CALDER RACE COURSE v. Illinois Union Ins. Co.

• Decision Date: 12 May 1989
• Docket Number: No. 87-2458-CIV.,87-2458-CIV.
• Citation: 714 F. Supp. 1183
• Parties: CALDER RACE COURSE, INC., Plaintiff, v. ILLINOIS UNION INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Florida

714 F. Supp. 1183

CALDER RACE COURSE, INC., Plaintiff, v. ILLINOIS UNION INSURANCE COMPANY, Defendant.

No. 87-2458-CIV.

United States District Court, S.D. Florida.

May 12, 1989.

R. Bruce Wallace, Taylor, Brion, Buker & Greene, Miami, Fla., for plaintiff.

Joseph Lowe, Marlow, Shofi, Connell, Valerius Abrams, Lowe & Adler, Miami, Fla., for defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

ATKINS, District Judge.

THIS CAUSE is before the court on the plaintiff's and defendant's cross motions for summary judgment. After carefully considering the pleadings, the relevant law, and after a hearing, it is

ORDERED AND ADJUDGED that the plaintiff's motion is GRANTED. It is further

ORDERED AND ADJUDGED that the defendant's motion is DENIED.

The case before this court began with a tragic accident on October 31, 1981, which left a jockey paralyzed. David Ashcroft won a ten million dollar verdict on September 10, 1982, against Calder Race Course, Inc. ("Calder"); the trial court entered judgment on October 4. On November 18, five weeks later, the trial court vacated the judgment and entered an order for remittitur or in the alternative for a new trial. Ashcroft declined the remittitur and filed a notice of appeal; Calder cross appealed.

In February of 1985, the Third District Court of Appeals of Florida held that Ashcroft had assumed the risk of injury and ordered judgment be entered for Calder. After granting review, the Supreme Court of Florida reinstated the jury verdict. In September of 1986, final judgment was entered by the trial court in favor of Ashcroft for ten million dollars plus interest at the rate of twelve per cent from September 10, 1982, the date of the jury verdict.

Calder was insured under a policy written by Illinois Union Insurance Company ("Illinois Union") to a limit of $500,000 for injuries suffered by any jockey at the race course. The policy which was in effect during the applicable period also provided that, in addition to the $500,000 liability limitation, Illinois Union was responsible to pay:

All expenses incurred by the company, all costs taxed against the insured in any suit defended by the company and all interest on the entire amount of any judgment therein which accrues after entry of the judgment and before the company has paid or tendered or deposited in court that part of the judgment which does not exceed the limit of the company's liability thereon....

See Illinois Union's General/Automobile/Liability Policy, Supplementary Payments (a) (hereinafter "Primary Policy") (emphasis added). The policy also acknowledged that:

The insurance afforded by this policy is primary insurance except when stated to apply in excess of or contingent upon the absence of other insurance. When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of the company's liability under this policy shall not be reduced by the existence of such other insurance.

See Primary Policy, Conditions ¶ 6 (emphasis added).

Illinois Union was Calder's primary insurer. Calder had also purchased, as part of the same insurance package, an additional twenty million dollar excess umbrella policy from Mutual Fire, Marine and Inland Insurance Company ("Mutual Fire"). Mutual Fire's policy contained a similar supplementary payment provision and an "Other Insurance" provision that stated:

The insurance afforded by this policy shall be excess insurance over any other valid and collectible insurance available to the Insured and applicable to any part of ultimate net loss, whether such other insurance is stated to be primary, contributing, excess, contingent or otherwise, unless such other insurance applies specifically as excess insurance over the limits of liability provided by this policy. The Company shall not be liable for loss expense and legal expenses included in other valid and collectible insurance.

See The Mutual Fire, Marine & Inland Insurance Company's Policy, Other Conditions ¶ 6 (hereinafter "Excess Policy"). Mutual Fire's policy also contained a defense provision:

(a) The Company shall defend any suit seeking damages which are not payable on behalf of the Insured under the terms of any policy of underlying insurance (1) because such damages are not covered thereunder. . . .

* * * * * *

(c) With respect to any suit defended by the Company, it will pay in addition to the ultimate net loss:

(i) all expenses incurred by the Company and reasonable expenses incurred by the Insured at the Company's request, excluding loss of wages, salary or earnings. . . .

