Levin v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 10 June 1974
• Docket Number: No. 58435,58435
• Citation: 510 S.W.2d 455
• Parties: Valerie Commerford LEVIN, Plaintiff-Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant, and Terrence L. Govero, Defendant-Respondent.
• Court: Missouri Supreme Court

Page 455

510 S.W.2d 455

Valerie Commerford LEVIN, Plaintiff-Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant and Terrence L. Govero, Defendant-Respondent.

No. 58435.

Supreme Court of Missouri, En Banc.

June 10, 1974.

Thurman, Nixon, Smith, Howald, Weber & Bowles, Robert Lee Smith, Hillsboro, for plaintiff-respondent.

Kortenhof & Ely, Joseph M. Kortenhof, Frank E. Strzelec, St. Louis, for defendant-appellant.

SEILER, Judge.

The question presented is whether an automobile liability insurer terminates its liability for further interest on a judgment which exceeds the policy limits, by paying into court the limit of its coverage, without at the same time paying accrued interest and costs.

This is a suit against defendant insurer State Farm Mutual Automobile Insurance Company to compel it to continue paying interest on plaintiff's $90,000 judgment against its insured, Govero, despite the fact that State Farm had deposited its $25,000 bodily injury coverage into court. Summary judgment was entered for plaintiff by the trial court. State Farm appealed to the court of appeals, St. Louis district, where the judgment was affirmed. The case is before us, having been transferred after opinion under rule 83.03, V.A.M.R. We decide the case as though here on original appeal and reverse and remand with directions.

On March 31, 1968, plaintiff was injured while riding in an automobile driven by defendant Govero which collided with a vehicle driven by Paul Kreitler. Plaintiff, then an unmarried minor, sued Govero and Kreitler through her father as next friend. On February 7, 1969, the jury returned a $90,000 verdict against both defendants and judgment was entered accordingly.

On April 15, 1969, 67 days after entry of judgment, State Farm deposited with the circuit clerk the sum of $25,000. In an accompanying letter, State Farm stated: 'This tender is made in full payment of the limits of liability of this company applicable to the vehicle operated by the defendant Terrence L. Govero . . .' The letter continued, saying State Farm did not itself intend to pursue an appeal in the case, but would, pursuant to the terms of its policy, take the appeal on behalf of defendant Govero.

The judgment against both Govero and Kreitler was affirmed February 11, 1971. ¹ The $25,000 fund was released on March 1, 1971, to plaintiff, who by then was an adult. At the same time Kreitler's insurer paid $10,000 plus interest thereon to plaintiff, reducing the unsatisfied part of the judgment to $55,000.

Plaintiff then filed this suit against Govero and State Farm, seeking interest on the $25,000 fund deposited with the court from the date of judgment to the date of its release to plaintiff and also for interest on the $55,000 unsatisfied portion of the judgment from the date of the judgment until the interest was paid. The circuit court entered summary judgment for plaintiff for $14,578 against State Farm and from this judgment State Farm appeals.

State Farm concedes it is obligated by its policy to pay all interest accruing on the entire judgment, even though that amount exceeds the $25,000 limit of its bodily injury coverage, until such time as it pays or tenders the amount of its liability on the judgment. State Farm thus acknowledges that it remains liable for interest that accrued during the 67-day period after rendition of the original judgment and before the $25,000 fund was deposited with the court. State Farm contends its liability for further interest ended April 15, 1969, when the policy limit of $25,000 was deposited with the circuit clerk.

The State Farm policy, in the 'Declarations' portion, limits the liability Coverage A, the bodily injury coverage, to $25,000 for each person and $100,000 for each accident. The policy also contains the following provisions:

'(1) . . . Limits of Liability . . . Coverage A. The limit of liability stated in the declarations as applicable to 'each person' is the limit of the company's liability for all damages arising out of bodily injury sustained by one person in any one accident, and subject to this provision, the limit of liability stated in the declarations as applicable to 'each accident' is the total limit of the company's liability for all such damages for bodily injury sustained by two or more persons in any one accident.

'. . .

