Fratus v. Republic Western Ins. Co.

• Decision Date: 29 May 1997
• Docket Number: C.A. No. 94-0385B.
• Citation: 963 F.Supp. 113
• Parties: Joseph L. FRATUS, Stephanie L. Fratus and Carissa M. Fratus, p.p.a. Stephanie L. Fratus v. REPUBLIC WESTERN INSURANCE COMPANY.
• Court: U.S. District Court — District of Rhode Island

963 F.Supp. 113

Joseph L. FRATUS, Stephanie L. Fratus and Carissa M. Fratus, p.p.a. Stephanie L. Fratus v. REPUBLIC WESTERN INSURANCE COMPANY.

C.A. No. 94-0385B.

United States District Court, D. Rhode Island.

May 29, 1997.

Fred T. Polacek, Rodio & Ursillo, Ltd., Providence, RI, for Joseph L. Fratus, Stephanie L. Fratus, Carissa M. Fratus, p.p.a. Stephanie L. Fratus.

Jeffrey C. Schreck, Brown, Rudnick, Freed & Gesmer, Ltd., Providence, RI, for Republic Western Ins. Co.

OPINION

FRANCIS J. BOYLE, Senior District Judge.

Plaintiffs bring this diversity action against defendant insurer to recover under six insurance policies issued by defendant.

Plaintiff Joseph Fratus was employed by the State of Rhode Island to control traffic about a road construction site on Interstate Route 295 in the City of Cranston. On June 4, 1985, a U-Haul truck operated by defendant Joseph T. Obert ("Obert") was rented in Worcester, Massachusetts from U-Haul Co. of Western Massachusetts by Obert's employer, American Drywall Company, Inc. ("Drywall"). Obert was to pick up construction materials in Rhode Island and return them to Massachusetts. The truck veered into the construction site striking plaintiff Joseph Fratus and another state employee. The injuries suffered by Fratus rendered him a paraplegic.

Plaintiffs brought a diversity action in this court against Drywall, Obert and a bevy of U-Haul companies. The U-Haul defendants included the following: U-Haul Co. of Western Massachusetts, a Massachusetts corporation, from whom the truck was leased; Amerco Lease Co., a Nevada corporation, which held title to the truck; and U-Haul Co. of Western Michigan, a Michigan corporation, the registered owner of the truck. Following jury verdicts, judgments were entered in favor of plaintiffs. The jury returned verdicts against Obert and Drywall, his employer, and awarded damages to Fratus, Stephanie L. Fratus, his wife, and Carissa M. Fratus, his daughter. The jury awards were substantial: $2,900,00 to Fratus; $20,000 to his wife; and $250,000 to his daughter. On December 14, 1988, judgments were entered on the jury verdicts. (Following the litigation described below, a further form of Judgment was entered on July 2, 1990.) The plaintiffs calculate that the verdicts plus pre-judgment interest amount to $4,100,600 for Fratus; $28,200 for his wife; and $353,500 for his daughter. The jury also returned verdicts in favor of the U-Haul defendants on plaintiffs' claim that the truck operated by Obert had a defective brake system. On January 27, 1989, the defendant U-Haul companies moved to certify to the Rhode Island Supreme Court the issue of whether or not the U-Haul companies were jointly and severally liable for the judgments under the law of the State of Rhode Island. This court granted the motion by order dated March 30, 1989. The Rhode Island Supreme Court filed its opinion on June 5, 1990. It held that the U-Haul companies were not jointly or severally liable under Rhode Island law. Fratus v. Amerco, 575 A.2d 989 (R.I.1990). Therefore, the only parties liable after the Rhode Island Supreme Court ruling were Obert and Drywall. There is no entry in the docket of this court which suggests any further action in this court in the action against the U-Haul defendants.

No payments of any kind were made to plaintiffs before October 20, 1994. On that date, Republic Western Insurance Company ("Republic Western"), as the insurer of Obert and Drywall, paid the policy limit of one of the policies, number RL 01000, of $25,000 to plaintiffs. The named insured were Amerco (successor owner of the vehicle), U-Haul International, Inc., and their subsidiaries, affiliated, associated or allied companies. Republic Western Insurance Company agrees that this policy is available to plaintiffs' benefit as Obert and Drywall are insureds within its terms.

Plaintiffs brought this action in part seeking payment from Republic Western Insurance Company of interest on the judgments from December 14, 1988, the date of entry, to October 20, 1994, the date of payment of $25,000 by defendant. Additionally, plaintiffs make claims for the proceeds of five other policies of insurance issued by defendant claiming that the policies insured defendants. Obert and Drywall. Plaintiffs make these claims against Republic Western as insurer for Obert and Drywall, and not against the U-Haul defendants.

Republic Western insurance policy RL 01000 is a basic business automobile insurance policy. Both parties concede that the proceeds of this policy are available for plaintiff's benefit. The policy limits are the particular minimum responsibility insurance coverage of the state in which the loss occurs, in this instance, Rhode Island. With respect to post-judgment interest, in relevant part, the policy provides:

Part IV. B. WE WILL ALSO PAY

In addition to our limit of liability, we will pay for the insured: ...

