Dade County v. American Re-Insurance Co., RE-INSURANCE

• Decision Date: 09 April 1985
• Docket Number: No. 84-1511,RE-INSURANCE,84-1511
• Citation: 467 So.2d 414,10 Fla. L. Weekly 922
• Parties: 10 Fla. L. Weekly 922 DADE COUNTY, a political subdivision of the State of Florida, Appellant, v. AMERICANCOMPANY, a Delaware corporation doing business in the State of Florida, Appellee.
• Court: Florida District Court of Appeals

Page 414

467 So.2d 414

10 Fla. L. Weekly 922

DADE COUNTY, a political subdivision of the State of Florida, Appellant, v. AMERICAN RE-INSURANCE COMPANY, a Delaware corporation doing business in the State of Florida, Appellee.

No. 84-1511.

District Court of Appeal of Florida,

Third District.

April 9, 1985.

Robert A. Ginsburg, Co. Atty., and John E. Finney and Gary Oldehoff, Asst. Co. Attys., for appellant.

Fowler, White, Burnett, Hurley, Banick & Strickroot and Michael A. Mullen, Miami, for appellee.

Before HENDRY, NESBITT and FERGUSON, JJ.

NESBITT, Judge.

Dade County (Dade) appeals a final summary judgment entered for American Re-Insurance Company (American) on an insurance contract dispute. We reverse in part.

The facts in this case are undisputed. By an indemnity insurance contract, American indemnified Dade for losses in excess of $100,000 at a standard premium rate of $1.50 per $100 of transit revenue. ¹ The contract provided for annual accountings and adjustments of premiums. These adjusted or retrospective premiums were to be computed by dividing the "incurred losses" by the "loss adjustment factor." ² These premiums were subject to a "minimum retrospective premium" in an amount of fifty per cent of the standard premium or, in other words, $0.75 per $100 of transit revenue, and a "maximum retrospective premium" in an amount of 100 per cent of the standard premium. The term of the contract was three years, commencing on February 26, 1973 and terminating on February 26, 1976.

The computation of the retrospective premiums was to be done annually with the "incurred losses," as used in the equation and defined in the policy, being "valued as of a date six months after the expiration of [the applicable] period." American was to compute the retrospective premium "as soon as practicable after [the] valuation date." Following the expiration of the three-year term of the insurance contract, retrospective premiums were to be calculated as follows:

A computation of the retrospective premium, based upon the standard premium and the incurred losses for the three year period, such losses to be valued as of a date six months after the expiration of such period, shall be made by the Company as soon as practicable after such valuation date.

Such computation of the retrospective premium for the three year period shall be final if (1) all claims have been closed or it is apparent that the retrospective premium will exceed the maximum retrospective premium [100 per cent of the standard premium], and (2) within ninety days the Company and the Insured agree that the computation be final.

If such computation is not final, a further computation of retrospective premium based upon incurred losses valued as of a date eighteen months after termination of the contract shall be made by the Company as soon as practicable after such valuation date. Such further computation shall be final unless, within ninety days the Company or the Named Insured requests that a further computation be authorized. Any subsequent computations, to be made only at intervals of twelve months, shall each be subject to a similar procedure.

After each computation, if the premium thus computed exceeds the premium paid, the Named Insured shall pay the difference to the Company, subject to the maximum retrospective premium for the period; if less, the Company shall return the difference to the Named Insured, subject to the minimum retrospective premium for the period.

Six months after each of the three annual terms, American computed the retrospective premiums. These calculations were made on September 6, 1974, September 2, 1975 and October 19, 1976, respectively. Each calculation resulted in a rebate of the retrospective premium to Dade based on the minimum retrospective premium of $0.75 per $100 of transit revenue. The last retrospective premium was paid to Dade on November 3, 1976, bringing the total of the retrospective premiums rebated to Dade to $289,372.

Soon thereafter, a judgment in the amount of $617,000 was entered against Dade on a claim covered by the policy. American immediately recalculated the retrospective premium and determined that the maximum premium (100 per cent of the standard premium of $1.50 per $100 of transit revenue) applied. Accordingly, on December 8, 1976, American demanded of Dade the repayment of the rebated retrospective premiums of $289,372.

