Opinion ID: 1414212
Heading Depth: 1
Heading Rank: 5

Heading: Issue 4: Mutual of Enumclaw's Failure to Tender Costs Entitles Hell's Canyon to Interest on the Entire Amount of the Judgment

Text: Hell's Canyon contends that Mutual of Enumclaw's failure to tender or deposit with the court the costs taxed against Bruce Oakes in the underlying action entitles it to post judgment interest on the entire judgment under the terms of the policy. Mutual of Enumclaw maintains that Hell's Canyon is entitled to no interest because costs are not part of the judgment, and, alternatively, that the obligation ceases upon tender of policy limits to which the insured is entitled, which in this case is zero. Section II, Supplementary Coverages 2.c. obligates the company to pay interest until the `Company has paid or tendered or deposited in court that part of the judgment which does not exceed the limit of this Company's liability thereon;' The result turns on the meaning of the term `limit of this Company's liability thereon.' If that phrase is interpreted to mean `until the Company has paid, tendered or deposited the amounts for which it is liable under all parts of the insurance contract,' then Mutual of Enumclaw continues to be obligated to pay interest since costs have been determined to be a contractual obligation due under the policy and since Mutual of Enumclaw has not yet tendered those costs. On the other hand, if `limit of this Company's liability thereon,' is interpreted to mean those amounts which flow from the underlying, basic coverage for the conduct of Oakes, then the obligation ended at the time that there was a factual basis for determining that Oakes' conduct was not covered by the policy. Hell's Canyon cites River Valley Cartage Company, Inc. v. Hawkeye-Security Ins. Co., 17 Ill.2d 252 [242], 161 N.E.2d 101 (Ill. 1959), and Stibal v. Carland, 381 N.W.2d 855 (Minn. Ct. App. 1986). In River Valley Cartage Company's tender of the policy limits made almost two months after entry of judgment on the grounds that the tender did not include interest on the entire judgment from the date judgment was entered, which, the insured contended was due under an interest clause obligating the company to pay interest until the company `has paid, tendered or deposited in court such part of the judgment as does not exceed the limits of the company's liability thereon.' The Court held that the tender of policy limits `did not operate to terminate the insurer's continuing obligation for interest on the entire (judgment),' noting the following: While it is true that interest is a separate and distinct obligation from the judgment, the provision in the policy only makes sense if the word `judgment' is read to include interest. Otherwise the insurer could, by offering a sum that in most instances the judgment creditor would have to refuse in order to preserve his full rights, free itself from the impact of the provision which is its incentive for speedily discharging its entire obligation. River Valley Cartage Company, Inc. v. Hawkeye-Security Ins. Co., 17 Ill.2d 242, 161 N.E.2d 101, 104 (Ill. 1959). In Stibal v. Carland, 381 N.W.2d 855 (Minn. Ct. App. 1986), the court interpreted an interest clause identical to that in the instant case. The court determined that interest continued to run until the company tendered the policy limits plus interest on the entire judgment from entry of judgment until date of valid tender. The court adopted the reasoning of River Valley Cartage, noting that `the purpose of the interest-on-judgment clause is to give the insurer an incentive to discharge its obligation promptly.' Id. at 857. Though neither of these cases directly addresses the issue of costs, the rationale they used is equally applicable to costs. In this case if limit of the company's liability is interpreted to mean only the basic policy limits, Mutual of Enumclaw has little incentive to settle its obligation for costs promptly, a situation that runs contrary to the interest clause's intent. In opposition to Hell's Canyon's position, Mutual of Enumclaw cites Allegheny Airlines, Inc. v. Forth Corporation, 663 F.2d 751 (7th Cir.1981) for the proposition that `limits of this Company's liability thereon,' refers only to the basic policy limits. In that case the court was asked to interpret an interest clause that obligated the insurer to pay `all interest accruing after the entry of judgment until the company has paid, tendered or deposited in court, such part of such judgment as does not exceed the limits of the company's liability thereon.' The Court held that limit of the company's liability thereon was a `clear and unambiguous' reference to the principal policy limits and that a tender of those limits, even without accrued interest, was valid and stopped the running of the interest clause. Id. at 756. The case does not directly address costs, but its holding is broad enough to encompass them. The reasoning of River Valley Cartage Company, Inc. v. Hawkeye-Security Ins. Co., 17 Ill.2d 242, 161 N.E.2d 101 (Ill. 1959), and Stibal v. Carland, 381 N.W.2d 855 (Minn. Ct. App. 1986) is persuasive. Based on those cases and the meaning which would be attached to the clause by an ordinary lay purchaser of homeowner's insurance, `limits of the Company's liability thereon' includes all amounts for which Mutual of Enumclaw is liable under the policy, including costs and interest. Therefore, Mutual of Enumclaw must pay all interest on the entire judgment, verdict plus costs, from the date of the entry of the Order re Costs and Attorney Fees until it has paid, tendered, or deposited in court costs, and interest accrued to the date of that tender.