Case Title: Jackson Hop v. Farm Bureau Insurance

Citation: 

Docket Number: 42384

State: idaho

Court: Idaho Supreme Court (civil)

Date: 2015-07-16T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
Docket No. 42384-2014 
 
JACKSON HOP, LLC, 
 
Plaintiff-Appellant, 
 
v. 
 
FARM BUREAU MUTUAL INSURANCE  
COMPANY OF IDAHO, 
 
Defendant-Respondent. 
 
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Boise, June 2015 Term 
 
2015 Opinion No. 67  
 
Filed: July 16, 2015 
 
Stephen W. Kenyon, Clerk 
 
 
 
Appeal from the District Court of the Third Judicial District of the State of Idaho, 
in and for Canyon County.  Hon. Christopher S. Nye, District Judge. 
 
The judgment of the district court is affirmed. 
 
Edward J. Guerricabeitia, Davidson Copple Copple & Copple, Boise, argued for 
appellant. 
 
James S. Thomson, Powers Tolman Farley PLLC, Boise, argued for respondent. 
 
 
 
EISMANN, Justice. 
 
This is an appeal out of Canyon County from a ruling that an insured was not entitled to 
an award of prejudgment interest on a sum owing for a fire loss because under the terms of the 
insurance policy payment was not due until the amount of the loss was ascertained by arbitration.  
We affirm the judgment of the district court. 
 
I. 
Factual Background. 
 
 
On September 12, 2012, a fire destroyed three buildings and related equipment that were 
owned by Jackson Hop, LLC, and were used to dry hops, to process and bale hops, and to store 
hop bales.  The buildings were insured by Farm Bureau Mutual Insurance Company of Idaho for 
the actual cash value of the buildings and equipment, not to exceed the policy limit.  Farm 
 
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Bureau’s appraisers determined that the actual cash value of the buildings was $295,000 and the 
value of the equipment was $85,909.  On November 28, 2012, it paid Jackson Hop $380,909.  
Jackson Hop disagreed with that figure, and it hired its own appraiser, who concluded that the 
actual cash value of the buildings and equipment totaled $1,410,000.  Farm Bureau retained 
another appraiser to review the report of Jackson Hop’s appraiser, and that appraiser concluded 
that the value of $1,410,000 was unrealistically high. 
 
On June 18, 2013, Jackson Hop filed this action to recover the balance of what it 
contended was owing under the insurance policy, plus prejudgment interest.  The parties agreed 
to submit the matter to arbitration as provided in the policy.  During that process, Jackson Hop 
presented additional opinions regarding the actual cash values, ranging from $800,000 to 
$1,167,000 for the buildings and $379,108 to $399,000 for the equipment.  Farm Bureau’s 
experts revised their opinions upward, although only from $295,000 to $333,239 for the 
buildings and from $85,909 to $133,000 for the equipment.  Before completion of the arbitration, 
Farm Bureau paid an additional sum of $85,330. 
On February 21, 2014, the arbitrators issued their decision.  They determined that the 
actual cash value of the buildings and the equipment was $740,000 and $315,000, respectively, 
for a total of $1,055,000.  Within seven days of the arbitrators’ decision, Farm Bureau paid 
Jackson Hop $588,761, which was the amount of the arbitrators’ award less the prior payments. 
 
On March 4, 2014, Jackson Hop filed a motion asking the district court to confirm the 
arbitrators’ award and to award Jackson Hop prejudgment interest, court costs, and attorney fees.  
Farm Bureau filed an objection to the request for court costs, attorney fees, and prejudgment 
interest.  After briefing and argument, the court awarded Jackson Hop attorney fees in the sum 
$78,259.75, which the court later increased to $82,059.75.  The court denied the request for court 
costs because the parties’ arbitration agreement stated that both parties would pay their own 
costs, and the court denied the request for prejudgment interest because the amount of damages 
was unliquidated and unascertainable by a mathematical process until the arbitrators’ award.  
Jackson Hop then appealed. 
 
