Hi-Mill Mfg. Co. v. Aetna Cas. & Sur. Co.

• Decision Date: 27 March 1995
• Docket Number: No. 90-CV-72494-DT.,90-CV-72494-DT.
• Citation: Hi-Mill Mfg. Co. v. Aetna Cas. & Sur. Co., 884 F. Supp. 1109 (E.D. Mich. 1995)
• Court: U.S. District Court — Eastern District of Michigan
• Parties: HI-MILL MANUFACTURING COMPANY, a Michigan corporation, Plaintiff, v. AETNA CASUALTY & SURETY COMPANY, Defendant.

884 F. Supp. 1109

HI-MILL MANUFACTURING COMPANY, a Michigan corporation, Plaintiff, v.AETNA CASUALTY & SURETY COMPANY, Defendant.

No. 90-CV-72494-DT.

United States District Court, E.D. Michigan, Southern Division.

March 27, 1995.

COPYRIGHT MATERIAL OMITTED

Butzel Long, P.C., John H. Dudley, Jr., Jack D. Shumate, Detroit, MI, for plaintiff.

Plunkett & Cooney, P.C., Charles W. Browning, Kenneth C. Newa, Detroit, MI, for defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

WOODS, District Judge.

This matter having come before the Court on cross-motions for partial summary judgment;

The Court having reviewed the pleadings submitted herein, and being otherwise fully informed in the matter;

The Court finds that plaintiff's motion for partial summary judgment shall be, and hereby is, GRANTED; defendant's motion for partial summary judgment shall be, and hereby is, DENIED.

I.INTRODUCTION

Before the Court are cross-motions for partial summary judgment on issues relative to plaintiff's entitlement to prejudgment interest.In August, 1990, plaintiff filed the above-entitled action seeking declaratory relief and money damages after defendant denied coverage for an underlying Superfund enforcement action which the U.S. Environmental Protection Agency(EPA) commenced against plaintiff in 1988.On March 21, 1991, this Court entered a memorandum opinion and order granting plaintiff's motion for summary judgment finding that plaintiff's receipt of a PRP letter from the EPA imposed on defendant a duty to defend.In order to permit an immediate appeal, this Court directed its March 21, 1991 order be entered as a final judgment.

In an amended per curiam opinion dated June 8, 1993, the United States Court of Appeals for the Sixth Circuit reversed this Court's decision.The Sixth Circuit relied on its earlier holding in Ray Industries, Inc. v. Liberty Mutual Ins. Co.,974 F.2d 754(6th Cir.1992) in finding that receipt of a PRP letter did not trigger an insurer's duty to defend.The Court acknowledged, however, that it would be bound by a Michigan Supreme Court pronouncement, should that court rule to the contrary on this issue.The Sixth Circuit vacated the remainder of this Court's opinion and dismissed without prejudice the duty to defend portion of the declaratory judgment action.

In November, 1994, in Michigan Millers Mutual Ins. Co. v. Bronson Plating Co.,445 Mich. 558, 519 N.W.2d 864(1994), the Michigan Supreme Court held that the receipt of a PRP letter, informing an insured of its potential liability for alleged environmental contamination, constitutes "a suit" imposing upon an insurer a duty to defend.Id. at 575, 519 N.W.2d 864.In accordance with the holding in Michigan Millers, this Court entered an Order dated November 23, 1994 granting plaintiff's motion to reinstate duty to defend portion of the action and reinstating previous order granting plaintiff's motion for summary judgment on the duty to defend.The case was scheduled for trial on December 12, 1994.

On December 6, 1994, the parties informed the Courtthey had reached a partial compromise and settlement of plaintiff's claims.Pursuant to a consent judgment to be entered by the Court, defendant will pay plaintiff $2,250,000.00 in partial reimbursement of the defense costs which plaintiff incurred in the underlying Superfund action.The parties disagree, however, on whether plaintiff is entitled to prejudgment interest, and if so, how such interest should be computed.In addition, the parties dispute whether various EPA and Department of Justice(DOJ) oversight costs incurred by plaintiff constitute defense costs for the purposes of calculating prejudgment interest.With leave of the Court, the parties have submitted these issues for determination in the form of cross-motions for partial summary judgment.Specifically, the issues presented are:

1) whether in light of the Sixth Circuit's amended per curiam decision dated June 8, 1993, which dismissed without prejudice the duty to defend portion of this action, Hi-Mill is entitled to prejudgment interest on the judgment amount of $2,250,000.00;

2) to the extent that prejudgment interest is owed by Aetna, the date or dates from which such interest should be calculated in light of a) the Sixth Circuit's amended per curiam decision dated June 8, 1993, and/or b) the fact that portions of the defense costs were incurred and paid during different periods of time;

3) whether the EPA and DOJ oversight costs incurred prior to the entry of the recent Consent Decree between Hi-Mill and the EPA properly qualify as defense costs under the policies for purposes of calculating the amount of prejudgment interest due (if prejudgment interest is otherwise determined to be due and owing).The parties agree that the $2,250,000.00 defense costs settlement includes oversight costs which EPA and DOJ have tendered (or will tender) to Hi-Mill.

