Schwimmer v. Allstate Ins. Co., Docket No. 98-9138

• Decision Date: 02 June 1999
• Docket Number: Docket No. 98-9138
• Citation: 176 F.3d 648
• Parties: Frances SCHWIMMER, Plaintiff-Appellee, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

Page 648

176 F.3d 648

Frances SCHWIMMER, Plaintiff-Appellee, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant.

Docket No. 98-9138.

United States Court of Appeals, Second Circuit.

Argued April 9, 1999.

Decided June 2, 1999.

Evan H. Krinick, Rivkin, Radler & Kremer, Uniondale, New York, for Defendant-Appellant.

Michael D. Brookman, Brookman & Brookman, P.C., New York, New York, for Plaintiff-Appellee.

Before: WINTER, Chief Judge, NEWMAN, and SOTOMAYOR, Circuit Judges.

WINTER, Chief Judge:

Allstate Insurance Company appeals from Judge Leisure's judgment awarding Frances Schwimmer damages for past and future pain and suffering in the amount of $130,000 and prejudgment interest in the amount of $51,123. We vacate the grant of prejudgment interest but otherwise affirm.

BACKGROUND

On April 27, 1994, a van backed into and ran over Schwimmer as she was crossing a one-way street in Manhattan. Schwimmer, with the approval of Allstate, her insurance company, subsequently settled with the van operator for his insurance-policy limit of $10,000.

To recover for her non-economic loss, including pain and suffering, Schwimmer, a New York citizen, commenced this action against Allstate, an Illinois corporation. Schwimmer was an insured under an Allstate insurance policy issued in Florida to her relatives, Max and Mildred Schwimmer. The policy provided for uninsured/underinsured coverage of $200,000 for one person injured in one accident. Under the insurance contract, Allstate agreed to pay damages for bodily injury, sickness, disease or death, "which the person insured is legally entitled to recover from the owner or operator of an uninsured auto." The term "uninsured auto" included "underinsured auto."

After trial, a jury awarded Schwimmer $100,000 for past pain and suffering and $100,000 for future pain and suffering. Based upon Schwimmer's comparative negligence (the jury found she was 35% at fault), her recovery was reduced to $130,000. The court subsequently entered judgment awarding Schwimmer $130,000 as well as prejudgment interest in the amount of $51,123, calculated from the date of her accident. This appeal followed.

DISCUSSION

Allstate challenges two of the district court's rulings. First, it claims that the court erred in awarding prejudgment interest. Second, it asserts that the court erred by failing to credit Allstate with a set-off for the $10,000 that Schwimmer had received from the van operator. We examine each contention in turn.

A. Prejudgment Interest

The awarding of prejudgment interest is considered a question of substantive law. See Marfia v. T.C. Ziraat Bankasi, 147 F.3d 83, 90 (2d Cir.1998) (state law applies to calculation of prejudgment interest on supplemental state law claims). Federal courts exercising diversity jurisdiction must apply the choice of law rules of the forum state, here New York, to determine which state's substantive law applies. See 28 U.S.C. § 1652; Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Erie R.R. v. Tompkins, 304 U.S. 64, 74-77, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1538 (2d Cir.) cert. denied, --- U.S. ----, 118 S.Ct. 169, 139 L.Ed.2d 112 (1997).

According to Allstate, New York choice of law rules require that Florida's law on prejudgment interest be applied. New York's choice of law rules require that determination of contract disputes be governed generally by the laws of the state with the most significant contacts to the contract. See In re Allstate Ins. Co. and Stolarz, 81 N.Y.2d 219, 597 N.Y.S.2d 904, 613 N.E.2d 936, 939-40 (1993); Lazard Freres, 108 F.3d at 1539. When Schwimmer's relatives obtained the policy, they were residents of Florida, and that is where the policy was negotiated. While Schwimmer was an additional insured, she was not a party to the contract. Thus, Allstate may well have had a viable argument that under New York choice of law rules, Florida law controlled both the issue of liability and prejudgment interest. Allstate, however, waived this argument by consenting to the application of New York law to the determination of liability in this case. Under New York choice of law rules, the law of the jurisdiction that determines liability governs the award of pre-judgment interest. See Entron, Inc. v. Affiliated FM Insurance Co., 749 F.2d 127, 131 (2d Cir.1984) (noting that "under New York choice of law principles, the allowance of prejudgment interest is controlled by the law of [the state], whose law determined liability on the main claim.").

Allstate also waived its argument by failing to bring to the attention of the district court the potential applicability of Florida law to the issue of prejudgment interest. See Doctor's Assocs., Inc. v. Hamilton, 150 F.3d 157, 164 (2d Cir.1998) ("Without reaching the merits of [the defendant's] contention, we conclude that he has waived this argument. He failed to bring New Jersey law on unconscionability to the attention of the district court ...."), cert. denied, --- U.S. ----, 119 S.Ct. 867, 142 L.Ed.2d 769 (1999); cf. Cargill, Inc. v. Charles Kowsky Resources, Inc., 949 F.2d 51, 55 (2d Cir.1991) ("[E]ven when the parties include a choice-of-law clause in their contract, their conduct during litigation may indicate assent to the application of another state's law.").

Under New York law, in personal injury cases, prejudgment interest is added from the "date of the liability determination." Love v. State of New York, 78 N.Y.2d 540, 542, 577 N.Y.S.2d 359, 583 N.E.2d 1296 (1991); but see N.Y. C.P.L.R. 5001(a) (McKinney 1992) (allowing prejudgment interest in contract cases). Because "[i]n personal injury actions, the damages are continuing and may even reach beyond the time of trial," no interest is recoverable prior to the verdict. Gillespie v. Great Atl. & Pac. Tea Co., 44 Misc.2d 670, 255 N.Y.S.2d 10, 11 (1964) (citation and internal quotation marks omitted), aff'd, 26 A.D.2d 953, 276 N.Y.S.2d 372 (1966), mod. on other grounds, 21 N.Y.2d 823, 288 N.Y.S.2d 907, 235 N.E.2d 911 (1968). Parties cannot attempt to circumvent this bar on pre-verdict interest in personal injury actions by couching their complaints in the form of contract actions. See id. at 12; see also Alkinburgh v. Glessing, 240 A.D.2d 904, 658 N.Y.S.2d 735 (1997) (pre-verdict interest not recoverable in action to recover medical costs because action is at bottom one for personal injuries); Hyatt v. Pepsi- Cola Albany Bottling Co., 32 A.D.2d 574, 298 N.Y.S.2d 1005, 1006-07 (1969) (per curiam) (interest recoverable only from date of verdict and not from date of injury in a breach of warranty action because claim was actually one for personal injuries); Raman v. Carborundum Co., 31 A.D.2d 552, 295 N.Y.S.2d 534, 536 (1968) ("Although plaintiff's recovery was based upon the breach of an implied warranty of fitness for use, the action was to recover damages for personal injuries and, therefore, pre-verdict interest is not allowable."); Gillespie, 276 N.Y.S.2d at 372 ("pre-verdict interest is not allowable on a verdict for personal injuries, even though the complaint was couched in the form of an action for damages for breach of an implied warranty of fitness for use"); McIntyre v. Manhattan Ford, Lincoln-Mercury, Inc., 176 Misc.2d 325, 672 N.Y.S.2d 230, 235-36 (1997) ("In determining whether to award pre-verdict interest, it is not the theory of the claim that controls. While a portion of plaintiff's award for pain and suffering was premised upon her claims of gender discrimination and unlawful retaliation, this action is clearly one to recover damages for emotional pain and suffering." (citations and internal...