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DTCI: Tort prejudgment interest statutes

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On Dec. 12, 2012, the Indiana Supreme Court decided four cases involving the tort prejudgment interest statutes: Kosarko v. Padula, 979 N.E.2d 144; Inman v. State Farm Mutual Automobile Insurance Co.,—N.E.2d—; Alsheik v. Guerrero, 979 N.E.2d 141; and Wisner v. Laney,—N.E.2d at—. These decisions clarified many questions regarding the TPIS, but also left several issues undecided.

ramsey-williamDTCI Ramsey

Overview of the TPIS

The TPIS allow a plaintiff in a civil action arising out of tortious conduct to recover prejudgment interest if the plaintiff makes a settlement offer that complies with the TPIS’ requirements. See Ind. Code §§ 34-1-4-1 through -6. The TPIS allow defendants to avoid prejudgment interest by making their own qualified settlement offer. See Ind. Code § 34-51-4-5.

Qualified settlement offers

For a plaintiff’s settlement offer to qualify, it must meet explicit statutory requirements. See Ind. Code § 34-51-4-6. If a plaintiff fails to make an offer that meets these requirements, a trial court cannot award prejudgment interest. See Alsheik, 979 N.E.2d at 154. The Indiana Supreme Court explained that the better practice is for parties to cite the TPIS in the letter, include the 60-day settlement window, and note the possibility of prejudgment interests. See id. at 155. However, although courts generally require strict compliance with prejudgment interest statutes, see Anthony E. Rothschild, Prejudgment Interests: Survey and Suggestion, 77 Nw. U. L. Rev. 192 (1982), and although statutes in derogation of the common law are strictly construed, see Bartrom v. Adjustment Bureau, Inc., 618 N.E.2d 1, 10 (Ind. 1993), both the Wisner and Alsheik decisions applied a relaxed standard and found that although offers did not strictly track the statutory language, the offers met a “minimum threshold” for compliance.

Discretionary nature of prejudgment interest award

Some debate had occurred over whether a trial court could deny prejudgment interest if a plaintiff had issued a qualified settlement offer. It is now clear that trial courts have this discretion. See Alsheik, 979 N.E.2d at 155. Trial courts need not offer any explanation for decisions denying prejudgment interest. See Inman. However, if a trial court gives reasons for denying a request for prejudgment interest and the reasons are improper, an appellate court will reverse the award. See id.

The TPIS’ effect on the common law

Indiana common law allowed parties to recover prejudgment interest in tort actions. See N.Y., C. & St. L. Ry. Co. v. Roper, 176 Ind. 497, 96 N.E. 468 (1911). Although the TPIS are thus somewhat consistent with the common law, our Supreme Court has concluded that the TPIS abrogate common-law prejudgment interest rules. See Kosarko, 979 N.E.2d at 148-49. Although the common law no longer applies (because trial courts have virtually unlimited discretion in awarding or declining to award prejudgment interest), Indiana common-law decisions that are not inconsistent with the TPIS may still have some persuasive effect with trial courts regarding their discretionary decisions.

Open Questions

A new approach to statutory interpretation?

The TPIS require that qualified settlement offers must be made: “within one (1) year after a claim is filed in the court, or any longer period determined by the court to be necessary upon a showing of good cause.” Ind. Code § 34-51-4-6. The Wisner and Alsheik courts’ interpretation of this timing requirement may signal a subtle shift in the court’s approach to statutory interpretation.

In Wisner, the plaintiff filed suit in November 2002, sent the settlement letter in April 2005, dismissed the complaint in 2006, and refiled the complaint in August 2007. The court held the letter was untimely but suggested that if the plaintiff had sent a second letter within one year of refiling, the letter would have complied with the TPIS. This suggestion seems contrary to the TPIS’ requirement that a plaintiff make an offer “within one year after filing.” Further, it is difficult to see how allowing parties to resurrect waived claims for prejudgment interest furthers the TPIS’ purpose of encouraging prompt claim resolution. See Inman.

