Matich v. Modern Research Corp.

• Decision Date: 24 February 1986
• Docket Number: Docket No. 79993
• Citation: 146 Mich.App. 813,381 N.W.2d 834
• Parties: Steven P. MATICH, Plaintiff-Appellant, v. MODERN RESEARCH CORPORATION, Not Participating, and Canadian Universal Insurance Company, Ltd., and Insurance Company of North America, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 834

381 N.W.2d 834

146 Mich.App. 813

Steven P. MATICH, Plaintiff-Appellant, v. MODERN RESEARCH CORPORATION, Not Participating and Canadian Universal Insurance Company, Ltd., and Insurance Company of North America, Defendants-Appellees.

Docket No. 79993.

Court of Appeals of Michigan.

Submitted July 1, 1985.

Decided Nov. 5, 1985.

Released for Publication Feb. 24, 1986.

Zeff, Zeff & Materna by Michael T. Materna, Detroit, and Gromek, Bendure & Thomas by Nancy L. Bosh, of counsel, Detroit, for plaintiff-appellant.

Fitzgerald, Hodgman, Kazul, Rutledge, Cawthorne & King, P.C. by Christopher L. Terry, Detroit, for Canadian Universal Ins. Co., Ltd.

Martin, Bacon & Martin, P.C. by James N. Martin and Stuart A. Fraser, Mt. Clemens, for Ins. Co. of North America.

Before BEASLEY, P.J., and J.H. GILLIS and KELLY, JJ.

PER CURIAM.

Plaintiff brought a products liability action against defendant Modern Research Corporation (Modern) which, after a jury trial, resulted in a May 20, 1983, judgment in the amount of $2,250,000. Canadian Universal Insurance Company (Canadian) was Modern's primary insurer under a policy with a liability limit of $300,000. An excess liability policy was written by the Insurance Company of North America (INA), with a liability limit of $1,000,000. Canadian defended the suit on behalf of Modern at trial and, other than being apprised of the suit, INA did not actively participate in the defense. Following the entry of judgment, Modern moved for new trial, remittitur, and judgment notwithstanding the verdict.

During the pendency of Modern's posttrial motions, the parties engaged in settlement negotiations which culminated in an agreement, the terms of which were placed on the record on November 18, 1983. The agreement proposed to discharge Modern from any liability on the judgment and add Canadian and INA as parties defendant in the action. Further, the defendant insurers agreed to pay the full sum of their respective policy limits. Any disagreement over the insurers' respective liability for interest on the judgment would be litigated in circuit court.

After several versions of a proposed settlement order were exchanged by counsel for the plaintiff and the two insurance carriers, a consent judgment drafted by plaintiff's counsel was agreed upon and entered by the court on February 27, 1984. Thereupon, Canadian paid plaintiff $508,044.81, representing its $300,000 policy limit, $43,928.25 in costs, and postcomplaint/prejudgment interest on its policy limit and interest on the entire judgment from the date of entry until July 8, 1983, when Canadian allegedly tendered the amount of its policy limit to INA. On the same date, INA paid plaintiff its $1,000,000 policy limit.

Both carriers then filed motions for satisfaction of judgment, and plaintiff responded with a motion to determine liability for interest on the judgment. Plaintiff asked the trial court to award him prejudgment interest on the excess over the $300,000 policy limit of Canadian; postjudgment interest on and entire judgment amount between July 8, 1983, the date plaintiff and Canadian asserted that Canadian actually tendered its policy limits to INA, and February 27, 1984, the date the consent judgment was entered by the trial court; and interest on the unpaid balance of the judgment accruing since February 27, 1984.

After oral arguments were heard on the motions, the trial court ruled that Canadian had paid all interest for which it was liable under its policy with the insured and Michigan law and was thus entitled to a satisfaction of judgment. As to INA, the court ruled that that defendant was not required to pay any prejudgment interest but was liable for postjudgment interest on the $1,000,000 policy limit from July 8, 1983, to February 27, 1984. Plaintiff appeals as of right from those orders.

I

Plaintiff first argues that the trial court erred in finding that he was not entitled to prejudgment interest on the $1,000,000 limit of defendant INA's policy. In support of the trial court's ruling, defendant INA first argues that since the limit of its insurance policy with Modern Research is clearly stated to be $1,000,000, it cannot be held liable for any amount over that figure, including the payment of interest. We disagree since we believe this argument was specifically rejected in Denham v. Bedford, 407 Mich. 517, 287 N.W.2d 168 (1980). That opinion states:

"Defendant Transamerica's concern seems to boil down to the following: An insurer limits its risks when it sets a certain policy limit. Any chargeable interest which causes the insurer to pay a sum in excess of this limitation is an intrusion upon the insurer's right and ability to contract. However, this notion runs contrary to the very concept and purpose of charging interest. Interest has been defined as follows:

" 'Interest and court costs are added to a judgment to recompense the prevailing party for the delay in payment of the money damages determined and to put back in his pocket some of the expense he incurs in instituting and prosecuting an action.' Waldrop v Rodery, 34 Mich App 1, 4; 190 NW2d 691 (1971).

