Opinion ID: 2633929
Heading Depth: 2
Heading Rank: 1

Heading: jurisdiction

Text: Before we analyze the court of appeals' legal basis for awarding prejudgment interest, we must first examine whether the court had jurisdiction to issue the order in question. Old Republic emphasizes that the sole mechanism by which it was brought before the trial court was a garnishment proceeding, based on the stipulated judgment. Old Republic argues that once the court of appeals held that the stipulated judgment was not binding, a holding we affirm, the court lost jurisdiction to issue any garnishment order against it. Old Republic relies on Zurich Insurance Co. v. Bonebrake, in which this court held that [t]he existence of a valid judgment is a jurisdictional prerequisite to garnishment relief. 137 Colo. 37, 39, 320 P.2d 975, 976 (1958). Acknowledging the absence of a binding judgment, the court of appeals stated, Wrongful withholding [under section 5-12-102] only requires failure to pay or deliver money when obligated to do so.  Old Republic, 134 P.3d at 512 (citing Peterman v. State Farm Mut. Auto. Ins. Co., 8 P.3d 549, 551 (Colo.App.2000)) (emphasis added). However, except to suggest that Old Republic agreed to indemnify defendants to the extent of the determined coverage, the court of appeals did not identify the source of Old Republic's obligation to pay, nor did the court specify when the wrongful withholding began. See id. Old Republic asserts that it has never been under any obligation to pay the $1.5 million balance of coverage. Although the federal declaratory judgment determined that the maximum amount of coverage under the insurance policies was $1.7 million, Old Republic argues that there was never any judgment against the defendant-insureds or Old Republic to pay that amount. Rather, Old Republic claims that its payment of policy limits immediately following the declaratory judgment was voluntary. Because the court of appeals lacks jurisdiction to order prejudgment interest unless the court has before it some breach of an obligation to pay, we now examine possible sources for the obligation implicitly recognized by the court of appeals. The insurance policies themselves cannot be the source of the obligation in question, as the policies only require Old Republic to pay the legal obligations of its insureds  that is, the obligations encompassed in the stipulated judgment to which Old Republic is not bound. Furthermore, the court of appeals did not treat the federal declaratory judgment as the source of the obligation. Thus, we rely on the court of appeals' statement that Old Republic agreed to indemnify the defendant-insureds to conclude that the court identified a new contractual obligation  outside the confines of the insurance contract  which bound Old Republic to pay policy limits. In a portion of its opinion separate from its analysis of prejudgment interest, the court of appeals examined a letter written by Old Republic's counsel. This letter came before the court because the Rosses argued that it evidenced Old Republic's consent to the settlement agreement and ensuing stipulated judgment. [6] Although the court rejected the Rosses' argument that the letter bound Old Republic to the stipulated judgment, the court, without elaboration, found that the letter show[ed] that Old Republic agreed to pay plaintiffs under the insurance policy if the parties entered into a settlement agreement. 134 P.3d at 512. The court of appeals thus treated the letter as a new contract obligating Old Republic to pay policy limits to the Rosses upon their entry of a settlement. Under this construction, the letter obligated Old Republic to pay policy limits more than three years before the federal declaratory judgment was finalized. We conclude that the court of appeals relied on this letter when it determined that Old Republic breached an obligation to pay policy limits. The court of appeals' reliance on the letter may have been misplaced. The letter is arguably no more than a unilateral assurance by Old Republic to its insureds that Old Republic would continue to honor its existing obligations under the policies. Furthermore, even if the letter did create a new contract between Old Republic and its insureds, the Rosses are not parties to the new contract. However, we decline to further address the jurisdiction question. Rather, we conclude that, even if there was a proper jurisdictional basis for the court of appeals' award of prejudgment interest, the court's award of interest in excess of policy limits was not legally justified. As we will show below, Old Republic's obligation to the defendant-insureds was satisfied by the payment of policy limits, and the award of prejudgment interest exceeding those limits was improper.