In Alsheik, the plaintiff filed the lawsuit in May 2002, dismissed the suit in January 2003, sent the settlement letter in April 2003, and refiled a complaint in February 2006. Citing the purpose of the TPIS, the court concluded that settlement offers sent before a claim is filed in court fulfill the TPIS’ requirement that a settlement offer must be extended “within one year after a claim is filed in the court.” See Wisner. The court thereby essentially interpreted the statute either as saying “before one (1) year after a claim is filed in the court” or discounting the term “after.” The court explained: “We believe this interpretation is broader and more in line with the Legislature’s intent to facilitate and encourage settlement of claims amicably without legal recourse, but also to give real meaning and effect to the prejudgment interest statute.” Wisner; see Alsheik, 979 N.E.2d at 155.

The Supreme Court’s rules for statutory interpretation are well established. “If a statute is unambiguous, we may not interpret it, but must give the statute its clear and plain meaning.” Elmer Buchta Trucking, Inc. v. Stanley, 744 N.E.2d 939, 942 (Ind. 2001) (emphasis added). “It is only when the language of the statute or ordinance is ambiguous that the courts should search for legislative intent.” Ott v. Johnson, 262 Ind. 548, 552, 319 N.E.2d 622, 624 (1974). Neither the Wisner nor Alsheik court stated that the TPIS’ timing provision was ambiguous or explained the ambiguity.

The court would not be the first to find ambiguous a timing requirement including the word after following the word within. See Young v. Waldrop, 109 P.2d 59, 60 (Mont. 1941). But the greater weight of authority holds that such language is not ambiguous. See People Holding Co. v. Brey, 173 A. 233, 234-35 (Conn. 1934) (holding appraisal made four days before time for redemption expired failed to comply with statute requiring the appraisal to be made “within ten days after the time limited for redemption shall have expired”); Scribner v. Sachs, 164 N.E.2d 481, 484 (Ill. 1960); Hulegaard v. Garrett, 446 P.2d 975, 977 (Or. 1968) (holding document filed before a notice of appeal failed to meet the statutory requirement that document be filed “within five days after the notice of appeal is given or filed”); State v. Dyches, 28 Tex. 535, 538 (1866) (“The use of the term ‘after conviction’ excludes the idea that it was intended that he should do so at any time before conviction.”); American Hous. Found. v. Calhoun County Appraisal Dist., 198 S.W.3d 816, 819 (Tex. App. 2006) (“Moreover, an interpretation of the statute that makes the phrase ‘constructed after December 31, 2001’ mean constructed before or after December 31, 2001, is grossly contrary to the ordinary meaning of the word ‘after.’”), review denied; see also Formal Opinion Vermont Attorney General #2008-01 (explaining that a proposed interpretation that “expands [constitutional language] to include adjournments ‘before the presentation’ of a bill as well as adjournments ‘within three days after the presentation’” must fail because “the plain meaning of ‘after’ does not include ‘before’”); Silva v. Maplewood Care Ctr., 582 N.W.2d 566, 570 (Minn. 1998) (Tomljanovich, J., dissenting with Stringer, J.) (“Surely the word ‘after’ is not ambiguous.”); State v. Scott, 15 S.E. 405, 406 (Va. 1892) (“[I]t is impossible for us to construe the word ‘after’ as if it had been written ‘before.’”).

Whether these decisions signal the new Supreme Court’s willingness to look at the Legislature’s intent without finding a statute to be ambiguous, or whether the court simply found the statute ambiguous and declined to explain the ambiguity remains to be seen.

Can UM/UIM carriers explicitly exclude coverage for prejudgment interest?

In Inman, the court held that the TPIS apply to UM and UIM claims and that a prejudgment interest award can exceed UM/UIM policy limits. The Inman court based its conclusion on TPIS’ failure to state that UM/UIM carriers may exclude coverage for prejudgment interest. Indiana statutes regarding punitive damages make no mention of whether insurance companies can exclude coverage, see Ind. Code §§ 34-51-3-0.2 through -6, and it is well established that insurance policies may permissibly exclude coverage for punitive damages, see, e.g., Crabtree ex rel. Kemp v. Estate of Crabtree, 837 N.E.2d 135, 139-40 (Ind. 2005). In fact, the Court of Appeals and Supreme Court have recognized that public policy considerations weigh against insurance coverage for punitive damages in the UM/UIM context. See Shuamber v. Henderson, 563 N.E.2d 1314, 1317 (Ind. Ct. App. 1990), adopted in relevant part, 579 N.E.2d 452 (Ind. 1991).

