Court Opinion

ID: 5071413
Source: CourtListenerOpinion
Date Created: 2021-10-01 10:42:56.583455+00
Date Added: 2024-06-11T08:19:50.906263
License: Public Domain

LEIBSON, Justice,
dissenting.
Respectfully, I dissent.
The Majority Opinion disregards the general rule found in cases and materials on insurance law on the subject of the standard interest clause (See Long, The Law of Liability Insurance, Ch. 9, “Payment of Interest by Insurer,” and cases cited therein) without discussion or citation of authority to the contrary.
Farm Bureau’s insurance policy included both bodily injury liability coverage limited to $25,000 and the obligation to pay “all interest accruing after entry of judgment until the Company has paid, tendered or deposited in Court such part of such judgement as does not exceed the limit of Company’s liability thereon.”
This is an obligation “to pay” supplementing the policy limits; it is “in addition to the applicable limits of liability” and extends to “all interest accruing after entry of judgment.” Such language is all inclusive and not ambiguous:
“This provision, in unambiguous language, requires the insurer to pay interest on the entire amount of damages until it either pays the amount of its liability under the policy limits or pays such amount into court. The agreement to pay interest is by its nature an undertaking to pay a sum over and above the policy limits.
... The interest referred to is the interest accruing on the judgment. Inter*595est accrual is not limited to a part of the judgment, hence, there can be no doubt that the word ‘all’ specifically refers to interest accruing on the entire amount of the judgment.” Id., Sec. 9.01.
The policy is drafted in its entirety by the insurance company. It is a contract of adhesion and therefore the insurer should be held strictly accountable for its terms.
If we were to assume that it is ambiguous (which it is not), then the policy should be construed to resolve any doubts in favor of the insured. Wolford v. Wolford, Ky., 662 S.W.2d 835 (1984). While the Majority Opinion recognizes this principle, it resolves all doubt in favor of the insurer. The Majority Opinion does the converse of what the rule of construction requires.
The Court of Appeals’ Opinion, which we reverse, states sound reasons why an insurance contract written as was this one should be viewed as reasonable rather than as an absurdity as we mistakenly call it. As stated in Security Ins. Co. of Hartford v. Houser, 552 P.2d 308, 310 (Colo.1976), quoted in the Court of Appeals’ Opinion:
“[W]e must not ignore the purpose of the standard interest clause. The insurer controls any litigation from which liability might ensue and further controls settlement negotiations. Thus, the accrual of interest may be attributable to the insurer’s decision to contest a judgment. ...”
As stated in Long, supra:
“It is logical and reasonable to construe the words ‘all interest’ as relating to interest accruing on the entire amount of the judgment. The provision for payment of ‘all interest’ recognizes that the insurer controls all litigation based on claims covered by the policy, even in the matter of appeals from a judgment. Payment of all interest is one of the expected costs of litigation. The provision affords the insured protection against consequences of delays on the part of the insurer in paying the amount of the policy limits when a judgment exceeds such limits.” Long, supra at Sec. 9.01, 9-2.
If the insurer does not intend to cover all interest on a judgment, but only interest on the portion covered by its policy, it would be relatively simple to revise its policy accordingly. The National Bureau of Casualty Underwriters has so recommended. See Ramsey, Interest on Judgments Under Liability Insurance Policies, Ins.LJ. # 414 (July 1957), quoted at length in McPhee v. American Motorists Ins. Co., 57 Wis.2d 669, 205 N.W.2d 152, 159 (1973).
The National Bureau of Casualty Underwriters has also removed any possible doubt about the meaning of the standard interest clause as used in this case. A directive issued by the Bureau to member companies reads:
“Several court cases have held that an insurer’s obligation to pay interest extends only to that part of the judgment for which the insurer is liable. The respective rating committees have agreed that this is contrary to the intent. As a result, the wording with respect to payment of interest in the new Family Automobile Policy has been restated, in order that it be entirely clear that all interest on the entire amount of any judgment, which accrues after entry of the judgment, is payable by the insurer until the insurer has paid or tendered or deposited in court that part of the judgment which does not exceed the limit of the insurer’s liability thereon.5 (fn. 5: Letter of National Bureau of Casualty Underwriters dated December 5, 1956, Circular No. 1311 (Automobile Division), and Circular No. 990 (General Liability Division). There has been no [subsequent] change or addition to this [directive] in the time which has elapsed.)”
The statement in the Court of Appeals’ Opinion that it appears that a substantial majority of cases and the “modem trend” is to interpret the “standard interest clause” used in this case to require the insurer to pay interest on the entire judgment and not just the portion covered by its applicable limits of liability, significantly understates the overwhelming authority supporting this proposition. See Annotation, 76 A.L.R.2d 983 (1959), and later case service.
Thus it would appear that rather than being “illogical” or “absurd” to require the *596insurer to pay interest on the entire judgment, the interpretation of the policy language applied in the Court of Appeals falls squarely in the mainstream and should be affirmed. These descriptive adjectives are better suited for our undocumented opinion reversing the Court of Appeals, holding that the insurer need not pay what the policy provides.
Here the insurer, Farm Bureau, has consistently refused to make an unconditional tender in payment of its obligation, including interest, under the policy. At any stage of the proceeding in the trial court, the insurer could have paid or tendered bodily injury coverage plus interest to date, thus relieving itself of further obligation. However, even when the insurer finally tendered payment of the bodily injury coverage, it did so excluding all interest, and only after an order sustaining its motion to “be relieved of any further liability to the Plaintiff (Faulkner) or Defendant (Smith) herein, or to any and all other persons involved in this litigation.”
The terms of the order discharge Farm Bureau from any further obligation if plaintiff accepts the tender, thus making the tender one that the plaintiff “would have to refuse in order to preserve his full rights.” River Valley Cartage Co. v. Hawkeye-Security Ins. Co., 17 I11.2d 242, 161 N.E.2d 101 (1959).
In order to be discharged of the interest obligation under its policy, Farm Bureau was required to tender or pay its bodily injury coverage plus such interest as had accrued on the entire judgment to the date of payment. Such additional amount as Farm Bureau has paid on this account, as with the original payment of $25,000, under the general rule regarding payment of interest (45 Am.Jur.2d Interest and Usury § 99) is simply a credit towards the total for payment of the two obligations in the policy, bodily injury coverage and interest.
LAMBERT, J., joins in this dissent.