II. 
Did the District Court Err in Ruling that Jackson Hop Was Not Entitled to Prejudgment 
Interest? 
 
 
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This Court has long held that prejudgment interest cannot be awarded on a claim “for 
unliquidated damages, the amount of which was not susceptible of ascertainment by computation 
or by reference to market values.”  Barrett v. Northern Pac. Ry. Co., 29 Idaho 139, 145, 157 P. 
1016, 1018 (1916).  Accord Opportunity, L.L.C. v. Ossewarde, 136 Idaho 602, 609-10, 38 P.3d 
1258, 1265-66 (2002).  Jackson Hop contends that there is an exception to that rule for first-party 
insurance claims.  Farm Bureau contends that Jackson Hop is precluded from being awarded 
prejudgment interest because that issue was not presented to the arbitrators.  We will address 
Farm Bureau’s arguments first. 
 
Relying upon Wolfe v. Farm Bureau Insurance Co., 128 Idaho 398, 913 P.2d 1168 
(1996), Farm Bureau asserts that any claim for prejudgment interest must be presented to the 
arbitrators.  Wolfe was injured as a passenger in a car being driven by the owner, who had an 
automobile liability policy with a $25,000 policy limit.  Id. at 401, 913 P.2d at 1171.  After 
recovering the policy limit of the owner’s policy, Wolfe made a demand under the underinsured 
motorist coverage of his automobile policy.  Id.  That claim was arbitrated pursuant to the 
insurance contract, and Wolfe was awarded less than the policy limit of his underinsured 
coverage.  Id.  He then filed an action seeking confirmation of the award, prejudgment interest, 
court costs, and attorney fees.  Id. On appeal, this Court held that Wolfe could not recover 
prejudgment interest because he had not sought it in the arbitration.  This Court stated: 
Section 7–910 of the UAA grants authority to the arbitrators to award “expenses 
and fees, together with other expenses,” incurred during arbitration, absent a 
contrary agreement between the parties.  “Other expenses” include both 
prejudgment interest and costs of arbitration.  Because costs and prejudgment 
interest are paid only as provided in the arbitration award, they are matters which 
must be brought during arbitration.  Wolfe’s failure to claim costs and 
prejudgment interest during arbitration precludes his recovery of costs and 
prejudgment interest outside of arbitration. 
 
Id. at 403, 913 P.2d at 1173. 
 
The holding in Wolfe was based upon the contention that Idaho Code section 7-910 
requires that when a matter is arbitrated, any claim for prejudgment interest must be included in 
the issues to be arbitrated.  Idaho Code section 7-910 states, “Unless otherwise provided in the 
agreement to arbitrate, the arbitrators’ expenses and fees, together with other expenses, not 
including counsel fees, incurred in the conduct of the arbitration, shall be paid as provided in the 
award.”  The statute makes no mention of prejudgment interest, and prejudgment interest could 
 
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not reasonably be considered as being “other expenses . . . incurred in the conduct of the 
arbitration.”  The word “expense” means “[a]n expenditure of money, time, labor, or resources to 
accomplish a result.”  Black’s Law Dictionary 598 (Bryan A. Garner ed., 7th ed., West 1999).  
The word “incur” means “[t]o suffer or bring on oneself (a liability or expense).”  Id. at 771.  
Prejudgment interest is not an expenditure suffered in the conduct of the arbitration.  Interest is 
“compensation fixed by agreement or allowed by law for the use or detention of money, or for 
the loss of money by one who is entitled to its use.”  Id. at 816.  Thus, prejudgment interest is 
compensation that can be awarded to a party in arbitration, it is not an expense incurred by that 
party in the conduct of the arbitration. 
 
“We will ordinarily not overrule one of our prior opinions unless it is shown to have been 
manifestly wrong, or the holding in the case has proven over time to be unwise or unjust.”  State 
v. Koivu, 152 Idaho 511, 518, 272 P.3d 483, 490 (2012).  Because the above-quoted portion of 
the decision in Wolfe is manifestly wrong, we overrule it and its progeny insofar as they hold that 
Idaho Code section 7-910 either authorizes arbitrators to award prejudgment interest or requires 
prejudgment interest to be submitted to arbitrators along with other issues.  Idaho Code section 
7-910 has absolutely nothing to do with prejudgment interest. 
 