See Excess Policy, The Conditions ¶ 2. Mutual Fire's policy also provided:

In the event the Insured or the Insured's underlying insurer elect not to appeal a judgment in excess of the applicable underlying limit, the Company may elect to do so at its own expense and shall be liable for the taxable costs, disbursements and interest incidental thereto, but in no event shall the liability of the Company for ultimate loss exceed the amount set forth in LIMITS OF LIABILITY plus the taxable costs, disbursements and interest incidental to such appeal.

See Excess Policy, Occurence, Claim or Suit ¶ 2.

Ashcroft's injuries were covered by both Illinois Union's and Mutual Fire's policies. As the primary carrier, Illinois Union assumed the defense for Calder. Prior to trial, Mutual Fire retained counsel to assist. Mutual Fire handled the appeal for Calder and kept Illinois Union's counsel apprised of all developments.

In June of 1986, Mutual Fire was placed under supervision by the Commonwealth of Pennsylvania. Although Illinois Union sent a check for $500,000 payable to Calder on February 11, 1987, to date it has made no attempt to make a payment of any part of the interest on the Ashcroft judgment.

This court is now asked to resolve the question of whether Illinois Union is liable for interest which accrued during the period of appeal. Illinois Union disputes that it is obligated to pay interest on the entire judgment and argues that its contractual obligation to pay interest was altered by Mutual Fire's involvement in the Ashcroft appeal and its subsequent insolvency. Illinois Union also contends that it stopped the running of interest by tendering its policy limits. Illinois Union finally contests the conclusion that the interest that accrued during the Ashcroft appeal is "interest on a judgment" under the terms of the insurance policy.

Illinois Union argues that the liability of an insurer under the standard interest clause does not extend to interest on the entire amount of the judgment when there is an umbrella carrier. Since both carriers assumed identical obligations, Illinois Union urges that the post judgment interest should be shared on a pro rata basis. Moreover, Mutual Fire controlled the litigation and made the decision to appeal despite Illinois Union's desire to pay its policy limits and terminate the litigation. It would be unconscionable to compel Illinois Union to pay the entire amount of interest which accrued pending the appeal when Illinois Union wished to tender its policy limits and prevent the running of interest.

Calder stresses that the language of the policy drafted by Illinois Union is unambiguous. It states unequivocally that "the company will pay, in addition to the applicable limit of liability . . . all interest on the entire amount of any judgment. . . ." Calder points out that the Florida courts follow the national majority and support the position that an insurer is liable for interest on the entire judgment though that judgment exceeds its policy's limits.

The parties agree that the general rule in many jurisdictions, including Florida, provides that when a policy contains a supplementary payment provision the insurer is liable for interest on a judgment though the amount rendered the total in excess of the policy limits. See, e.g., Highway Casualty Co. v. Johnston, 104 So.2d 734 (Fla. 1958); Perez v. Otero, 415 So.2d 101 (Fla. Dist.Ct.App.1982); Allstate Insurance Co. v. Warren, 125 So.2d 886 (Fla.Dist.Ct.App. 1961); see also 8A J. Appleman, Insurance Law and Practice § 4894.25 (1981) (hereinafter "Appleman"). Illinois Union argues that this general rule does not apply when an excess carrier assumes the same obligation. The Florida district court of appeals considered a similar argument in Insurance Company of the State of Pennsylvania v. Puritan Insurance Co., 532 So.2d 35, 36 (Fla.Dist.Ct.App.1988). The Insurance Company of Pennsylvania ("Penn") argued that because both primary and excess carriers were responsible for funds due to the insured, the companies should share on a pro rata basis the interest incurred. The court rejected that argument saying that "had both carriers assumed identical obligations, that solution may have been considered." 532 So.2d at 36 (emphasis added). The court found that Puritan's policy qualified its obligation:

As respects occurrences covered under this policy, but not covered under the underlying insurance or under any other collectible insurance, the company shall . . . pay . . . all interest accruing after the entry of judgment.

532 So.2d at 36.

Although Illinois Union's and Mutual Fire's supplementary payment clauses are similarly worded, they did not assume identical obligations. Mutual Fire's policy also contains a qualification: "The Company shall not be liable for loss expense and legal expenses included in other valid and collectible insurance." See Excess Policy, Conditions ¶ 6. In Puritan, the "excess carrier's promise was limited to those cases in which no underlying insurer had assumed the obligation." 532 So.2d at 36. Mutual Fire, an excess carrier, limited its obligation to those occasions when no "other valid and collectible insurance" was available. "The obligation of a primary insurer is contractual in nature," and is "preemptive over the secondary excess...