'(2) As respects the insurance afforded under coverages A and B and in addition to the applicable limits of liability to pay:

(a) costs taxed against the insured in any such suit and, after entry of judgment all interest accruing on the entire amount thereof until the company has paid or tendered such part of such judgment as does not exceed the limit of the company's liability thereon;

(b) premiums on bonds (referring to attachment, appeal and bail) . . .

(c) expense incurred by the insured (referring to emergency medical and surgical relief to others) . . .

(d) reasonable expense incurred by the insured at the company's request (referring to loss of wages and salary up to $25 per day because of court attendance) . . .' ²

Plaintiff contends that State Farm did not cut off its liability for further interest by its payment into court of $25,000 because State Farm failed to include in the amount, court costs and interest accrued as of the date of payment. There is no question that $25,000 is the limit of State Farm's liability for bodily injury for any one person. The question is whether the language of the policy provision referring to payment of interest until the company has paid such part of the judgment as does not exceed the 'limit of the company's liability thereon' has reference to the limits of liability for bodily injury under the policy, as appellant contends, or to State Farm's entire obligation under the policy, as plaintiff contends, which would necessarily include in addition to the judgment, such items, expenditures, and obligations as costs, interest, bond premiums, emergency medical expense, attorney fees, and expenses of the insured while attending trial.

The supplementary payments provisions are stated to be 'in addition to the applicable limits of liability.' State Farm's agreement to pay court costs and interest is not part of, but is a separate obligation beyond 'the limit of the company's liability' of $25,000. Costs and interest after judgment, even though they accompany or follow a judgment, are separate and apart from a judgment. ³ The 'applicable limits of liability' partain to the limits for damages arising out of bodily injury. The judgment is what is awarded the victorious plaintiff for the verdict returned by the jury which assesses the plaintiff's damages. Thus, the limit of the company's liability on the judgment--that is, 'the limit of the company's liability thereon'--is fixed by the limit of liability stated in the declarations, which in this case is $25,000.

The foregoing accords with the generally accepted view that in instances where claim is being made that the company is liable for an excess over the coverage because of its negligent or bad faith failure to settle within the policy limits, it is the policy limits as stated in the declarations which determine whether the offer to settle was in fact within the policy limits, a necessary predicate to establishing excess liability on the part of the insurer. See the many cases collected in Annotation: Liability Insurer--Duty to Settle, 40 A.L.R.2d 220--224, all proceeding on the assumption that the policy limits were the round figures stated in the declarations. None of these cases treat the policy limits as including the supplementary obligations of the insurer requiring payment of interest, costs, attorney fees, expenses, bond fees and the like, although, of course, such payments do increase the total outlay required of the insurer, Couch on Insurance 2d, Vol. 15, Sec. 56:36, p. 705.

It strains the meaning of the supplementary provisions to say that they serve to increase the company's liability on the judgment. They do not. Instead they enlarge the company's liability for specified obligations and expenditures over and above the company's $25,000 liability on the judgment obtained by the plaintiff for bodily injury damages. Nor is it correct to say that State Farm agreed to be responsible for all interest accruing on the entire amount of the judgment until State Farm paid or tendered the full amount of its liability under the policy, an amount which in many instances would not be known until all litigation was terminated and expenses paid. For the policy to provide this, it would have to read 'until the company has paid or tendered such part of such judgment as does not exceed the limit of the company's liability under the policy.' Instead the policy uses the word 'thereon', which cannot be considered synonymous with the words 'under the policy.'

The same problem was before the court in High v. Southern Farm Bureau Casualty Insurance Co., 247 Ark. 373, 376, 445 S.W.2d 507, 509 (1969), where the insurance company, although paying the policy limits, failed to pay $17.10 in costs and the plaintiff contended the insurer thereby continued to be liable for interest on the entire judgment. After quoting the policy provisions about payment of interest, which were the same as those in the present case, the court directed its attention to the meaning and significance of the key word 'thereon' in the phrase 'such part of such judgment as does not exceed the limit of the Company's liability thereon' appearing in the supplementary provisions. The court concluded that it referred to the limit of liability under Coverage A, which in our case is $25,000, and denied recovery, saying:

'Merriam-Webster New International Dictionary (2d ed. 1935) defines the term 'thereon' as an adverb meaning 'thereupon; after, or as a result of, some specified thing.' . . . Thus when we consider that the adverb 'thereon' means 'as a result of' and that ...