Buckhannon-Upshur County Airport Authority v. R & R Coal Contracting, Inc., BUCKHANNON-UPSHUR
| Decision Date | 17 December 1991 |
| Docket Number | BUCKHANNON-UPSHUR,No. 20211,20211 |
| Court | West Virginia Supreme Court |
| Parties | COUNTY AIRPORT AUTHORITY, Plaintiff Below, Appellee, v. R & R COAL CONTRACTING, INC., a West Virginia corporation, a/k/a R & R Contracting, Inc., a corporation; W.A. Ryder Contracting Company, Inc., a corporation; Willie A. Ryder; Allied Fidelity Insurance Company, a corporation; L. Robert Kimball and Associates, a Pennsylvania sole proprietorship; Continental Casualty Company, a corporation; Buckeye Union Insurance Company, a corporation; Boston Old Colony Insurance Company, a corporation; Firemen's Insurance Company of Newark, New Jersey, a corporation; and Continental Insurance Company, a corporation, Defendants Below, Appellants. |
James A. Varner, Catherine D. Munster, McNeer, Highland & McMunn, Clarksburg, for Buckhannon-Upshur Airport Authority.
Michael L. Solomon, Busch, Jory, Smith & Talbott, Morgantown, for Buckeye Union Ins. Co., Boston Old Colony Ins. Co., Firemen's Ins. Co., Newark, N.J., and Continental Ins. Co.
W. Arch Irvin, Jr., Wayman, Irvin & McAuley, Pittsburgh, Pa., for L. Robert Kimball and Associates.
Stephen D. Annand, Shuman, Annand & Poe, Charleston, for Continental Cas. Co.
This case is before the Court upon a January 28, 1991, order of the Circuit Court of Upshur County which certified six questions to this Court. 1 The lower court This action involves one of two pending lawsuits 4 arising out of the construction of the Buckhannon-Upshur County Airport. On August 4, 1988, the Buckhannon-Upshur County Airport Authority (hereinafter referred to as BUAA) filed its original complaint against L. Robert Kimball & Associates (hereinafter referred to as Kimball), the insured of Continental Casualty Company (hereinafter referred to as Continental Casualty), and R & R Coal Contracting, Inc., a/k/a R & R Contracting, Inc., W.A. Ryder Contracting Company, Inc. and Willie A. Ryder (hereinafter referred to collectively as R & R), the insureds of the R & R insurers. These four defendants had performed work on the Buckhannon-Upshur County Airport construction project. On about October 23, 1989, Continental Casualty requested Kimball's consent to settle both of the pending lawsuits, as required by the insurance policy. 5 Kimball did not give the necessary consent to settle until March 2, 1990, and Continental Casualty did not receive written notice of Kimball's consent until March 8, 1990.
[186 W.Va. 585] answered each of the certified questions in the affirmative. We decline to address the certified questions as formulated since they are largely redundant. 2 The question which must be addressed is whether a liability insurer is liable, on behalf of its insured, to a third-party claimant for prejudgment and/or presettlement interest, in excess of those proceeds of insurance which are subject to the limits of liability provisions found within the insurance policy. 3 Upon review of the arguments of the parties and all the matters of record submitted before the Court, we disagree with the lower court's answer to this question
On April 6, 1990, Continental Casualty offered to pay its remaining policy limit of $1.9 million in full and final settlement of the claims made against Kimball in this action and the Ryan suit. BUAA rejected this offer on April 16, 1990.
Trial on this matter was scheduled to begin on October 29, 1990, when the parties agreed to postpone it to pursue settlement negotiations. As a result of these negotiations, BUAA demanded that Continental Casualty settle the claims against Kimball in both lawsuits by paying the remaining policy limit of $1.9 million plus $1.3 million in prejudgment or presettlement interest in excess of the policy limits.