“An arbitrator’s authority is derived from the parties’ arbitration agreement.”  Norton v. 
Cal. Ins. Guarantee Ass’n, 143 Idaho 922, 925, 155 P.3d 1161, 1164 (2007).  “Whether an 
arbitration clause in a contract requires arbitration of a particular dispute or claim depends upon 
its terms.”  Mason v. State Farm Mut. Auto. Ins. Co., 145 Idaho 197, 201, 177 P.3d 944, 948 
(2007).  In this case, the insurance contract stated:  “An insured or we may make a written 
demand for arbitration to determine all disputed issues as to (1) whether an insured is entitled 
under the policy to coverage for a loss, or (2) the value of a loss to real or personal property 
where coverage is not disputed.”  The insurance contract did not state that the parties would 
arbitrate all issues arising out of a claim based upon a loss caused by fire.  The contract expressly 
restricted the issues to be arbitrated to the two issues listed.  Farm Bureau stated in its brief, “The 
fact that the arbitration agreement in this case did not specifically address prejudgment interest 
does not prohibit the arbitration panel from considering interest.”  Absent any agreement 
between the parties to include prejudgment interest as an issue to be arbitrated, the arbitration 
panel was prohibited from considering that issue.  Therefore, the failure to have the arbitrators 
 
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address prejudgment interest has no bearing on whether Jackson Hop can obtain an award of 
prejudgment interest from the district court. 
 
Jackson Hop correctly argues that there are decisions from this Court which created an 
exception to the general rule regarding the awarding of prejudgment interest on claims for 
unliquidated damages.  In Intermountain Association of Credit Men v. Milwaukee Mechanics’ 
Insurance Co., 44 Idaho 491, 258 P. 362 (1927), the Court held that an insured under a fire 
policy was entitled to recover prejudgment interest from the date that the insurer denied coverage 
because “[t]his action does not come within the rules controlling allowance of interest upon 
unliquidated claims for damages, but rather those applicable in an action for money due upon 
contract.”  Id. at 500, 258 P. at 365.  The insurance policy provided that payment was “due 60 
days after satisfactory proof of loss was submitted.”  Id. at 499, 258 P. at 365.   
In Brinkman v. Aid Insurance Co., 115 Idaho 346, 766 P.2d 1227 (1988), the Court held 
that an insured, who was injured by an under-insured motorist, was entitled to prejudgment 
interest from the date of the accident on the general damages that he eventually recovered from 
his insurer under the underinsured motorist coverage of his insurance policy.  Id. at 354, 766 
P.2d at 1235.  In so holding, the Brinkman Court stated, “It is significant that Aid’s duty arose 
out of a contract between Aid and Brinkman, not out of a tort action.”  Id. at 353, 766 P.2d at 
1234.  That statement is curious because the rule against awarding prejudgment interest on 
unliquidated damages also applied to contract claims.  Storey & Fawcett v. Nampa & Meridian 
Irrigation Dist., 32 Idaho 713, 719, 187 P. 946, 946 (1920); Medling v. Seawell, 35 Idaho 333, 
339, 207 P. 137, 139 (1922); Ervin Const. Co. v. Van Orden, 125 Idaho 695, 704, 874 P.2d 506, 
515 (1993). 
In Emery v. United Pacific Insurance Co., 120 Idaho 244, 815 P.2d 442 (1991), the Court 
held that as part of a proceeding to confirm an arbitration award of general damages to an 
insured under the uninsured motorist coverage of her insurance contract, the district court could 
award prejudgment interest from the date of the accident on the entire damage award.  Id. at 248, 
815 P.2d at 446.  The Emery Court based its decision on Brinkman, and it added:  “The 
Brinkman decision is not, as the appellant contends, applicable to all tort actions, or all contract 
actions.  The Brinkman decision is limited to actions based on first party insurance contract 
actions involving an underinsured motorist clause similar to the one contained in Brinkman’s 
insurance policy.”  Id. 
 
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In Greenough v. Farm Bureau Mutual Insurance Co. of Idaho, 142 Idaho 589, 130 P.3d 
1127 (2006), this Court overruled Brinkman and its progeny, based upon the plain wording of 
Idaho Code section 28-22-104(1), which provides: 
When there is no express contract in writing fixing a different rate of 
interest, interest is allowed at the rate of twelve cents (12¢) on the hundred by the 
year on: 
1.  Money due by express contract. 
2.  Money after the same becomes due. 
3.  Money lent. 
4.  Money received to the use of another and retained beyond a reasonable 
time without the owner’s consent, express or implied. 
5.  Money due on the settlement of mutual accounts from the date the 
balance is ascertained. 
6.  Money due upon open accounts after three (3) months from the date of 
the last item. 
 
