Preferred Risk Mut. Ins. Co. v. Johnson

Citation730 So.2d 574
Decision Date10 December 1998
Docket NumberNo. 97-CA-00712-SCT.,97-CA-00712-SCT.
PartiesPREFERRED RISK MUTUAL INSURANCE COMPANY, a/k/a Preferred Risk Automobile Insurance Company v. Ronald Glen JOHNSON and Sara Ballard Johnson.
CourtUnited States State Supreme Court of Mississippi

Herman M. Hollensed, Jr., Hattiesburg, Attorney for Appellant.

Jim Waide, Victor I. Fleitas, Tupelo, Attorneys for Appellees.

EN BANC.

WALLER, Justice, for the Court:

INTRODUCTION

¶ 1. Ronald and Sara Johnson, Appellees, sued Preferred Risk Mutual, Appellant, to recover uninsured motorist benefits for injuries sustained in an automobile accident. The Lee County Circuit Court entered a Judgment of Dismissal Granting Summary Judgment for Preferred Risk Mutual holding that the Johnsons were not residents of their parents' households and were not covered as insureds under the policy. The Johnsons appealed the circuit court's entry of summary judgment. This Court reversed and remanded the order granting summary judgment to Preferred Risk Mutual, finding that the Johnsons were members of their respective parents' households, and therefore eligible for uninsured motorist benefits under the policies issued to their parents.

¶ 2. On remand, the Johnsons filed a Motion for Summary Judgment demanding the policy limits, a combined $51,000, from Preferred Risk Mutual and prejudgment interest from the date of the accident. Preferred Risk Mutual conceded that it owed the policy limits, but denied that the Johnsons were entitled to prejudgment interest. Subsequently, the Lee County Circuit Court entered an order granting the Johnsons' request for prejudgment interest. Preferred Risk Mutual appeals from this order assigning the following as error:

I. WHETHER THE TRIAL COURT ERRED IN AWARDING THE PLAINTIFFS PREJUDGMENT INTEREST.
II. WHETHER THE TRIAL COURT ERRED IN AWARDING THE PLAINTIFFS POSTJUDGEMENT INTEREST ON ITS AWARD OF PREJUDGMENT INTEREST.

STATEMENT OF THE FACTS AND PROCEDURAL HISTORY

¶ 3. On June 10, 1988, Ronald Johnson ("Ron") and his wife Sara Ballard Johnson ("Dee") were injured in an accident in Lee County, Mississippi, with an uninsured motorist. The Johnsons' pickup truck was uninsured. At the time of the accident, Ron was temporarily staying with his parents in Columbus, Mississippi, and Dee was temporarily staying with her parents in Plantersville, Mississippi.

¶ 4. At the time of the accident, both sets of parents had vehicles insured by Preferred Risk Mutual Insurance Company ("Preferred"). The Charles Johnson family, Ron's family, had one policy providing UM coverage of $10,000 per person, $20,000 per accident. The Ballards, Dee's family, had two policies, each providing coverage of $10,000 per person, $20,000 per accident.

¶ 5. On October 20, 1989, Ron and Dee filed suit against Preferred in Lee County Circuit Court, seeking a declaratory judgment that they were covered by their parents' policies, and to obtain the UM coverage under each policy. Preferred defended on the grounds that Ron and Dee were not "residents" of their respective parents' households as required under the policy. On June 3, 1994, the Lee County Circuit Court entered a Judgment of Dismissal Granting Summary Judgment for Preferred, finding that the Johnsons were not members of their parents' households and were not covered under their policies. Ron and Dee filed an appeal with this Court.

¶ 6. On appeal, this Court held that Ron and Dee were members of their respective parents' households and thus were entitled to coverage under their policies. In doing so, this Court expressly overruled its prior decision in Goens v. Arinder, 248 Miss. 806, 161 So.2d 509 (1964). Goens had excluded relatives making "transient visits" from policy coverage.

¶ 7. On February 5, 1996, the Johnsons filed a Motion for Summary Judgment demanding the policy limits ($51,000) and prejudgment interest at an eight percent rate from the date of the original accident. Preferred conceded liability of $51,000, but denied the prejudgment interest requested. Preferred alleged that the Johnsons had failed to demand prejudgment interest in their complaint and that the claims were for unliquidated damages. Subsequently, the Johnsons filed a Motion to File a Second Amended Complaint to request prejudgment interest.1 On April 1, 1996, the Lee County Circuit Court entered a Partial Judgment of Dismissal, noting that Preferred had satisfied its contractual obligations to the Johnsons by tendering the sum of $51,000. All of the Johnsons' claims were dismissed except for the claim of prejudgment interest.

¶ 8. On May 9, 1997, the circuit court entered an Order Awarding Prejudgment Interest and Final Judgment. The court awarded prejudgment interest at eight percent on the amount due the Johnsons from the June 10, 1988 (date of the accident) to March 1, 1996 (date that the claims were paid). The amount of the prejudgment interest awarded to Ron was $18, 543.00, while Dee's prejudgment interest came to $12,980.00. The trial judge also awarded the Johnsons additional interest on the awards of prejudgment interest, at the rate of eight percent, until the awards of prejudgment interest were paid.

