Dittus v. Geyman

• Decision Date: 06 April 1976
• Docket Number: Docket No. 23372
• Citation: 242 N.W.2d 800,68 Mich.App. 433
• Parties: Marian C. DITTUS and Richard Dittus, Plaintiffs-Appellees, v. Robert Edward GEYMAN, Defendant, Michigan Mutual Liability Company, jointly and severally, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 800

242 N.W.2d 800

68 Mich.App. 433

Marian C. DITTUS and Richard Dittus, Plaintiffs-Appellees, v. Robert Edward GEYMAN, Defendant Michigan Mutual Liability Company, jointly and severally Defendant-Appellant.

Docket No. 23372.

Court of Appeals of Michigan.

April 6, 1976.

Released for Publication June 21, 1976.

Martin, Bohall, Joselyn, Halsey, Rowe & Jamieson by Lawrence A. Bohall, Detroit, for defendant-appellant.

Lopatin, Miller, Bindes & Freedman by Saul Bluestone, Detroit, for plaintiffs-appellees.

Before BASHARA, P.J., and WALSH and WHITE, ^* JJ.

BASHARA, Presiding Judge.

The appellant, Michigan Mutual Liability Company, appeals from a judgment holding the appellant responsible for both prejudgment and post judgment interest on a verdict that was within the limits of a liability policy issued by the appellant.

This action arose when an automobile driven by the appellee, Marian Dittus, was rear-ended by a car driven by Robert Geyman. Marian Dittus sued for personal injuries, while her husband, Richard, who is also an appellee, sought recovery for medical expenses and the loss of the services of his wife. At the time of the collision, Geyman was insured by the appellant on an automobile policy providing a $250,000 maximum liability for bodily injury to one person. Marian Dittus and Richard Dittus obtained verdicts of $200,000 and $35,000 respectively.

After the verdict, costs were taxed on favor of the appellees in the amount of $1,426. The court also awarded the appellees interest of $45,118 at the rate of 6% On the verdict from the date of the complaint to the date the judgment was paid. The appellant paid the appellees $251,426. This amount includes the $235,000 verdict, $15,000 in prejudgment interest and $1,426 in costs.

The payment to the appellees was subject to an agreement and satisfaction of judgment which provided that Geyman was relieved from any further personal liability. It was further agreed that the appellees could test in a subsequent action the liability of the appellant for prejudgment interest in excess of the $15,000 paid by the appellant. The agreement was in accordance with the appellant's stipulation that it was liable for prejudgment interest, but only up to an amount that would not exceed the policy limits.

The applicable insurance provisions are as follows:

'Bodily Injury Liability

'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:

'A. bodily injury . . . sustained by any person;

'Supplementary Payments:

To pay, in addition to the applicable limits of liability:

'(a) * * * all costs taxes against the insured in any such suit 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;'

Appellees contend that prejudgment interest on the entire judgment is appropriate under either of two theories. First, it was argued at oral hearing that prejudgment interest is covered by the provisions in the insurance contract pertaining either to 'damages' or 'costs'. The Supreme Court in Ballog v. Knight Newspapers, Inc., 381 Mich. 527, 164 N.W.2d 19 (1969), construed the prejudgment interest statute, M.C.L.A. § 600.6013; M.S.A. § 27A.6013, as procedural. Damages are substantive, therefore prejudgment interest must be recoverable as costs under the supplementary payments provision. Second, appellees propose that as Michigan allows an injured party to recover interest on the entire judgment from the date of the complaint, public policy mandates that insurance companies pay prejudgment interest on the entire verdict because they control the litigation.

It is appellant's position that the bodily injury liability provision requiring the insurer to pay 'all sums which the insured shall become legally obligated to pay as damages' means that the insurer is liable for any judgment including prejudgment interest, but only up to an amount that does not exceed the policy limits.

The first issue for our consideration is whether prejudgment interest is recoverable as interest or costs under the supplementary payments provision, or as damages under the bodily injury liability clause.

The law is well settled in Michigan that policies containing ambiguities are construed against the insurer and most favorably to the insured. Weaver v. Michigan Mutual Liability Co., 32 Mich.App. 605, 609, 189 N.W.2d 116 (1971). Moreover, insurance policies must be construed in accordance with the ordinary and popular sense of the language in order to avoid strained interpretations. Cora v. Patterson, 55 Mich.App. 298, 300, 222 N.W.2d 221 (1974).

