Case Title: State Farm Mutual Automobile Insurance Co. v. Enrique

Citation: 

Docket Number: 474, 2010

State: delaware

Court: Delaware Supreme Court

Date: 2011-03-22T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
STATE FARM MUTUAL 
 
) 
AUTOMOBILE INSURANCE  
)  No. 474, 2010 
COMPANY, a foreign corporation, 
) 
 
 
 
 
 
 
)  Court Below:  Superior Court 
 
 
Defendant Below,  
)  of the State of Delaware in 
 
 
Appellant,  
 
)  and for Kent County 
 
 
 
 
 
 
) 
v. 
 
 
 
 
 
)  C.A. No. 08C-07-026 
 
 
 
 
 
 
) 
JOANNE ENRIQUE, 
 
 
) 
 
 
 
 
 
 
) 
 
 
Plaintiff Below, 
 
) 
 
 
Appellee. 
 
 
) 
 
Submitted:  March 2, 2011 
Decided:  March 22, 2011 
 
Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS and 
RIDGELY, Justices. 
 
O R D E R 
 
This 22nd day of March 2011, it appears to the Court that: 
 
(1) 
State Farm Mutual Automobile Insurance Company appeals from a 
Superior Court order awarding Joanne Enrique costs and prejudgment interest 
under 6 Del. C. § 2301(d) on her uninsured motorist benefits claims.  State Farm 
insured Enrique under a typical auto policy in which she had $100,000 uninsured 
motorist coverage.  State Farm disputed Enrique’s claim for damages under the 
UM coverage.  Enrique sued.  A jury awarded Enrique $260,000 for damages 
arising out of the automobile accident with the uninsured motorist.  On appeal, 
2 
 
State Farm claims that the trial judge erred by awarding Enrique prejudgment 
interest because the underlying judgment with prejudgment interest exceeded the 
uninsured motorist policy coverage limit.  Because prejudgment interest is a 
litigation cost and not an element of damages, the uninsured motorist policy’s 
coverage limits do not cap the award. Therefore, we AFFIRM. 
(2) 
This action arises out of a claim for uninsured motorist benefits under 
a policy State Farm issued to Jason Garber.  On September 26, 2005, Enrique 
permissively drove Garber’s car.  Bridgett Roy struck the Garber car.  The parties 
do not dispute that Roy’s negligence proximately caused the accident, that Enrique 
sustained injuries in the accident, and that Enrique qualified for uninsured motorist 
coverage under Garber’s policy. 
(3) 
On July 22, 2008, Enrique filed a complaint against State Farm for 
damages under Garber’s uninsured motorist coverage.  The policy provided for 
$100,000 in single limits uninsured motorist coverage.  State Farm advanced 
$25,000 to Enrique after negotiations between the parties broke down.  On January 
22, 2010, Enrique sent State Farm a demand pursuant to 6 Del. C. § 2301(d)1 
                                          
 
1 6 Del. C. § 2301(d) is also commonly known as the “rejected settlement offer” statute.  It reads:   
In any tort action for compensatory damages in the Superior Court or the Court of 
Common Pleas seeking monetary relief for bodily injuries, death or property 
damage, interest shall be added to any final judgment entered for damages 
awarded, calculated at the rate established in subsection (a) of this section, 
commencing from the date of injury, provided that prior to trial the plaintiff had 
extended to defendant a written settlement demand valid for a minimum of 30 days 
3 
 
requesting payment of an additional $65,000 for a total of $90,000.  On February 
2, 2010, State Farm rejected the demand.  Before trial, the parties stipulated that 
$75,000 remained under the UM coverage. 
(4) 
After a three day trial, a jury returned a verdict for $260,000 in 
Enrique’s favor.  Following trial, Enrique filed a motion to assess expert witness 
fees, court costs, and prejudgment interest.  The Superior Court judge awarded an 
undisputed $1,369 for court costs, $2,000 for expert fees, and prejudgment interest.  
The Superior Court judge held that an award of prejudgment interest added to 
damages could exceed the UM policy limits but that the remaining coverage 
balance of $75,000 would be the basis for calculating prejudgment interest, not the 
jury verdict of $260,000. The Superior Court judge awarded prejudgment interest 
of $32,296.87 based on the remaining $75,000 of the $100,000 coverage limit.2   
(5) 
On appeal, State Farm contends that the trial judge’s total award 
(damages plus prejudgment interest) erroneously exceeded the $75,000 remaining 
under the UM coverage limit.  According to State Farm, prejudgment interest is an 
element of damages. Because the policy limits the maximum recoverable under 
UM to the bodily injury damage limits in the policy ($100,000), and prejudgment 
                                                                                                                                        
in an amount less than the amount of damages upon which the judgment was 
entered. 
 