5. All interest accruing after the entry of judgment in a suit we defend. Our duty to pay interest ends when we pay or tender our limit of liability (emphasis in original).

This is a typical standard interest clause. The defendant does not dispute that it is liable under the insurance policy for the policy limit of $25,000, and it has paid that amount. The issue is whether the defendant must pay interest on the entire total amount of the judgments exclusive of prejudgment interest ($3,170,000), from the date of their entry to the date of payment of the policy proceeds or only interest on the policy limit of $25,000. Literally, the question is a million dollar question.

As a preliminary matter, there is a vociferous dispute between the parties concerning the law which is to be applied to the insurance contracts. Defendant urges that the law of the Commonwealth of Massachusetts applies. The plaintiffs contend that the law of Rhode Island applies. In the end, this situation is what has been described much earlier as much ado about nothing. As will appear, it makes no difference which law applies because the application of either state's law leads to the same conclusion.

The Republic Western insurance policies in question in this matter contain no choice-of-law provision. There is no Massachusetts or Rhode Island statute or common law which specifically addresses the import of this standard interest clause. Therefore, it is necessary to look for guidance to other states and courts which have interpreted and applied the clause.

In general, insurance policies are to be construed by applying the rules of construction for written instruments. Tyler v. Treasurer & Receiver Gen., 226 Mass. 306, 115 N.E. 300 (1917). The words of a contract of insurance are to be given their plain and ordinary meaning. Jacobs v. U.S. Fidelity & Guar. Co., 417 Mass. 75, 627 N.E.2d 463, 464 (1994); see also Rocci v. Mass. Acci. Co., 222 Mass. 336, 110 N.E. 972, 973 (1916). If the terms are clear and unambiguous, they must be applied as written. See Cody v. Conn. Gen. Life Ins. Co., 387 Mass. 142, 439 N.E.2d 234, 237 (1982); Factory Mut. Liability Ins. Co. of Am. v. Cooper, 106 R.I. 632, 262 A.2d 370, 372 (1970). In order to determine if the plain and ordinary meaning of the contractual language is sufficient guidance to the court, the court should not strain to identify an ambiguity where one does not exist. See Lustenberger v. Boston Cas. Co., 300 Mass. 130, 14 N.E.2d 148, 150 (1938); Rocci, 110 N.E. at 973; Mallane v. Holyoke Mut. Ins. Co. in Salem, 658 A.2d 18, 20 (R.I.1995).

The language in Republic Western policy RL 01000 is clear and unambiguous. It provides that the defendant will pay certain sums "... in addition to our limit of liability." Among the various items is listed an obligation to pay "all interest accruing after the entry of judgment." The contract reads "all interest," not "partial interest" or "no interest." It is undisputed that a judgment was rendered against Obert and Drywall, the insureds. Interest began to accrue when judgments were entered: December 12, 1988. The defendant did not pay its $25,000 limit of liability until October 20, 1994. Therefore, a straightforward reading of the policy language establishes that the defendant contractually committed itself to pay all interest accruing on the judgments between December 12, 1988, and October 20, 1994. See Wilkerson v. Md. Cas. Co., 119 F.Supp. 383, 389 (D.C.Va.1953), aff'd 210 F.2d 245 (4th Cir.1954); McLemore v. Fox, 565 So.2d 1031, 1038 (La.App. 3d Cir.1990); Weber v. Biddle, 4 Wash.App. 519, 483 P.2d 155, 161-62 (1971).

It is well settled that post-judgment interest shall be calculated in accord with federal law. 28 U.S.C. § 1961(a); Loft v. Lapidus, 936 F.2d 633, 639 (1st Cir.1991) (post-judgment interest is determined by federal law, not state law, even in diversity cases). See also Grogan v. Garner, 806 F.2d 829, 839 (8th Cir.1986); Home Life Ins. Co., New York v. Equitable Equipment Co., Inc., 694 F.2d 402, 404 (5th Cir.1982); Armacost v. Amica Mut. Ins. Co., 821 F.Supp. 75, 82 (D.R.I.1993), aff'd 11 F.3d 267 (1st Cir.1993). In this matter, the federal interest rate that should be used is 9.20%, which was the interest rate in effect at the time of the entry of the judgments, December 12, 1988. See Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 835, 110 S.Ct. 1570, 1575-76, 108 L.Ed.2d 842 (1990) (post-judgment interest runs from date of judgment); 28 U.S.C. § 1961(a); Memorandum from the Admin. Office of the U.S. Courts to All Clerks, U.S. Courts 2 (Jan. 31, 1997) (on file with U.S. District Court for the District of R.I.) (details historical and current federal post-judgment interest rates).

This court will leave the precise calculation of interest to the parties in a form of judgment to be submitted to the court. Considering the circumstances, the interest will amount to a substantial sum, many times the $25,000 policy limit. The failure was the fault of the defendant insurer and the fact that the...