II.PLAINTIFF IS ENTITLED TO PREJUDGMENT INTEREST ON THE JUDGMENT AMOUNT

The question of prejudgment interest in a diversity action is governed by state law.Diggs v. Pepsi-Cola Metropolitan Bottling Co.,861 F.2d 914, 924(6th Cir.1988).In Michigan, an award of prejudgment interest is derived from statute.Gordon Sel-Way v. Spence Bros.,438 Mich. 488, 499 n. 9, 475 N.W.2d 704(1991).The parties concede that any award of prejudgment interest in the present case is directed by Mich.Comp. Laws Ann. § 600.6013(5)(West Supp.1994).That section provides:

For complaints filed on or after January 1, 1987, if a judgment is rendered on a written instrument, interest shall be calculated from the date of filing the complaint to the date of satisfaction of the judgment at the rate of 12% per year compounded annually, unless the instrument has a higher rate of interest....

Section 6013 is a remedial statute to be liberally construed in favor of the plaintiff.Old Orchard by the Bay Associates v. Hamilton Mutual Ins. Co.,434 Mich. 244, 260, 454 N.W.2d 73(1990);Denham v. Bedford,407 Mich. 517, 528, 287 N.W.2d 168(1980);McKelvie v. Auto Club Ins.,203 Mich.App. 331, 339, 512 N.W.2d 74(1994).The primary purpose of the provision is to compensate a litigant for the delay in receiving money damages.Rittenhouse v. Erhart,424 Mich. 166, 191-92, 380 N.W.2d 440(1985);Dep't of Treasury v. Central Wayne County Sanitation Authority,186 Mich.App. 58, 61, 463 N.W.2d 120(1990);McDaniel v. Macomb County Bd. of Road Comm.,169 Mich.App. 474, 477, 426 N.W.2d 747(1988).The section is further intended to encourage prompt settlement and compensate litigants for expenses incurred in bringing an action.Old Orchard, supra at 252-253, 454 N.W.2d 73;Rittenhouse, supra at 191-92, 380 N.W.2d 440;McDaniel, supra at 477, 426 N.W.2d 747;Goins v. Ford Motor Co.,131 Mich.App. 185, 202, 347 N.W.2d 184(1983);but see, Farmers Ins. Group v. Lynch,186 Mich.App. 537, 538, 465 N.W.2d 21(1990).

In the insurance context, prejudgment interest promotes settlement, and discourages an insurer from engaging in litigation solely to delay making payment.Old Orchard, supra at 253, 454 N.W.2d 73(citingMatich v. Modern Research Corp.,430 Mich. 1, 12-15, 420 N.W.2d 67(1988)).It is plaintiff's position that it is entitled to prejudgment interest.Plaintiff argues that section 6013 is unambiguous and must be enforced according to its mandatory terms.Defendant asserts that an award of prejudgment interest rests within the discretion of the district court, and that the purposes of section 6013 are not furthered by an award of interest in the present case.

Michigan Courts have ruled that an award of prejudgment interest on a money judgment is mandatory under section 6013.SeeDept. of Treasury, supra at 61, 463 N.W.2d 120;Marina Bay Condominiums, Inc. v. Schlegel,167 Mich.App. 602, 609, 423 N.W.2d 284(1988);Goins, supra at 201-02, 347 N.W.2d 184.Defendant has not provided the Court with any authority to the contrary.¹Based upon the above precedent, and the clear, mandatory language of the statute, the Court finds that plaintiff is entitled to prejudgment interest on the money judgment.

Defendant argues that policy considerations warrant a departure from the strict application of section 6013.Defendant maintains there has been no delay in reimbursement of plaintiff's defense costs.Defendant further contends it should not be penalized because it "prevailed" in the litigation until the Michigan Millers decision, and promptly engaged in settlement negotiations after the change in the law.In response, plaintiff asserts defendant delayed payment of defense costs for more than four years after plaintiff filed its complaint.In addition, plaintiff asserts that defendant's denial of coverage has resulted in intensive and protracted litigation between the parties.Further, plaintiff argues the fact that defendant"prevailed" for a period of time is irrelevant pursuant to the clear language of the statute.

The Court finds the mandatory dictates of section 600.6013 dispositive on the issue of plaintiff's entitlement to prejudgment interest.In addition, the Court finds the legislative intent of the statute furthered by an award of interest in this case.The purposes of the provision are to compensate a litigant for delay in receiving payment and the expenses of litigation, and to encourage settlement.Rittenhouse, supra at 191-92, 380 N.W.2d 440.

Defendant contends there was no delay in making payment because it did not have a duty to defend until the Michigan Supreme Court's pronouncement in Michigan Millers.Regardless of whether defendant experienced temporary "victories" during the course of the litigation, the statute compels an award of prejudgment interest on a final money judgment.Section 6013 compensates an insured for the delay in the use of money.In the present case, there is no question that defendant had the...