2 Enrique v. State Farm Mut. Auto. Ins., 2010 WL 263845, at *3 (Del. Super. Ct. June 30, 2010). 
4 
 
interest is an element of damages, the policy limit of $100,000 caps Enrique’s 
recovery—prejudgment interest included.3  
(6) 
We review questions of statutory interpretation de novo because they 
involve questions of law.4  When reviewing a statute or policy de novo, we must 
determine whether the trial judge “erred in formulating or applying legal 
precepts.”5 
(7) 
Section 2301(d) sets forth certain requirements that a claimant must 
meet in order to qualify for prejudgment interest.6  The action must be a tort action, 
the claimant must have made and held open a demand for settlement for 30 days, 
and the damages determined at trial must exceed the amount plaintiff agreed to 
accept for settlement.7  If these elements are met, then “[a] trial judge would 
ultimately calculate the contested prejudgment interest based upon the extent of 
damages—not the existence of or terms of coverage.”8 However, when 
prejudgment interest is awarded based on uninsured motorist coverage, then we 
                                          
 
3 App. to Op. Br. at A0032. 
4 Rapposelli v. State Farm Mut. Ins., 988 A.2d 425, 427 (Del. 2010). 
5 State Farm Mut. Ins. Co. v. Clarendon Nat’l Ins. Co., 604 A.2d 384, 387 (Del. 1992). 
6 6 Del. C. § 2301(d). 
7 See id. 
8 Rapposelli, 988 A.2d at 427-29. 
5 
 
agree with the trial judge that the award of prejudgment interest can be greater than 
the uninsured motorist policy limits but that the award must be based on the 
remaining coverage—not the actual jury damage award. 
(8) 
Here, Enrique met all the requirements under section 2301(d).  
Further, it is undisputed that Enrique offered to settle the case before trial for an 
additional payment of $65,000.00, State Farm rejected that demand, it remained 
open for 30 days, and the jury returned a damages verdict for $260,000.00—clearly 
in excess of the demand.  Because all of the requirements under the plain and 
unambiguous statute are met, the trial judge must award prejudgment interest. 
(9) 
In Delaware, prejudgment interest only becomes an obligation of a 
litigating party—here the uninsured motorist carrier—when that party rejects a 
demand before trial for an amount less than what the jury awards as damages.  Just 
as State Farm must pay ordinary court costs and fees which are beyond the limits 
of liability, it also must pay prejudgment interest costs.  The contracted policy limit 
forms the basis for the prejudgment interest award but does not set the cap for 
recovery on litigation costs and fees, which may include expert witness fees, 
witness fees, and court reporter fees.9   Indeed, we agree with the rationale of the 
                                          
 
9 See Super. Ct. R. 54 
 
. . . 
(d) Costs. Except when express provision therefore is made either in a statute or in these 
Rules or in the Rules of the Supreme Court, costs shall be allowed as of course to the 
6 
 
trial judge that prejudgment interest is an expense associated with the defense costs 
and strategy in the case.10 As a litigation cost, prejudgment interest does not 
constitute an element of damages controlled by the uninsured motorist policy’s 
coverage limits. 
(10) The General Assembly enacted 6 Del. C. § 2301(d) to promote earlier 
settlement of claims by encouraging parties to make fair offers sooner, with the 
effect of reducing court congestion.11  A contradictory holding capping State 
Farm’s liability on prejudgment interest to the policy limit would strip section 
2301 of its purpose—encouraging settlement—when the insurer is faced with a 
                                                                                                                                        
prevailing party upon application to the Court within ten (10) days of the entry of final 
judgment unless the Court otherwise directs.  
 (f) Court reporter fees. The fees paid court reporters for the Court's copy of transcripts of 
depositions shall not be taxable costs unless introduced into evidence. Fees for other 
copies of such transcripts shall not be taxable costs. The production and playback costs 
associated with any videotape deposition may also be taxable as costs if the video 
deposition is introduced into evidence. 
(g) Witness fees. Witness fees for those testifying on deposition shall be the same as 
statutory witness fees for testifying in Court and such fees shall be taxable as costs if the 
deposition is introduced into evidence. 
(h) Expert witness fees. Fees for expert witnesses testifying on deposition shall be taxed 
as costs pursuant to 10 Del.C. § 8906 only where the deposition is introduced into 
evidence. 
10 Enrique, 2010 WL 263845, at *2; see Cox v. Peerless Ins. Co., 774 F.Supp. 83, 86 (D. Conn. 
1991) (“[P]rejudgment interest . . .  provides an additional incentive to settle a lawsuit and avoid 
a trial in certain cases by imposing an increased penalty upon a nonsettling litigant.”)(internal 
quotation marks omitted). 
 
11 Rapposelli, 988 A.2d at 427; see Del. S.B. 310, 140th Gen. Assemb. (2000). 
7 
 
demand below or at what ultimately may be determined to be at or in excess of the 
policy limit.  Contractual terms in an uninsured motorist policy must be interpreted 
consistently with statutory public policy.  The trial judge correctly did so here. 
NOW, THEREFORE, IT IS ORDERED that the judgment of the Superior 
Court is AFFIRMED. 
 
 
 
 
 
BY THE COURT: 
 
 
 
 
 
 
/s/ Myron T. Steele 
 
 
 
 
 
Chief Justice