¶ 9. The trial judge found that Ron's and Dee's damages from injuries received in the accident, which was the amount in controversy, was clearly over the policy limits. Thus, the damages were liquidated and they were entitled to the face value of the uninsured motorist benefits and medical pay. The Johnsons' Motion to File a Second Amended Complaint to include a demand for prejudgment interest was granted. The trial court found that no prejudice would result to Preferred by the granting of the motion.

¶ 10. Preferred asserts that it was error for the trial court to award prejudgment interest because: 1) the Johnsons failed to include a demand for prejudgment interest in their pleadings; and, 2) the amount in controversy was unliquidated. The Johnsons argue that, since the amount was clearly over the policy limits, it was a liquidated amount; and, that since the trial court granted their motion to amend in its final order, it would serve no useful purpose to the parties or the court to require the Johnsons to file an amended complaint after final judgment had been entered.

DISCUSSION OF THE LAW

I. WHETHER THE TRIAL COURT ERRED IN AWARDING THE PLAINTIFFS PREJUDGMENT INTEREST.

¶ 11. "The grant or denial of a motion for leave to amend is within the sound discretion of the trial court." MBF Corp. v. Century Bus. Communications, 663 So.2d 595, 600 (Miss.1995)(citing McDonald v. Holmes, 595 So.2d 434, 436 (Miss.1992)

; Bourn v. Tomlinson Interest, Inc., 456 So.2d 747, 749 (Miss. 1984)). An award of prejudgment interest is normally left to the discretion of the trial judge. Warwick v. Matheney, 603 So.2d 330, 342 (Miss.1992); Aetna Cas. & Sur. Co. v. Doleac Elec. Co., 471 So.2d 325, 331 (Miss. 1985).

¶ 12. Mississippi recognizes judicial authority to award prejudgment interest to a prevailing party in a breach of contract suit. City of Mound Bayou v. Roy Collins Constr. Co., 499 So.2d 1354, 1361 (Miss.1986); Stockett v. Exxon Corp. 312 So.2d 709, 712 (Miss. 1975). Prejudgment interest may be allowed in cases where the amount due is liquidated when the claim is originally made or when the denial of a claim is frivolous or in bad faith. Aetna Cas. & Sur., 471 So.2d at 331. No award of prejudgment interest is allowed where the principal amount has not been fixed prior to judgment. Warwick v. Matheney, 603 So.2d 330, 342 (Miss.1992); Stanton & Assoc., Inc. v. Bryant Constr. Co., 464 So.2d 499, 504 (Miss.1985); American Fire Protection, Inc. v. Lewis, 653 So.2d 1387, 1391 (Miss.1995). Prejudgment interest "`is not imposed as a penalty for wrong doing; it is allowed as compensation for the detention of money overdue.'" Sunburst Bank v. Keith, 648 So.2d 1147, 1153 (Miss.1995)(quoting 221 Miss. 848, 75 So.2d 59, 69 (1954)). "For prejudgment interest to be awarded, the party must make a proper demand for the interest in the pleadings, including the date that it was allegedly due." Wirtz v. Switzer, 586 So.2d 775, 785 (Miss.1991)(citing Simpson v. State Farm Fire & Cas. Co., 564 So.2d 1374, 1381 (Miss.1990)

).

¶ 13. In order for the Johnsons to be entitled to prejudgment interest, they must meet several requirements. First, the claim for damages must be liquidated or the denial of the claim by Preferred must have been frivolous or in bad faith. Second, the pleadings must reflect that the Johnsons made a request for prejudgment interest.

¶ 14. Preferred did not act in bad faith when it denied the Johnsons' request for UM coverage under their parents' policies. Preferred denied the Johnsons' claim primarily because it concluded that the Johnsons were not "residents" of their respective parents' households. Preferred's position on this point was consistent with this Court's prior interpretation of the meaning of "resident" in the context of insurance policies. See Goens v. Arinder, 248 Miss. 806, 161 So.2d 509 (1964)

. In fact, the trial court granted Preferred's Motion for Summary Judgment based on the Goens definition of the term "resident." Subsequently, this Court overruled Goens the first time that the case sub judice was on appeal. Johnson v. Preferred Risk Auto. Ins. Co., 659 So.2d 866 (Miss.1995). Based on the applicable law at the time Preferred denied the Johnsons' claim, this Court finds that the denial of said claim was not in bad faith.

¶ 15. To recover prejudgment interest, in the absence of bad faith, the Johnsons' claim for UM benefits under the policy issued by Preferred to their parents must be a liquidated claim. Prejudgment interest has been denied where "`there is a bona fide dispute as to the amount of damages as well as the responsibility for the liability therefore.'" Simpson, 564 So.2d at 1380 (quoting Grace v. Lititz Mut. Ins. Co., 257 So.2d 217, 225 (Miss.1972)

). Prejudgment interest is not awarded where...

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