The Inman court also correctly recognized that the TPIS do not permit insurance companies to exclude coverage for prejudgment interest. But no provision of the TPIS precludes insurance companies from excluding coverage for prejudgment interest. The General Assembly has demonstrated that when it wishes to require or preclude certain provisions in insurance policies, it will do so explicitly. See, e.g., Ind. Code § 27-7-5-2 (requiring insurance companies to provide UM and UIM coverage unless insured rejects coverage in writing); Ind. Code § 27-1-13-7 (requiring certain casualty insurance policies to provide coverage even in the event of the insolvency or bankruptcy of the insured entity); Ind. Code § 27-8-14.7-4 (requiring insurers to provide coverage for prostate screening).

The Inman court recognized that one jurisdiction, Georgia, has held that UM/UIM insurance companies have no duty to pay prejudgment interest that exceeds policy limits. The Inman court noted that the Georgia court offered no analysis for its position and declined to adopt its holding. However, several other decisions not cited by the Supreme Court reached the same conclusion as the Georgia court. See USAA v. Parker, 200 P.3d 350 (Colo. 2009); Trask v. Auto. Ins. Co., 736 A.2d 237, 239 (Me. 1999); Ricke v. Progressive Specialty Ins. Co., 577 N.W.2d 512 (Minn. Ct. App. 1998), review denied; Baxley v Nationwide Mut. Ins. Co., 430 S.E.2d 895 (N.C. 1993); Carney v State Farm Mut. Auto. Ins. Co., 877 P2d 1113 (Okla. 1994). These decisions, unlike the Georgia decision, included thoughtful analyses explaining that policy limits are bargained-for contractual terms and should not be ignored.

The natural reaction of insurance companies would be to include language in their policies specifically precluding coverage for prejudgment interest. Public policy would seem to favor giving consumers the option to reject certain coverage in exchange for lower premiums. See, e.g., Green v. Great Am. Ins. Co., 516 SW.2d 739, 740 (Tex. Civ. App. 1974). The Inman court suggested that insurance companies cannot include such terms in policies by stating, “it is not within the parties’ power to contractually preclude a prejudgment interest award made under the TPIS.” The Inman court, however, addressed only a general coverage limit, not an explicit exclusion. Therefore, although Inman will undoubtedly present a substantial hurdle for a party arguing that an exclusion of coverage for prejudgment interest is permissible, this issue remains open.

Can liability insurance companies exclude coverage for prejudgment interest?

Inman did not address the issue of whether an insurance company must provide coverage for prejudgment interest awarded against its insured if the prejudgment interest exceeds policy limits. The strong majority rule is that insurance companies have no duty to provide such coverage. See Lessard v. Milwaukee Ins. Co., 514 N.W.2d 556, 559 (Minn.1994); Buckhannon-Upshur County Airport Auth. v. R & R Coal Contracting, Inc., 413 S.E.2d 404, 410-11 (W. Va. 1991) (collecting cases). Although the Inman decision seems to suggest that the Indiana Supreme Court might reject this majority rule, the court made no explicit statement on the issue.

At what point in a case must a plaintiff formally request prejudgment interest?

The TPIS are silent on the timing of a plaintiff’s formal request for prejudgment interest. Significant authority from other jurisdictions indicates that a plaintiff must make this request before a judgment is entered in the complaint or pretrial order. See, e.g., First State Bank of Monticello v. Ohio Cas. Ins. Co., 555 F.3d 564, 572 (7th Cir. 2009); Uphoff v. Elegant Bath, Ltd., 176 F.3d 399, 409-10 (7th Cir. 1999); Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F. Supp. 2d 916, 923 (C.D. Cal. 2010); Rowland v. Magna Millikin Bank of Decatur, N.A., 812 F. Supp. 875, 881 (C.D. Ill. 1992); McLaurin v. Old S. Life Ins. Co., 334 So. 2d 361, 362 (Miss. 1976); Gonzales v. Lockwood Lumber Co., 668 S.W.2d 813, 815 (Tex. App. 1984). Until the Supreme Court explicitly addresses this issue, it makes sense for defendants to argue that plaintiffs who have failed to request prejudgment interest before trial have waived their right to prejudgment interest.

