N.E.2d 588 (1991); Beals v. Commercial Union Ins. Co., 61 Mass.App.Ct. 189, 192, 808 N.E.2d 824 (2004); Diaz v. Cruz, 76 Mass.App.Ct. 773, 775, 926 N.E.2d 1182 (2010).

In Sansone, we vacated the addition of preaward interest by a Superior Court judge. We concluded that the fundamental purpose of arbitration is to “avoid[ ] court proceedings” and is better “served by considering, in the absence of an explicit agreement to the contrary, pre-award damage claims, including interest, to have been submitted to arbitration” (emphasis supplied).⁵Sansone, supra at 663–664, 572 N.E.2d 588. In Diaz, we discussed the possibility of an arbitrator intending to “leave for the court the power to award preaward interest,” and we concluded that to do so the “arbitrator must at least state that conclusion in the award before the plaintiff can seek prejudgment interest in a court” (emphasis supplied). Diaz, supra. Our cases suggest that the issue of preaward interest properly may be reserved to a reviewing court, under certain circumstances.

In this case, unlike in Sansone and Diaz, the arbitrator's award was not silent on the issue of preaward interest, but made reference to an explicit agreement that the issue would not be submitted to the arbitrator and that “[t]he parties ... agree that any question of interest will be determined by the court.” There is no written arbitration agreement,⁶ but a plain reading of the arbitrator's decision indicates that the parties unambiguously ⁷ intended to limit the scope of...