State Farm Mutual Automobile Insurance Company v. Barker
| Decision Date | 29 June 2004 |
| Docket Number | Docket No. 23,659. |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellee, v. ELLEN BARKER, Personal Representative of the Estate of CLARENCE BARKER, Defendant-Appellant. |
| Court | Court of Appeals of New Mexico |
Lee M. Rogers, Jr., Cord D. Borner, Atwood, Malone, Turner & Sabin, P.A. Roswell, NM, for Appellee.
MacKenzie Hunt, Roswell, NM, for Appellant.
{1} In this case, we must determine if the trial court properly denied a claim for prejudgment interest under NMSA 1978, § 56-8-3 (1983), on an arbitration award. The award established the amount of damages payable by an insurance company to its insured, based on an accident caused by an uninsured motorist. We hold that the award of prejudgment interest was correctly denied, and we affirm.
{2} On December 15, 1995, a drunk driver (motorist) rear-ended a vehicle driven by Clarence Barker (Barker). Several days after the accident, Barker suffered a stroke.1 At the time of the accident, Barker was insured by State Farm Mutual Automobile Insurance Company (State Farm) under a policy of automobile insurance with coverage for bodily injury caused by an uninsured or underinsured motorist (collectively referred to as uninsured motorist). Barker settled his claim against the motorist for the available limits of the motorist's liability coverage. Barker—contending that all of his injuries, including those related to his stroke, were proximately caused by the accident—then asserted an uninsured motorist claim against State Farm for the policy limits of $100,000 available after offset. State Farm maintained that the only damage proximately caused by the accident was a minor neck strain, for which Barker had been fully compensated by his settlement with the motorist. The claim was submitted to an arbitration panel. During the arbitration proceeding, Barker and State Farm stipulated that if the arbitrators determined that the stroke was proximately caused by the accident, then Barker's damages would exceed policy limits. On October 8, 1998, the arbitration panel concluded that all of Barker's injuries were in fact caused by the accident. On December 7, 1998, State Farm paid Barker $100,000, which he accepted on the condition that acceptance of the award would not affect his right to make a claim for interest.
{3} To resolve the issue of prejudgment interest, State Farm filed an action for declaratory judgment. Barker filed a motion for summary judgment, and then State Farm filed a cross-motion for summary judgment. The motions and responses contained stipulated facts. After hearing, the district court entered an order determining that State Farm owed no prejudgment interest to Barker. He timely appealed the order.
{4} Barker argues that the proper standard of review on summary judgment is de novo. State Farm contends that the correct standard is abuse of discretion. We agree with Barker. This case comes to us on an order denying Barker's motion for summary judgment and granting State Farm's cross-motion for summary judgment. In its order, the trial court acknowledged that the parties had stipulated to certain facts, as set forth in the motion and cross-motion for summary judgment and the responses thereto. On appeal, neither party argues that genuine issues of material fact exist; we therefore review the disposition of the summary judgment motions de novo. Barncastle v. Am. Nat'l Prop. & Cas. Cos., 2000-NMCA-095, ¶ 5, 129 N.M. 672, 11 P.3d 1234.
{5} In his motion for summary judgment, Barker relies solely on Section 56-8-3 as authority for the award of prejudgment interest:
{6} Barker argues that State Farm breached its contract of insurance with him by failing to pay policy limits for uninsured motorist coverage until after arbitration. Citing to Ponder v. State Farm Mutual Automobile Insurance Co., 2000-NMSC-033, 129 N.M. 698, 12 P.3d 960, Sunwest Bank of Albuquerque, N.A. v. Colucci, 117 N.M. 373, 872 P.2d 346 (1994) [hereinafter Sunwest], Kueffer v. Kueffer, 110 N.M. 10, 791 P.2d 461 (1990), and O'Meara v. Commercial Insurance Co., 71 N.M. 145, 376 P.2d 486 (1962), Barker contends that this case is governed by Section 56-8-3(A) and that based on State Farm's breach of contract, Barker is entitled to prejudgment interest as a matter of right. Relying on Ponder, Barker further maintains that he lost the use and earning power of the funds that State Farm retained during the pendency of the arbitration and that he is therefore entitled to interest on the funds during that time period.
{7} State Farm contends that it did not breach its policy of insurance. On the contrary, State Farm argues, once there was a dispute about the amount of damages Barker was legally entitled to collect from the uninsured motorist, the contract required the parties to arbitrate the issue, and therefore no money was due until the arbitrators rendered their decision. State Farm points us to Restatement (First) of Contracts § 337 cmt. b (1932), which states, "Where performance is to be rendered . . . on any other condition precedent, interest as damages will not begin until . . . occurrence or excuse of the condition[.]" State Farm's position is that an arbitration award determining damages was a condition that had to be satisfied before State Farm was obligated to pay the demand for uninsured motorist coverage.
{8} In further support of its position, State Farm points to other jurisdictions that have held that there is no entitlement to prejudgment interest until there is a resolution of the amount owed to the insured. State Farm points out that the cases relied on by Barker are distinguishable, in that any prejudgment interest allowed was based on damages flowing from a breach of contract and that because there is no breach, neither Section 56-8-3(A) nor these cases apply.
{9} We first turn to the trial court's order, wherein it found that "[a]n award of pre-judgment interest in this matter would not have been appropriate until after the arbitration award was made and established, and developed into formality." We read this to mean that the trial court determined that there was no breach of contract and that Barker was therefore not entitled to prejudgment interest as a matter of right under Section 56-8-3(A).
{10} The pertinent section of the insurance contract was attached as Exhibit 1 to State Farm's cross-motion for summary judgment. Under this contract, State Farm agreed to pay damages for bodily injury . . . an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle. The bodily injury must be sustained by an insured and the bodily injury . . . must be caused by accident arising out of the ownership, maintenance or use of an uninsured motor vehicle.
{11} The contract goes on to provide the following directions for deciding fault and amount:
{12} The parties did not agree on the amount of damages and arbitrated the amount due. The question before the arbitrators was one of proximate cause: Was the accident the proximate cause of the stroke? The parties had previously agreed that if the arbitrators answered in the affirmative, any damages would exceed policy limits. State Farm did not contest that Barker was covered under the policy, rather that any damages were owed. We hold that State Farm did not breach its contract by following the terms of the insurance contract and arbitrating the issue of damages caused by the uninsured motorist.
Id. at 572, 761 P.2d at 450 (citations omitted). Arbitration clauses are governed by contract law. Santa Fe Techs., Inc. v. Argus Networks, Inc., 2002-NMCA-030, ¶ 52, 131 N.M. 772, 42 P.3d 1221.
{14} Barker is in no different position...
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