 
Because the statute sets forth when interest begins to accrue when there is no express 
contract in writing fixing a different rate of interest, we held in Greenough: 
After a review of Brinkman and its progeny, it is apparent that these cases 
must be overruled in order to vindicate the “plain, obvious principles” of I.C. § 
28–22–104 and to “remedy continued injustice.”  Therefore, to the extent that 
Brinkman and its progeny provide for prejudgment interest from the date of the 
accident, they are overruled.  Consequently, although the district court applied the 
established case law in Idaho, we must vacate its opinion to the extent that it does 
not conform with this opinion. 
In insurance cases money becomes due as provided under the express 
terms of the insurance contract.  Therefore, the insured is not entitled to 
prejudgment interest until he or she complies with the applicable contract 
provisions. 
 
Id. at 593, 130 P.3d at 1131. 
 
Pursuant to Idaho Code section 28-22-104(1), interest on the amount that Jackson Hop 
was entitled to receive under the insurance contract did not begin to run until the money was due 
under the terms of the parties’ contract.  The insurance contract between Jackson Hop and Farm 
Bureau sets forth when payment of a loss is due.  It states:  “Payment for loss will be made 
within 60 days after we receive your signed, sworn proof of loss and ascertainment of the loss is 
made by:  (a) agreement with you; (b) entry of a final judgment; or (c) the filing of an arbitration 
award with us.”  Under the parties’ contract, payment of Jackson Hop’s loss was not due until 
the filing of the arbitration award with Farm Bureau.  Jackson Hop has not contended that any 
 
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unpaid interest accrued between the filing of the arbitration award and the payment.  Therefore, 
Jackson Hop is not entitled to an award of interest. 
We affirm the judgment of the district court on the ground that pursuant to Idaho Code 
section 28-22-104(1), interest on the sum that Jackson Hop was entitled to recover under the 
insurance contract did not begin to accrue until payment was due under the contract.  Therefore, 
we need not address the issue of interest accruing on an award of unliquidated damages. 
 
III. 
Is Either Party Entitled to an Award of Attorney Fees on Appeal? 
 
 
Both parties request an award of attorney fees on appeal pursuant to Idaho Code section 
41-1839.  Jackson Hop seeks an award of attorney fees under subsection (1) of the statute.  
Because Jackson Hop is not the prevailing party on appeal, it is not entitled to an award of 
attorney fees under that statute.  Bank of Idaho v. First Am. Title Ins. Co., 156 Idaho 618, 624, 
329 P.3d 1066, 1072 (2014). 
 
Farm Bureau seeks an award of attorney fees under subsection (4) of the statute, which 
provides that “attorney’s fees may be awarded by the court when it finds, from the facts 
presented to it that a case was brought, pursued or defended frivolously, unreasonably or without 
foundation.”  I.C. § 41-1839(4).  In opposing Jackson Hop’s request for attorney fees, Farm 
Bureau argued that (1) any award of prejudgment interest had to be included in the arbitrators’ 
award, pursuant to Wolfe; (2) prejudgment interest could not be awarded because the amount of 
the loss was unliquidated and not capable of mathematical computation; and (3) interest could 
not begin to accrue until payment was due under the insurance contract.  The district court held 
that Jackson Hop could not recover prejudgment interest because the amount of its loss was 
unliquidated, but the court did not address the other two grounds of Farm Bureau’s objection.  
On appeal, Jackson Hop argued that Intermountain Association of Credit Men permitted an 
award of prejudgment interest on the insurance proceeds from a fire loss even though the amount 
of the claim was unliquidated.  On appeal, Farm Bureau made the same three arguments that it 
had made in the district court.  Although this Court had overruled Brinkman and its progeny, 
which permitted the award of prejudgment interest on unliquidated claims, we did so based upon 
the ground that by statute interest could not begin to run until the claim was liquidated.  This 
Court has not had occasion to address the holding in Intermountain Association of Credit Men.  
 
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We also overruled Wolfe, upon which Farm Bureau relied.  Under the circumstances, we do not 
find that Jackson Hop pursued this appeal frivolously, unreasonably, or without foundation.  
Therefore, we do not award Farm Bureau attorney fees on appeal. 
 
IV. 
Conclusion. 
 
 
We affirm the judgment of the district court, and we award respondent costs, but not 
attorney fees, on appeal. 
 
 
Chief Justice BURDICK, Justices J. JONES, W. JONES, and HORTON CONCUR.