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Court hits on 2 first impression issues about prejudgment interest

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The Indiana Court of Appeals has reversed a trial judge decision against awarding a litigant prejudgment interest in an uninsured motorist case, examining two issues of first impression and finding that state statute warrants the litigant receive that money even when it exceeds insurance policy limits for those types of claims.

A unanimous decision came today in Kathy Inman v. State Farm Mutual Automobile Insurance Co., No. 41A01-1005-CT-223, which involves a Johnson County woman’s action against State Farm Insurance Company stemming from a November 2006 car collision. Kathy Inman sued on grounds that the other driver was negligent when he struck the rear of her vehicle. Though she later settled with that driver’s insurance company for the $50,000 limit, Inman amended her complaint against State Farm seeking an additional $50,000 in underinsured motorist benefits from her policy that had a $100,000 per person liability cap.

In June 2009, she filed a written offer to settle the case for the policy limit of $50,000, pursuant to Indiana Code 34-51-4-6. State Farm didn’t respond to that request, and earlier this year a jury returned a verdict in Inman’s favor for $50,000. She filed a motion for prejudgment interest in the amount of $3,616.44, plus $13.10 per day after that filing on April 12, 2010. Special Judge Richard Tandy summarily denied that motion.

Analyzing that state law known as the Tort Prejudgment Interest Statute, the appellate court looked at State Farm’s contention that Inman doesn’t meet the TPIS requirements because an underinsured motorist claim is not a civil action arising out of tortious conduct as required by the statute. Though no Indiana cases address that issue, the panel turned to Woods v. Farmers Insurance of Columbus, Inc, 666 N.E.2d 283 (Ohio Ct. App. 1995) for guidance, as well as rulings from Oklahoma, North Carolina, Georgia, and Louisiana.

“We find the reasoning of these cases, as well as similar ones in other jurisdictions, to be persuasive,” Judge Patricia Riley wrote. “We therefore hold that a claim against one’s insurer for underinsured motorist benefits is a civil action arising out of tortious conduct, and the award of prejudgment interest pursuant to IC 34-51-4-5 in such a case is appropriate.”

The court also looked at prejudgment interest in excess of the policy limits, a second issue that no Indiana court has addressed. They looked to Potomac Insurance Company v. Howard, 813 S.W.2d 557 (Tex Ct. App. 1991) for guidance, as well as the Michigan Supreme Court in Denham v. Bedford, 287 N.W.2d 168 (Mich. 1979).

“Here, based on the purpose of the TPIS as well as public policy considerations as already stated in Denham, we hold that an insurer can be required to pay prejudgment interest in excess of uninsured and/or underinsured motorist limits in an action brought by an insured for failure to pay uninsured and/or underinsured motorist coverage,” Judge Riley wrote.

The holding is consistent with what the Northern District of Indiana concluded in Schimizzi v. Illinois Farmers Insurance Company, 928 F. Supp. 760 (N.D. Ind. 1996), and also with the Indiana Supreme Court’s treatment in Cahoons v. Cummings, 734 N.E.2d 535, 547 (Ind. 2000) of prejudgment interest in medical malpractice cases where the court had held a qualified health care provider is responsible for collateral litigation prejudgment interest expenses over the statutory cap.

“The rationale for this treatment is the same rationale set forth in other civil actions arising out of tortious conduct,” the court wrote. “Specifically, in Cahoons, the Indiana supreme court explained that if the defendant has the option to terminate the dispute at a known dollar cost, and chooses not to do so, that defendant and not the plaintiff should bear the cost of the time and value of money in the intervening period if the ultimate result is within the parameters of the legislature.”

Noting State Farm didn’t challenge the prejudgment interest amount here, the appellate court reversed the trial judge and ordered that amount be paid.
 

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  1. What is this, the Ind Supreme Court thinking that there is a separation of powers and limited enumerated powers as delegated by a dusty old document? Such eighteen century thinking, so rare and unwanted by the elites in this modern age. Dictate to us, dictate over us, the massess are chanting! George Soros agrees. Time to change with times Ind Supreme Court, says all President Snows. Rule by executive decree is the new black.

  2. I made the same argument before a commission of the Indiana Supreme Court and then to the fedeal district and federal appellate courts. Fell flat. So very glad to read that some judges still beleive that evidentiary foundations matter.

  3. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  4. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

  5. I will agree with that as soon as law schools stop lying to prospective students about salaries and employment opportunities in the legal profession. There is no defense to the fraudulent numbers first year salaries they post to mislead people into going to law school.

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