Furthermore, the notion clearly runs contrary to the Legislature's intent in enacting the prejudgment interest statute and is without foundation at common law.

"The common-law rule regarding the payment of interest in excess of the policy limits in an automobile insurance policy has been enunciated as follows:

" '[I]t has been established law for a long period of time that the insurer may be obligated to pay costs or interest on judgment recovered against the insured although these items may bring the total payment beyond the limits set in the policy.' Powell v T A & C Taxi Co, 104 NH 428, 430; 188 A2d 654 (1963)." 407 Mich. 532-533, 287 N.W.2d 168.

The Court went on to conclude:

"The Michigan Legislature has dictated that interest should accrue from the date of filing the complaint. If the legislative purpose was to compensate the prevailing party for the delay in payment of money damages and to cover the costs of litigation, then this legislative purpose can only be effectuated by the allowance of prejudgment interest, even if this interest exceeds the policy limits of an insurance contract." 407 Mich. 534-535, 287 N.W.2d 168. (Footnote omitted.) See also General Electric Credit Corp. v. Wolverine Ins. Co., 420 Mich. 176, 195-196, 362 N.W.2d 595 (1984).

Defendant INA attempts to avoid the result commanded in Denham by arguing that its status as the excess carrier places the burden of paying all prejudgment interest which may be due and owing on the primary carrier, Canadian. Denham differs from the case at hand in that it involved only one insurance carrier. INA cites the following clause of its insurance policy to support this argument:

"If collectible insurance with any insurer is available to the Insured covering a loss also covered hereunder, the insurance hereunder shall be in excess of, and not contribute with, such other insurance provided, however, this does not apply to insurance which is written as excess insurance over INA's limit of liability provided in this policy."

We are unable to extract from the language of this clause the interpretation sought by INA, i.e., that the primary carrier shall be liable for all interest on a judgment, including interest on those portions of the judgment which exceed its liability limit. Rather, the clause simply provides that if the judgment in the case at hand were for an amount less than the $300,000 coverage provided by the primary carrier, INA would not be required to provide any contribution to the satisfaction of that judgment.

We believe that responsibility for the payment of prejudgment interest in cases involving primary and excess carriers should be dealt with as advanced by a panel of this Court in Celina Mutual Ins. Co. v. Citizens Ins. Co. of America, 133 Mich.App. 655, 349 N.W.2d 547 (1984). Celina rejected a federal district court case which, in its attempt at interpreting Michigan law, held that liability for the payment of prejudgment interest should fall on the insurer which controlled the litigation. Michigan Milk Producers Ass'n. v. Commercial Union Ins. Co., 493 F.Supp. 66 (W.D.Mich.,1980). The Celina Court opted instead to apportion liability for prejudgment interest on a pro-rata basis because "otherwise insurers will be required to pay interest on risks they have not assumed and because a good faith vigorous defense of an action is in the interests of all potentially liable parties". 133 Mich.App. 659, 349 N.W.2d 547. We agree with those observations and thus hold that defendant INA is responsible for the payment of prejudgment interest on its policy limit of $1,000,000. ¹

II

Plaintiff next assigns error to the trial court's refusal to award prejudgment interest on the amount of the $2,250,000 judgment which exceeds the combined limits of the policies issued by Canadian and INA. We agree with the argument raised by defendant Canadian that plaintiff was foreclosed from obtaining interest on any portion of the judgment which exceeded the combined policy limits pursuant to the terms of the February 27, 1984, consent judgment. The relevant portion of that judgment states:

"IT IS FURTHER HEREBY ORDERED that Canadian Universal Insurance Company, Ltd., and Insurance Company of North America, shall pay to the said Steven P. Matich, and his attorneys, Zeff and Zeff, interest owed if any, on the amount of their policy limits from the date of filing of the Complaint in this action until the date of Judgment, along with interest owed, if any, on the entire amount of the judgment ($2,250,000.00) from the date of entry of said Judgment until the date of payment of said insurer's policy limits, under the terms of its insurance policy or otherwise to be paid by such insurance carrier under the laws of the State of Michigan; it being ordered and understood between the...