Grimes v. Swaim

• Decision Date: 03 August 1992
• Docket Number: No. 91-6363,91-6363
• Citation: 971 F.2d 622
• Parties: Verna Marie GRIMES, Plaintiff-Appellant, v. Keith Allen SWAIM, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 622

971 F.2d 622

Verna Marie GRIMES, Plaintiff-Appellant, v. Keith Allen SWAIM, Defendant-Appellee.

No. 91-6363.

United States Court of Appeals, Tenth Circuit.

Aug. 3, 1992.

John B. Norman of Norman & Edem, Oklahoma City, Okl., for plaintiff-appellant.

Don Manners, Oklahoma City, Okl., for defendant-appellee.

Before LOGAN, BARRETT and EBEL, Circuit Judges.

LOGAN, Circuit Judge.

Plaintiff Verna Marie Grimes brought a diversity action to recover damages for injuries she suffered because of the alleged negligence of defendant Keith Allen Swaim. After a bench trial, plaintiff obtained a judgment for $1.8 million plus prejudgment interest. Plaintiff appeals from an order of the district court finding that defendant's insurer, State Farm Mutual Automobile Insurance Company (State Farm), terminated its obligation under the policy to pay postjudgment interest when State Farm paid into court the policy's $50,000 liability limit but did not pay accrued postjudgment interest. ¹

Defendant's insurance policy with State Farm provides liability coverage under the heading "SECTION 1--LIABILITY--COVERAGE A." Plaintiff/Appellant Appendix at 133 (hereinafter App.). Then, still under "COVERAGE A," the policy provides:

In addition to the limits of liability, we will pay for an insured any costs listed below resulting from such accident.

1. Court costs of any suit for damages.

2. Interest on all damages owed by an insured as the result of a judgment until we pay, offer, or deposit in court the amount due under this coverage.

Id. (emphasis added; other emphasis deleted); see also Supplemental Response Brief of Defendant/Appellee Keith Allen Swaim at 4 (quoting policy). "COVERAGE A" also obligates State Farm to pay the premiums or costs of certain bonds and expenses of the insured, such as lost wages if insured is required to attend trial.

After judgment, State Farm attempted to pay to plaintiff the $50,000 policy liability limit. Plaintiff refused to accept it on the grounds that it was not tendered unconditionally and that under the terms of the policy State Farm owed more than just the policy liability limit. State Farm then applied to the district court for an order allowing it to pay its policy limit into the court. The district court authorized the court clerk to accept the $50,000, and six days later State Farm sent a check for $50,000 to the clerk. This amount was paid to plaintiff without prejudice to her claims under the policy.

Subsequently, in determining the amount of postjudgment interest owed, the district court determined State Farm's obligation. The district court reviewed the language of the policy, and concluded that the language at issue--"the amount due under this coverage"--"logically implies the limits of liability." Id. at 162. ² Based on this interpretation the court held that State Farm's obligation to pay postjudgment interest terminated on the day the court ordered the clerk to accept payment of the $50,000 liability limit.

In this diversity action, we apply Oklahoma substantive law. See Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938). We review de novo the district court's determination of state law. Salve Regina College v. Russell, --- U.S. ----, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991). As to issues the Oklahoma Supreme Court has not addressed, we may consider the decisions of other courts to determine how the Oklahoma Supreme Court would decide the issue. See Adams-Arapahoe Joint School Dist. No. 28-J v. Continental Ins. Co., 891 F.2d 772, 774 (10th Cir.1989). "The construction of an insurance policy is a matter of law." Id.; see also Dodson v. St. Paul Ins. Co., 812 P.2d 372, 376 (Okla.1991). Thus, we review de novo the narrow issue in this case: what is the meaning of the policy language that the insurer will pay interest on all damages until it pays, offers or deposits in court "the amount due under this coverage"?