The portion of the supplementary payments clause relating to interest provides that the insurance company shall pay 'all interest on the entire amount of any judgment * * * 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 * * *'. This language in plain and unambiguous terms provides that the insurer will pay post judgment interest on the entire amount of the judgment. Prejudgment interest is not recoverable under this provision of the policy.

We next consider whether prejudgment interest is recoverable as a cost under the supplementary payments provision. Costs were not awardable at common law. Booth v. McQueen, 1 Doug. 41 (Mich. 1843). Costs are only recoverable when there is statutory authority awarding them. Hester v. Commissioners of Parks and Boulevards of City of Detroit, 84 Mich. 450, 47 N.W. 1097 (1891). In general the specification of items which are taxable as costs and the prescription of amounts are enumerated in R.J.A. Chapters 24 and 25. See M.C.L.A. § 600.2401, and included Practice Commentary in Vol. 33, M.S.A. § 27A.2401. Prejudgment interest is not included therein, but rather provided for in R.J.A. Chapter 60. M.C.L.A. § 600.6013; M.S.A. § 27A.6013. We conclude that prejudgment interest is not recoverable under the supplementary payments provision covering costs.

It remains for us to determine whether prejudgment interest is covered by the bodily injury provision requiring the insurer to pay 'all sums which the insured shall become legally obligated to pay as damages * * *'. We note that appellant has stipulated that it is liable for prejudgment interest as damages, but only to the extent that the amount of interest falls within the policy limits. The distinction between interest on a judgment and interest as an element of damages had been often noted. The former is computed and added to the general verdict. Motyka v. Detroit, Grand Haven & Milwaukee Ry. Co., 260 Mich. 396, 398, 244 N.W. 897 (1932), Swift v. Dodson, 6 Mich.App. 480, 149 N.W.2d 476 (1967). The latter is awarded by the jury as an element of damages. Vannoy v. City of Warren, 26 Mich.App. 283, 288, 182 N.W.2d 65 (1970). Prejudgment interest from the date of the complaint is purely statutory. M.C.L.A. § 600.6013; M.S.A. § 27A.6013, and is computed and added to the general verdict. Waldrop v. Rodery, 34 Mich.App. 1, 4, 190 N.W.2d 691 (1971). Prejudgment interest is not an element of damages covered by the bodily injury liability provisions. Our determination that prejudgment interest is not covered by the 'damages' provision in the insurance policy, however, in no way affects the appellant's stipulation to which it is bound.

We now turn our attention to whether public policy requires the appellant to pay all prejudgment interest on any verdict that is within the maximum policy limits of the insurance policy.

The issue of liability of insurance companies for prejudgment interest was recently considered in Cates v. Moyses, 5m Mich.App. 405, 226 N.W.2d 106 (1975), Modified 394 Mich. 762, 228 N.W.2d 380 (1975). In Cates the plaintiff obtained a judgment for $60,000 against the defendant. The defendant's insurance policy contained a maximum liability limit of $10,000. The supplementary payments clause in Cates was identical in its key language to the corresponding provision in the instant case. Prior to commencement of the lawsuit the defendant's insurance company advanced $1,489 to the plaintiff. After a judgment was obtained against the defendant the insurer admitted a remaining liability of $8,511 under its policy, plus interest on that amount from the date the suit was commenced. Finding that the insurer was bound by its judicial admission, that it was liable for prejudgment interest, the Court of Appeals in Cates went on to hold that the insurance company was liable for prejudgment interest on the entire verdict under the authority of Cosby v. Pool, 36 Mich.App. 571, 194 N.W.2d 142 (1971), Lv. den. 386 Mich. 782 (1972).

In Cosby the plaintiffs obtained a $206,000 verdict against the defendant. The supplementary payments clause in the defendant's insurance policy provided that the insurer would pay 'interest accruing on verdict or after judgment up to the date of payment or tender to the judgment creditor * * * upon the company's share of such verdict or judgment * * *'. The policy was issued in 1963 when the interest statute, M.C.L.A. § 600.6013; M.S.A. § 27A.6013, only allowed recovery of post judgment interest. P.A.1965, No. 240 amended M.C.L.A. § 600.6013; M.S.A. § 27A.6013, to allow recovery of prejudgment interest. The trial court refused to allow prejudgment interest on the theory that it was an unconstitutional impairment of a contractual obligation. The Court of Appeals reversed the holding that the amendment did not affect the substantive undertaking of either the insured or the insurer. The supplementary payments provision clearly provided that the insurer assumed the risk to pay prejudgment and post judgment interest on its share of the verdict....