Over the next several years, while the underlying judgment of $617,000 against Dade was on appeal, American continued its demand for the repayment of the $289,372 premium. The $617,000 judgment was ultimately affirmed on appeal with interest and costs bringing the total to $806,047.53 and the supreme court denied review in June 1981. The judgment was then paid in full by Dade. At this point, Dade conceded that it owed American the $289,372 retrospective premium. The total amount American owed Dade pursuant to the indemnity insurance contract, however, was $675,407.74. Accordingly, on June 16, 1981, Dade requested American to issue its check for $386,035.74, which sum was the total amount due under the contract minus the retrospective premium Dade owed to American.

On August 3, 1981, American tendered to Dade a payment of $308,785.31 as full satisfaction of its obligation. This lesser amount was based upon an interest charge of $77,250.43 on the past due retrospective premium. Dade rejected this offer, returned the check and demanded American pay $386,035.74. When American refused to comply, Dade instituted this action against American for $675,407.74, the entire amount due under the contract, and interest thereon. American counterclaimed for the $289,372 retrospective premium and interest thereon.

On cross-motions for summary judgment, the trial court initially entered an order which on its face granted Dade's motion and denied American's motion. The order, however, awarded Dade $386,035.74 plus interest from July 16, 1981. ³ Thus, the court in effect granted summary judgment on both parties' substantive claims, but denied American's claim for interest.

On rehearing, the trial court changed its position and determined that American was entitled to prejudgment interest on the $289,372 retrospective premium from December 8, 1976 through June 16, 1981. The court determined that the retrospective premium was due when demanded by American on December 8, 1976 and, therefore, interest was due from that date. The court further found that Dade's offer of compromise for $386,035.74 on June 16, 1981 constituted a tender of debt which stopped the running of interest on the past-due retrospective premium. The court also found that American's offer of $308,785.31 on August 3, 1981 constituted a full legal tender of any obligation it owed to Dade. Following these findings, the court then determined that Dade was entitled to $288,734.41 under the terms of the insurance contract. This sum was reached by taking the entire amount due under the contract ($675,407.74) and subtracting both the retrospective premium due to American ($289,372) and the interest calculated thereon from December 8, 1976 through June 16, 1981 (the court determined the interest to be $97,301.33). Despite this determination, the court then entered a judgment for American in the amount of $386,673.33 (the amount of the retrospective premium plus the determined interest) and "denied" Dade's motion for summary judgment. This appeal followed.

Without first reaching the semantic problems with the order, which on its face would require Dade to pay American $386,673.33 and collect nothing under the insurance contract, we find it appropriate to set out what is not in dispute. First, it is clear that American owes Dade a principal amount of $675,407.74 under the indemnity insurance contract. Second, it is also clear that Dade owes American a principal amount of $289,372 pursuant to the retrospective premium provisions in the contract. It follows that Dade was entitled to summary judgment on its claim and American was entitled to summary judgment on its counterclaim. The issues on appeal deal solely with the amount of prejudgment interest to which each party is entitled, if any.

Dade's initial contention is that it is not liable for any amount of interest because of the doctrine of sovereign immunity. The trial court specifically rejected this argument and ruled that sovereign immunity was not a bar to American's counterclaim or the prejudgment interest claimed therein. We find the ruling of the trial court was correct.

It is undisputed that Dade was authorized by law to enter into the indemnity insurance contract here involved. Under basic hornbook law, in order to be valid, a contract must be mutually enforceable. In accord with this principle, the supreme court has recently held that sovereign immunity is not a valid defense to a breach of contract action brought against the state where the state had legal authority to enter the contract. Pan-Am Tobacco Corp. v. Department of Corrections, 9 FLW 73 (Fla. March 1, 1984). Accordingly, the defense of sovereign immunity will not protect Dade from American's counterclaim for Dade's breach of the insurance contract.

Dade concedes that sovereign immunity is not a bar to American's claim for the $289,372 retrospective premium, but argues that since no provision for interest is included in the insurance contract, American is barred by sovereign immunity from collecting interest on this past-due amount. Dade relies upon the limiting language in Pan-Am indicating that the court's holding there "is applicable only to suits on express, written contracts into which the state agency has statutory authority to enter." --- So.2d at ----. We find that Dade is reading more into this language than the supreme court intended.

Asjust indicated, it is undisputed that Dade had legal authority to enter into the contract. Further, it cannot be seriously contended that American's counterclaim...