Conclusion

Although this article focused on questions created and unanswered by the Supreme Court, the court’s recent decisions have provided significant clarity regarding prejudgment interest claims. Although litigation over the issues discussed above will undoubtedly occur, the Supreme Court has eliminated many open issues regarding the TPIS and has provided guidance for parties and trial courts faced with TPIS claims.•

Mr. William Ramsey is a member of DTCI and an associate in Murphy Ice & Koeneman, Fort Wayne. Firm partners, Edward Murphy and Heidi Koeneman, served as defense counsel in Wisner v. Laney. The opinions expressed in this article are those of the author.
 

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  1. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

  2. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

  3. Diversity is important, but with some limitations. For instance, diversity of experience is a great thing that can be very helpful in certain jobs or roles. Diversity of skin color is never important, ever, under any circumstance. To think that skin color changes one single thing about a person is patently racist and offensive. Likewise, diversity of values is useless. Some values are better than others. In the case of a supreme court justice, I actually think diversity is unimportant. The justices are not to impose their own beliefs on rulings, but need to apply the law to the facts in an objective manner.

  4. Have been seeing this wonderful physician for a few years and was one of his patients who told him about what we were being told at CVS. Multiple ones. This was a witch hunt and they shold be ashamed of how patients were treated. Most of all, CVS should be ashamed for what they put this physician through. So thankful he fought back. His office is no "pill mill'. He does drug testing multiple times a year and sees patients a minimum of four times a year.

  5. Brian W, I fear I have not been sufficiently entertaining to bring you back. Here is a real laugh track that just might do it. When one is grabbed by the scruff of his worldview and made to choose between his Confession and his profession ... it is a not a hard choice, given the Confession affects eternity. But then comes the hardship in this world. Imagine how often I hear taunts like yours ... "what, you could not even pass character and fitness after they let you sit and pass their bar exam ... dude, there must really be something wrong with you!" Even one of the Bishop's foremost courtiers said that, when explaining why the RCC refused to stand with me. You want entertaining? How about watching your personal economy crash while you have a wife and five kids to clothe and feed. And you can't because you cannot work, because those demanding you cast off your Confession to be allowed into "their" profession have all the control. And you know that they are wrong, dead wrong, and that even the professional code itself allows your Faithful stand, to wit: "A lawyer may refuse to comply with an obligation imposed by law upon a good faith belief that no valid obligation exists. The provisions of Rule 1.2(d) concerning a good faith challenge to the validity, scope, meaning or application of the law apply to challenges of legal regulation of the practice of law." YET YOU ARE A NONPERSON before the BLE, and will not be heard on your rights or their duties to the law -- you are under tyranny, not law. And so they win in this world, you lose, and you lose even your belief in the rule of law, and demoralization joins poverty, and very troubling thoughts impeaching self worth rush in to fill the void where your career once lived. Thoughts you did not think possible. You find yourself a failure ... in your profession, in your support of your family, in the mirror. And there is little to keep hope alive, because tyranny rules so firmly and none, not the church, not the NGO's, none truly give a damn. Not even a new court, who pay such lip service to justice and ancient role models. You want entertainment? Well if you are on the side of the courtiers running the system that has crushed me, as I suspect you are, then Orwell must be a real riot: "There will be no curiosity, no enjoyment of the process of life. All competing pleasures will be destroyed. But always — do not forget this, Winston — always there will be the intoxication of power, constantly increasing and constantly growing subtler. Always, at every moment, there will be the thrill of victory, the sensation of trampling on an enemy who is helpless. If you want a picture of the future, imagine a boot stamping on a human face — forever." I never thought they would win, I always thought that at the end of the day the rule of law would prevail. Yes, the rule of man's law. Instead power prevailed, so many rules broken by the system to break me. It took years, but, finally, the end that Dr Bowman predicted is upon me, the end that she advised the BLE to take to break me. Ironically, that is the one thing in her far left of center report that the BLE (after stamping, in red ink, on Jan 22) is uninterested in, as that the BLE and ADA office that used the federal statute as a sword now refuses to even dialogue on her dire prediction as to my fate. "C'est la vie" Entertaining enough for you, status quo defender?

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