The Oklahoma Supreme Court apparently has not construed the exact policy language at issue here. The Oklahoma Court of Appeals cases cited by the parties are not directly on point. In Worthan v. Ohio Casualty Ins. Co., 535 P.2d 1025 (Okla.Ct.App.1974), the court quoted the following language from the trial court's journal entry of judgment: "The Court holds that whenever the [insurance company] tendered its policy limits together with the accrued interest ... such tender stopped the running of interest." Id. at 1027 (emphasis added). Plaintiff argues that this supports her position that depositing the policy limits without accrued interest does not stop the running of interest. The appellate court itself, however, did not address the issue. Defendant cites Baughn v. Busick, 541 P.2d 873 (Okla.Ct.App.1975), for the proposition that tendering the policy limit alone stops the accrual of postjudgment interest. The court there held, however, that an insurance company's tender after judgment of the policy limit alone, when postjudgment interest had accrued, was not "an unconditional payment, or tender, or deposit in court, of 'that part of the judgment which does not exceed the limit of the company's liability thereon.' " Id. at 875 (quoting policy). Thus, Baughn tends to support plaintiff's position.

Courts in other jurisdictions have addressed the issue before us in the context of policy language like that in Baughn v. Busick. ³ Many have concluded that the payment of a policy's liability limit but without accrued postjudgment interest does not terminate the insurer's liability for postjudgment interest. See Security Ins. Co. v. Houser, 191 Colo. 189, 552 P.2d 308, 311 (1976) (holding payment of liability limit alone "constituted only a partial payment" and thus "a tolling of further accrual of interest [did] not occur"); River Valley Cartage Co. v. Hawkeye-Security Ins. Co., 17 Ill.2d 242, 161 N.E.2d 101, 104 (1959) (holding deposit of liability limit did not terminate insurer's obligation for interest); Glenn v. Fleming, 247 Kan. 296, 799 P.2d 79, 88 (1990) ("The payment or tender of only the policy limits was insufficient to stop the running of interest on the entire 'amount of any judgment.' "); Stibal v. Carland, 381 N.W.2d 855, 858 (Minn.Ct.App.1986) (holding the company's "tender was incomplete and ineffective because it did not include the amount of interest which had accrued on the judgment until the date of tender"); Home Indem. Co. v. Muncy, 449 S.W.2d 312, 316 (Tex.Civ.App.1969) (holding deposit of liability limit "did not operate to terminate the insurer's continuing obligation for interest"); see also Mutual of Enumclaw v. Harvey, 115 Idaho 1009, 772 P.2d 216, 221-22 (Idaho 1989) (holding an insurer's failure to pay costs continues the insurer's liability for interest; finding persuasive the reasoning of River Valley and Stibal ).

Based on the policy language before them, other courts have reached the opposite conclusion. See Allegheny Airlines Inc. v. Forth Corp., 663 F.2d 751, 755, 756 (7th Cir.1981) (finding the policy language "such part of such judgment as does not exceed the limit of the company's liability thereon" to clearly and unambiguously mean that "interest is owed until the Company deposits in court its principal policy limits"); Cox v. Peerless Ins. Co., 774 F.Supp. 83, 85, 87 (D.Conn.1991) (holding payment of liability limit ends obligation to pay postjudgment interest under policy providing that insurer must pay "that part of the judgment which does not exceed our limit of liability for this coverage"); Levin v. State Farm Mut. Auto. Ins. Co., 510 S.W.2d 455, 461 (Mo.1974) (holding "the wording of the policy provision in question [does not require] more than tender or payment of the policy limits"); Draper v. Great Am. Ins. Co., 224 Tenn. 552, 458 S.W.2d 428, 432 (1970) (rejecting River Valley on this issue).

Although the above cited cases go both ways, the difference in policy language between those cases and the instant case convinces us that the weight of authority supports plaintiff's position. Despite policy language that the insurer's obligation to pay postjudgment interest continues until it pays, e.g., "the limit of the company's liability," the Oklahoma Court of Appeals in Baughn v. Busick and a number of courts in other jurisdictions have held that payment of the liability limit without accrued interest does not end the obligation for postjudgment interest. Those courts holding to the contrary appear to have found significant the use of the words "limit" and "liability" in the policies before them; we believe they might reach a different...