Opinion ID: 3015680
Heading Depth: 3
Heading Rank: 2

Heading: MPC is liable for postjudgment interest.

Text: Interest accrued on the $400,000 MPC owed plaintiffs between the date of the verdict and August 24, 1999, when MPC paid over $400,000 into the court. In his April 11, 2003 order, the District Judge determined that that amount was $13,677. Interest also accrued on the yet-unpaid delay damages running from the verdict until August 24, 1999. In his April 2003 order, the judge determined that that amount was $4,682. Postjudgment interest also continued to accrue from August 24, 1999, until April 11, 2003, on all unpaid amounts. In his April 2003 order, the judge determined that that amount was $33,822. We agree and note that the precise facts of this case are controlled by Incollingo v. Ewing, 379 A.2d 79 (Pa. 1977), which held on a similarly worded contract that postjudgment interest is a cost of defense. Of course, postjudgment interest continues to accrue on all unpaid amounts. MPC has, however, raised the argument that, having lost control of the litigation at least as of August 24, 1999, it would be unfair to impose continuing postjudgment interest 12 on MPC at a time CAT conducted and controlled the litigation. This argument is plainly illogical. MPC’s liability to plaintiffs was established with the verdict in January 1999. Moreover, entry of judgment was on May 17, 1999. Throughout that period, MPC owed plaintiffs, its insureds, both delay damages and postjudgment interest running from the verdict through May 17, 1999. MPC has not paid these amounts and these amounts were due at a time MPC, by its own admission, controlled the litigation. Interest continues to accrue precisely because they were not paid, not because of any conduct by CAT. MPC could have terminated all interest accruing during the period that CAT controlled the litigation simply by having paid the amount it owed. If MPC is now saddled with postjudgment liability running forward from the time CAT first had control of this litigation, it is because MPC failed to make a timely and complete payment to its insureds at a time when its liability had already been determined in state court proceedings, 5 at a time it had exclusive control of the litigation.6 5 Nor can MPC take the position that the precise amount of its liability was not determined in state court proceedings. The District Court’s computations as to MPC liability accruing up through August 24, 1999 made use of no secret information or information generated in post-1999 litigation. The same calculations of the extent of MPC’s liability to plaintiffs could have been made by MPC at any time following the verdict of the Gunn jury. 6 Arguing by analogy, MPC relies on Willet v. Penn. Med. Catastrophe Loss Fund, 702 A.2d 850 (Pa. 1997), as authority for bringing a contribution or indemnity action against the CAT. MPC acknowledges that Willet is not precisely on-point and “respectfully requests that this [C]ourt extend the holding in Willet.” MPC Br. at 27. We decline the invitation. Such ambitious developments in Pennsylvania insurance law must come from Pennsylvania’s courts.See Vargas v. Pitman Mfg. Co., 675 F.2d 73, 76 (3d Cir. 1982) (holding that “the [non-prevailing party in District Court proceedings] here is asking that 13 MPC’s last argument is that, although the jury verdict was molded on May 17, 1999, in the amount of $2,798,924 when MPC still controlled the litigation, on August 27, 1999, when CAT controlled the litigation, CAT turned down a $2,400,000 offer to settle with the original Gunn plaintiffs. MPC has not taken the position that this $398,924 reduction would work a pro rata reduction in its delay damages and postjudgment interest, i.e., a reduction in liability to be shared by CAT and MPC in proportion to the original verdict. Rather MPC has taken the position that had CAT accepted this offer, then MPC’s liability would fall to precisely $400,000, the face amount of its policy limits, the amount it had actually tendered. MPC cites no statute or case, nor does it make any showing or proffer any explanation why its liability would top-out at $400,000 had CAT accepted the August 1999 offer. We know of none.7 To summarize, we will affirm the District Court’s determinations as to MPC’s monetary liability to plaintiffs. We will deny MPC’s appeal, seeking indemnification or contribution against CAT for delay damages and postjudgment interest. we anticipate the birth of a state law doctrine in the womb of time, but whose birth is distant. We have been asked to deliver prematurely a new doctrine of Pennsylvania tort law, and as a federal court we are unwilling to do so.”) (footnote omitted); cf. Burris Chemical, Inc. v. USX Corp., 10 F.3d 243, 247 (4th Cir. 1993) (“Under Erie Railroad v. Tompkins ... the federal courts sitting in diversity rule upon state law as it exists and do not surmise or suggest its expansion.”); L INDA M ULLENIX ET AL., U NDERSTANDING F EDERAL C OURTS AND J URISDICTION ¶ 15.19[3] (1998) (noting “policy against expanding state law” when a federal diversity court determines the content of state substantive law). 7 As no argument was made for equitably sharing the “proceeds” between CAT and MPC, we do not address the question. 14 B. Plaintiffs’ Bad Faith Claim Against MPC. The District Court held in its July 16, 2002, Memorandum and Order that MPC had a reasonable basis for denying the coverage demanded by its insureds and that, where such a reasonable basis exists, there is no viable claim for bad faith. See 42 Pa. C.S.A. § 8371; see also Klinger v. State Farm Mut. Auto Ins. Co., 115 F.3d 230, 233 (3d Cir. 1997). The District Court, however, based its conclusion that there was a reasonable basis for denying coverage on the fact that 40 P.S. § 1301.702(j), holding that the basic insurance carrier or self-insurer is responsible for its proportionate share of delay damages and postjudgment interest vis à vis the CAT Fund, was enacted after the execution of the insurance contract here and thus did not apply to it. Our determination is to the contrary. Because our holding above – that MPC is liable for pre- and postjudgment interest – is not based on § 1302.702(j) but on the clear language of the insurance contract, pursuant to Pa. R. Civ. P. 238 (controlling prejudgment interest), 42 Pa. C.S.A. § 8101 (controlling postjudgment interest), and related case law, we conclude that there is a possibility of bad faith and of liability for delay damages. We will, therefore, reverse the District Court’s dismissal of this claim and remand it to the District Court for further proceedings. Finally, on October 1, 2002, the District Court, having already dismissed plaintiffs’ bad faith claim against MPC, dismissed MPC’s derivative bad faith claim against CAT as 15 moot. Because we have reversed the dismissal of plaintiffs’ bad faith claim against MPC, MPC’s derivative claim is no longer moot. However, we have already held in this opinion that CAT is not derivatively liable to MPC for any monies MPC owes the insureds under the terms of the insurance contracts. It stands to reason that should plaintiffs prevail in a bad faith claim arising from MPC’s failure to pay, then CAT cannot be derivatively liable to MPC. See also Finkbiner v. Med. Prof’l Liab. Catastrophe Loss Fund, 546 A.2d 1327, 1329 (Pa. Cmwlth. 1988) (sustaining preliminary objections and dismissing bad faith claim against CAT in the absence of any contractual relationship between CAT and claimant), aff’d, 565 A.2d 157 (Pa. 1989) (per curiam). If there is any bad faith on these facts, it starts and stops with MPC. We will, therefore, affirm the dismissal on other grounds. See Fairview Park Excavating Co., Inc. v. Al Monzo Const., 560 F.2d 1122, 1123 n.2 (3d Cir. 1977) (“We can affirm a district court’s disposition on grounds other than those on which the district court relied.”).