Continental Casualty rejected BUAA's demand for the amount in excess of the stated policy limit and subsequently filed a declaratory judgment action against Kimball in the United States District Court for the Western District of Pennsylvania to The principal issue before this Court for determination is whether an insurer may be required to pay prejudgment interest that is awarded against its insured in excess of policy limits regardless of the liability limits under the insurance policy and regardless of the conduct of the insurer. The appellant asserts that the trial court erred in ruling that the insurer is liable for prejudgment interest because 1) the plain language of the insurance policy precludes such liability in excess of policy limits; 2) the public policy of this state in favor of prompt settlement of claims is already supported by existing state law; 7 and 3) the prejudgment interest statute found in West Virginia Code § 56-6-31 (1981) and the "doctrine of equitable interest" are not applicable to the facts of this case. The appellee, on the other hand, maintains that the insurance companies should be liable to third-party claimants for prejudgment interest in excess of policy limits as a matter of sound public policy. Moreover, the terms of the insurance policies in the present case are ambiguous as to the obligation of the insurers to pay prejudgment interest in addition to those policy proceeds which are the subject of the limits of liability provisions and therefore, the terms must be strictly construed against insurers.
[186 W.Va. 586] determine its liability under the policy. 6 Likewise, on October 26, 1990, BUAA also sought declaratory judgment relief by filing an amended complaint against Continental Casualty and four other insurers to determine the identical issue of the amount of coverage available to the original defendants under their respective insurance policies
First, the appellant contends that prejudgment interest is an element of compensatory damages under West Virginia Code § 56-6-31 and therefore, is afforded the same coverage as other types of damages under the insurance policy. The appellee asserts that with the enactment of West Virginia Code § 56-6-31, the legislature eradicated "the common law fiction" that interest is a form of damages depending on whether it is calculated before or after the judgment was entered, asserting rather that prejudgment interest is a cost which under the provisions of the insurance policy, the insurer must pay. 8
This Court has indicated that the purpose of a rule allowing prejudgment interest as part of damages for ascertainable pecuniary loss is "to fully compensate the injured party for the loss of the use of funds that have been expended." Bond v. City of Huntington, 166 W.Va. 581, 598, 276 S.E.2d 539, 548 (1981), superseded by statute as stated in Rice v. Ryder, 184 W.Va. 255, 400 S.E.2d 263 (1990) (emphasis added). 9
Then in 1981, the West Virginia Legislature amended West Virginia Code § 56-6-31 to provide, in pertinent part, that:
Except where it is otherwise provided by law, every judgment or decree for the payment of money entered by any court of this State shall bear interest from the date thereof, whether it be so stated in the judgment or decree or not: Provided, that if the judgment or decree, or any part thereof, is for special damages, as defined below, or for liquidated damages, Subsequent to the enactment of this statutory provision, this Court continued to indicate that prejudgment interest was a form of compensatory damages. See Beard v. Lim, 185 W.Va. 749, 408 S.E.2d 772 (1991); Grove ex rel. Grove v. Myers, 181 W.Va. 342, 346, 382 S.E.2d 536, 540 n. 4 (1989). Even the statute provides for prejudgment interest on special damages which includes compensatory damages. See W.Va.Code § 56-6-31. Hence, prejudgment interest, according to W.Va.Code § 56-6-31 and the decisions of this Court interpreting that statute, is not a cost, but is a form of compensatory damages intended to make an injured plaintiff whole as far as loss of use of funds is concerned.
[186 W.Va. 587] the amount of such special or liquidated damages shall bear interest from the date the right to bring same shall have accrued, as determined by the court. Special damages includes lost wages and income, medical expenses, damages to tangible personal property, and similar out-of-pocket expenditures, as determined by the court.
Consequently, the only way the appellee is entitled to prejudgment interest in excess of the policy limits is if such coverage is provided for in the insurance policy or if our public policy mandates such protection for the insured. It is clear, however, that the prejudgment interest statute does not require an insurer to pay prejudgment interest in any amount in excess of the policy limits contracted upon between the insurer and the insured, absent some provision in the policy to the contrary.
The appellants maintain that the insurance policies involved are not ambiguous and plainly preclude liability for prejudgment interest in excess of the policy limits. The appellee contradicts the...
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