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The Hon. Harry F. Barnes, United States District Judge for the Western

District of Arkansas.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 02-4157WA

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John H. Harrod; Brad Harrod; Brent *

Harrod; Matt Harrod, doing business *

as John H. Harrod & Sons Farm, *

doing business as John H. Harrod *

& Sons Poultry, *

* On Appeal from the United

Appellants, * States District Court

* for the Western District

v. * of Arkansas.

*

*

Farmland Mutual Insurance Company, *

*

Appellee. *

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Submitted: September 10, 2003

Filed: October 22, 2003 

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Before LOKEN, Chief Judge, HEANEY and RICHARD S. ARNOLD, Circuit

Judges.

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RICHARD S. ARNOLD, Circuit Judge.

John H. Harrod and others (the Harrods) appeal from the District Court's1

decision that certain items were not “stock” as that term was defined in an insurance
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policy issued by Farmland Mutual Insurance Company to them. The Harrods also

appeal the District Court's decision to deny prejudgment interest. In our opinion, the

District Court properly construed the contract and properly denied prejudgment

interest; therefore, we affirm.

I.

A fire destroyed the Harrods' packing shed, which also served as an office and

storage area, and its contents in August 1998. Previously, in February 1998, the

Harrods had purchased a contract of insurance from Farmland that covered, among

other things, the following categories of property: real and business personal

property, stock, newly acquired or constructed property, newly acquired stock, tank

leakage, débris removal, and electronic data processing equipment. After the fire, the

Harrods made a claim against the insurance policy to recover the losses resulting from

the fire. Farmland required the Harrods to submit a list of the items that they claimed

had been destroyed by the fire and to attach a value to each item. Farmland paid the

Harrods certain amounts at different times, totaling $726,231.06; thereafter, Farmland

refused to pay any additional amounts on the policy. The Harrods sued Farmland

claiming Farmland still owed $401,857.50. 

During the course of the proceedings in the District Court, the Harrods filed a

motion for partial summary judgment, claiming that under the terms of the policy and

Arkansas law, they were entitled to receive the full policy limits for the categories of

real and business personal property and newly acquired or constructed property. The

District Court granted partial summary judgment to the Harrods, and the only

remaining issue for trial was to determine which items constituted “stock” under the

policy. After a one-day bench trial on this issue and after examining various lists of

items submitted by the parties, the District Court awarded the Harrods $142,636.50

for items covered under the category of stock. The District Court later amended this

determination to include some additional items as stock, totaling $8,016.50, and then
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entered a final order for the total amount unpaid of $291,712.17. This amount

represented the total amount due under the policy, less the amount previously paid.

The District Court denied prejudgment interest on this amount. 

On appeal, the Harrods contend that the District Court erred in its construction

of the term stock and in denying prejudgment interest. 

II.

The Harrods argue that Farmland's use of the term “stock” in the policy is

ambiguous, and that the District Court erred in not construing the term liberally

against Farmland. Whether a contract is ambiguous is a question of law, and we

review questions of law de novo. Columbia Ins. Co. v. Baker, 108 F.3d 148, 149-50

(8th Cir. 1997). Under Arkansas law, an insurance policy is ambiguous if the policy

is reasonably susceptible of two or more interpretations. Keller v. Safeco Ins. Co.,

317 Ark. 308, 311, 877 S.W.2d 90, 93 (1994). If the policy is determined to be

ambiguous, the court should interpret the policy liberally in favor of the insured.

Norris v. State Farm Fire & Cas. Co., 341 Ark. 360, 366, 16 S.W.3d 242, 246 ( 2000).

We hold that the policy is not ambiguous.

We must first look at the language of the policy, which defines the term stock

as “the inventory of commodities, goods or merchandise held for manufacturing, sale,

trade or storage.” Business personal property is defined as “all property of a business

nature, other than real property, autos, or stock . . ..” Thus, an item must be either

business personal property or stock, but it cannot be both. The term “business

personal property” is a catchall phrase intended to include items of a business nature

that are not otherwise covered under another category in the policy. However, the

Harrods' losses exceeded the policy limits for business personal property. Thus, in

order for the Harrods to recover, the disputed items must be categorized as stock. 
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Turning to the actual words contained in the definition of stock, the Harrods

argue that the term stock is ambiguous because the words within the definition are not

defined. We disagree. If one believes that the sub-terms (i.e., commodities, goods,

etc.) need to be defined to provide clarity, then the words used in those definitions

would also need to be defined. The result would be an insurance policy the size of

a phone book, which would be no more clear than the current contract. Rather, when

construing the terms of an insurance policy, we must construe the language “in its

plain, ordinary, and popular sense.” Norris, id. at 363, 16 S.W.3d at 244. 

The definition of stock can be divided into three parts: (1) an inventory (2) of

items — commodities, goods, or merchandise — (3) held for a specified purpose —

manufacture, sale, trade, or storage. If the definition is viewed as a whole, then

implicit in the definition of stock is the notion of commerce, selling by the Harrods

and buying by someone else.

“Inventory” generally means items held by a person for sale. This popular

meaning implies that the person holding the inventory is in the business of selling

such items. The policy states that the inventory may consist of commodities, goods,

or merchandise. These terms, taken as a whole, are broad and encompass a wide

range of items. The ordering of the words (commodities, goods, merchandise)

indicates that the term “stock” was intended to include the components of a product,

and items used in selling it, as well as the final product itself. However, the dispute

does not seem to be whether these items are commodities, goods, or merchandise, but

instead, whether the items are held for the purpose of manufacturing, sale, trade, or

storage. 

