Opinion ID: 198024
Heading Depth: 2
Heading Rank: 2

Heading: Interpreting RL-1000

Text: 8 According to Republic's RL-1000 insurance policy, which indisputably covered Obert, [i]n addition to our limit of liability, we will pay for the insured ... [a]ll interest accruing after the entry of judgment in a suit we defend. Our duty to pay interest ends when we pay or tender our limit of liability (emphasis in original). The insurance industry refers to this clause as a standard interest clause. Republic does not dispute that it defended the underlying suit in this case. In that case, verdicts were delivered for the plaintiffs in the amount of $3,170,000 ($4,482,300 after computing pre-judgment interest). Judgments were entered on the verdicts on December 14, 1988. As of that date, RL-1000 obligated Republic to pay $25,000 to the plaintiffs. Nonetheless, Republic did not pay the plaintiffs any money until October 20, 1994. During the almost six years between the trial and Republic's tender of the policy limits, well over one million dollars in interest had accumulated on the original judgments. 9 Plaintiffs claim that Republic is bound by its contract terms to pay this interest, in spite of the fact that the limit of liability under the policy was only $25,000. Republic claims that it is, at most, obligated to pay interest on $25,000 of the judgment, since that is the limit of liability under the policy. Republic argues that the district court's decision produced the absurd result of requiring it to pay interest worth many times the policy limits. 10 This dispute does not merit much discussion. The contract terms could not be clearer. Republic agreed, in addition to its limit of liability, to pay [a]ll interest accruing after the entry of judgment (emphasis added) until the $25,000 was tendered. As the district court observed, all interest does not mean partial interest. Republic essentially asks this court to ignore the plain terms of its own policy because, under circumstances like those in the present case, it would be obligated to pay sums of interest that are grossly disproportionate to the policy limits. This argument is unavailing. Where the terms of a contract are clear and unambiguous, they must be applied as written. See Cody v. Connecticut Gen. Life Ins. Co., 387 Mass. 142, 439 N.E.2d 234, 237 (1982); Factory Mut. Liability Ins. Co. of Am. v. Cooper, 106 R.I. 632, 262 A.2d 370, 372 (1970). 11 At any time after judgments were entered in this case, Republic could have stopped the interest from accumulating by paying the Fratuses the $25,000 that they were owed. Republic's burden of adhering to its own contract was not onerous. Yet, to this date, no explanation has been offered for the delay in making the payment to which plaintiffs were entitled. 2 12 It may, at first, seem shocking to impose this immense obligation on Republic for a failure to deliver a relatively small sum to the plaintiffs. Yet, the clear majority of modern courts that have interpreted a standard interest clause under similar circumstances have concluded that the policies mean what they say. See In re Estate of Tichota, 191 Neb. 484, 215 N.W.2d 885, 886-87 (1974) (explaining that the modern trend and majority rule holds insurers liable for interest on the entire amount of the judgment); Weber v. Biddle, 4 Wash.App. 519, 483 P.2d 155, 161-62 (1971); 8A John Alan Appleman and Jean Appleman, Insurance Law and Practice § 4894.25 (1979) (listing cases applying the majority rule); 15A George J. Couch, Couch on Insurance § 56:39 (1983) (same). 13 These opinions not only apply the straightforward terms of the contracts, but produce sound policy. Compelling the insurer to pay all of the interest which accrues pending appeal protects the insureds, who may wish to pay the portion of the judgment in excess of policy limits and stop the tolling of interest, but whose lack of control over the litigation prevents them from doing so. See River Valley Cartage Co. v. Hawkeye-Security Ins. Co., 17 Ill.2d 242, 161 N.E.2d 101, 103 (1959). The rule also serves to protect plaintiffs from unreasonable delay on the part of insurers, or, as in this case, compensate them for such delays. The rule does not impose an unfair burden on insurers because they remain in control of both the tolling of interest and the litigation, and can fairly be expected to understand how the majority of jurisdictions interpret standard interest clauses. See id.; Cf. Tichota, 215 N.W.2d at 887 (citing three articles in insurance industry journals urging the continued adoption of the majority rule). We therefore affirm the district court's determination that Republic is liable for all interest accruing on the judgments from their date of entry. 3