Opinion ID: 2625050
Heading Depth: 4
Heading Rank: 2

Heading: The term policy limit

Text: ANIC is obliged under the contract to pay damages, costs, and expenses up to its policy limit. Farquhar argues that under our decisions in State Farm Mutual Automobile Insurance Co. v. Harrington [15] and Schultz v. Travelers Indemnity Co., [16] the policy limit must be construed to include the one million dollar facial limit, Rule 82 attorney's fees, and $195,040.26 in prejudgment interest. ANIC disagrees, claiming that the cited decisions went no further than to say `policy limits' means that which the insurer would have to pay if it went to trial. ANIC's interpretation is correct. In Harrington, the parties stipulated that State Farm would pay the plaintiff policy limits, as defined by this court. We determined that policy limits are what an insurance company would have to pay under its policy if it went to trial and received an adverse verdict. [17] Because we found that the Harrington policy did by its contractual terms cover prejudgment interest, an award of the policy limit in that case included such interest. [18] In Schultz, we followed the same rule, stating that [i]n determining what constitutes the maximum limits of insurance coverage, i.e., policy limits, it is necessary for the court to review the contractual obligations undertaken by the insurer in the insurance policy in question in light of the applicable statutes, regulations and court opinions. [19] In that case, the disputed policy apparently did not cover, and the plaintiffs did not claim, prejudgment interest. We found that policy limits meant the facial limit of the policy, plus Rule 82 attorney's fees. [20] Farquhar also suggests that his prejudgment interest should be calculated based on a projected three million dollar court verdict rather than the one million dollar insurance settlement figure. In Harrington, we noted that the insured was entitled to prejudgment interest based on the amount actually paid by the insurance company: the facial limit of the policy plus attorney's fees. [21] Farquhar offers no reason to depart from this.