The District Court noted that the plaintiffs were in the business of raising and

selling vegetables. The Court concluded that a reasonable interpretation of the term

“stock” would include “items such as seed, packing boxes, label applicators and other

items directly related to the business of growing and selling vegetables.” The District
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Court's decision included in “stock” all items that were used in the growing and

selling of vegetables, from the seeds themselves to the packaging materials in which

the vegetables were shipped. In denying that the other items were stock as defined

by the policy, the District Court noted that items such as “a cultivator, fiberglass pipe,

chains, battery charger, wrenches, motors, tires and rims, table saw, water cooler, and

mattresses” were not “part of the Harrods’ inventory of goods held for manufacture

or sale . . ..” 

The Harrods contend that the other items on their list, which were excluded by

the District Court's judgment, were held for storage. Although the items were

“stored” in the packing shed, the Harrods were not in the business of storage. The

definition of stock implies that the Harrods must be in the business of storage in order

for those items to constitute stock. If any item kept or stored in the packing shed is

stock, then little or nothing would be left of the category of business personal

property. Thus, the broad reading of stock for which the Harrods argue would make

the policy internally inconsistent and create ambiguity.

When the policy is viewed as a whole, and the language is given its popular

and ordinary meaning, the term stock is not ambiguous. The term stock carries with

it a notion of commerce, or the buying and selling of items, and the District Court's

construction of the term is consistent with this notion.

III.

The Harrods also argue that the District Court erred in denying their request

for prejudgment interest. We disagree. 

Arkansas law allows prejudgment interest “where the amount of damages is

definitely ascertainable by mathematical computation, or if the evidence furnishes

data that make it possible to compute the amount without reliance on opinion or
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discretion.” Woodline Motor Freight, Inc. v. Troutman Oil Co., 327 Ark. 448, 453,

938 S.W.2d 565, 568 (1997). 

The Harrods argue that all of the items they claimed as stock had an

ascertainable value because “[a]ll of the items claimed under this coverage are

tangible property, which is regularly sold in commerce and therefore has an

ascertainable value.” Brief of Appellants 19. Although the Arkansas Supreme Court

had earlier allowed prejudgment interest “if the damaged or destroyed property had

a market value,” see Woodline, 327 Ark. at 450, 938 S.W.2d at 567, the Court in

Woodline rejected the earlier precedent in favor of a stricter interpretation. The

Harrods' use of market value does not comport with the Woodline standard. 

The facts in Woodline support our conclusion. In Woodline, the defendant's

truck collided with a building and destroyed the building and its contents. The owner

of the building and the tenant sued the driver for damages. The Arkansas Supreme

Court held that the trial court erred in awarding prejudgment interest on both the

building and its contents. Because varying bids were received for reconstruction of

the building, and there was conflicting testimony about whether to rebuild or repair

the building, the Court held that awarding prejudgment interest on the building was

improper, as the amount of damages was not ascertainable at the time of the loss. The

Court denied prejudgment interest on the contents of the building as well, concluding

that the plaintiff's assignment of a market value to each item was subjective. Thus,

at the time of the loss, the amount due was neither liquidated nor ascertainable by

fixed standards. 

Prejudgment interest is allowable where the amount of

damages is definitely ascertainable by mathematical

computation, or if the evidence furnishes data that make it

possible to compute the amount without reliance on

opinion or discretion.

Id. at 453, 938 S.W. 2d at 568.
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In the present case, just as in Woodline, the Harrods lost a building and its

contents. The Harrods determined the value of the items in the building by assigning

a market value to each item. In fact, Brent Harrod testified that the values placed on

the items were derived from his opinion and various other sources such as catalogues

and newspapers. We fail to see how this case differs from Woodline. Thus, we

affirm the District Court's denial of prejudgment interest on the items that constitute

stock.

The Harrods also argue that because Farmland stipulated to owing certain

amounts covered by the policy under categories other than stock, and had no defense

for not paying those amounts, the Harrods are entitled to prejudgment interest on at

least those amounts. They appear to be arguing that the amount of damages becomes

liquidated at the time when a party stipulates or agrees to an amount owed. While

this argument has some merit, we are not free to accept it. Under Arkansas law, the

amount of damages must be ascertainable “at the time of the loss.” Wheeler Motor

Co. v. Roth, 315 Ark. 318, 329, 867 S.W.2d 446, 451 (1993), cited with approval in

Woodline, 327 Ark. at 452, 938 S.W.2d at 568. In this case, the parties did not

stipulate to these amounts until a lawsuit had been filed. A party's agreement to pay

a certain amount after a loss occurs does not mean that the amount of damages was

ascertainable at the time of the loss. Moreover, we believe that if a claim were to be

deemed liquidated when a party agrees to pay it, parties might have some incentive

to dispute issues they would not otherwise have disputed in order to avoid paying

prejudgment interest. It seems counterintuitive to force parties to dispute the amount

of damages to avoid paying prejudgment interest. This could serve only to lengthen

the time until the injured party receives compensation. 

 

Affirmed.

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