Court Opinion

ID: 6452237
Source: CourtListenerOpinion
Date Created: 2022-06-25 12:35:10.44195+00
Date Added: 2024-06-11T15:53:02.573821
License: Public Domain

Sosman, J.
(concurring in part and dissenting in part). The court imposes on Allstate Insurance Company (Allstate) an obligation to pay postjudgment interest that is contrary to the express provisions of Allstate’s standard automobile insurance policy. In my view, the judge below correctly granted Allstate’s motion for summary judgment on the issue of its liability for postjudgment interest. The court’s opinion also allows the plaintiff to pursue a G. L. c. 93A claim against Allstate based on its refusal to pay that disputed postjudgment interest. While I agree that the plaintiff should be allowed to proceed on a claim that Allstate’s delay in paying the $25,000 policy limit violated G. L. c. 93A, Allstate did not violate G. L. c. 93A merely by litigating the issue of its liability for postjudgment interest.
1. Interpretation of insurance policy’s interest provisions. Under the terms of its policy, Allstate agreed to pay postjudg*189ment interest in any suit it defended, but that contractual obligation to ,pay interest would terminate once Allstate “offered to pay up to the limits” of the policy. At issue in this appeal is the meaning of the term “offered” as used in this policy, specifically, whether Allstate’s offer to pay the policy limit in exchange for a release of its insured was sufficient to cut off its liability for postjudgment interest.
Courts interpreting policies with language identical to the Allstate policy have concluded that a conditional offer of the policy limit, such as that extended by Allstate, satisfies the policy requirement of an “offer to pay” the policy limit and terminates the insurer’s liability for interest. See Overbeek v. Heimbecker, 101 F.3d 1225, 1227-1228 (7th Cir. 1996) (where interest obligation “ends once the insurance company offers to pay the policy limits,” repeated offers to settle for policy limits precluded award of postjudgment interest); Farmers Alliance Mut. Ins. Co. v. Bethel, 812 F.2d 412 (8th Cir. 1987) (pretrial offers to pay $30,000 in exchange for release of insured satisfied policy requirement of “offer to pay”); Campbell v. Turner, 744 So. 2d 1261 (Fla. Dist. Ct. App. 1999) (offer of $10,000 policy limit in exchange for release was “offer to pay” that avoided liability for interest).
A contrary result has been reached in two cases. See Safeway Ins. Co. v. Amerisure Ins. Co., 707 So. 2d 218 (Ala. 1997); Sours v. Russell, 25 Kan. App. 2d 620, 629-630 (1998).1 Both relied on case law interpreting policy language requiring that the policy limit be “paid or tendered or deposited in court” in order to avoid interest. Safeway Ins. Co. v. Amerisure Ins. Co., supra at 220. Sours v. Russell, supra at 629-630. When the policy language requires the policy limit to be “paid or tendered *190or deposited into court” in order to terminate the insurer’s liability for interest, a mere settlement offer of the policy limits does not qualify as “tender” or “payment.” See Calder Race Course, Inc. v. Illinois Union Ins. Co., 714 F. Supp. 1183, 1188-1189 (S.D. Fla. 1989); Southern Gen. Ins. Co. v. Ross, 227 Ga. App. 191, 193 (1997); Cochran v. Auto Club Ins. Ass’n, 169 Mich. App. 199, 202-203 (1988); Balder v. Haley, 441 N.W.2d 539, 542 (Minn. Ct. App. 1989); Baughn v. Busick, 541 P.2d 873 (Okla. Ct. App. 1975); 12 G. Couch, Insurance § 170.53, at 170-67 — 170-68 (3d ed. 1998); 8A J.A. Appleman & J. Appleman, Insurance Law and Practice § 4894.25, at 98-100 (rev. 1981). But see Weimer v. Country Mut. Ins. Co., 216 Wis. 2d 705, 722-725 (1998) (using common meaning of term “tender,” as opposed to legal definition, offer of policy limit in full settlement of claim qualified as “tender” that terminated-insurer’s obligation to pay interest).
However, no such language appears in the present Allstate policy. Here, the obligation to pay interest ended once Allstate “offered to pay up to the limits” of the policy. Allstate did not have to “tender,” “pay,” or “deposit” the policy limit in order to stop interest from accruing. The contract term “offer to pay” should not be interpreted as the equivalent of “tender,” or “payment,” or “deposit into court.” The term “tender” and the term “pay” have always meant something more than a mere “offer.” See Metropolitan Credit Union v. Matthes, 46 Mass. App. Ct. 326, 333 (1999), quoting Mondello v. Hanover Trust Co., 252 Mass. 563, 567 (1925). Cases holding that an offer to pay the policy limit conditioned upon release of the insured qualifies as an “offer” have appropriately distinguished those policies that require an actual tender, payment, or deposit. See Campbell v. Turner, supra at 1262-1263, citing Calder Race Course, Inc. v. Illinois Union Ins. Co., supra (adhering “to the distinction between ‘offer’ and ‘tender’ ”).
When interpreting contract language, we should construe terms in their “usual and ordinary sense.” Citation Ins. Co. v. Gomez, 426 Mass. 379, 381 (1998), quoting Hakim v. Massachusetts Insurers’ Insolvency Fund, 424 Mass. 142, 146 (1982). Here, the term “offer to pay” the policy limit should be interpreted with reference to what was typically meant by an *191“offer” in the context of dealings with insurance companies in personal injury litigation. By standard custom and usage, an “offer” from an insurer defending its insured under a liability policy was an offer to pay in exchange for a release of its insured — i.e., an offer to pay in full settlement of the underlying claim.2 Indeed, our decision in Lazaris v. Metropolitan Prop. & Cas. Ins. Co., 428 Mass. 502 (1998), was premised in part on the fact that an insurer could not make an unconditional offer of the policy limit without risking a claim that it had violated its duty to its own insured. Id. at 506. It would be anomalous in the extreme to interpret the term “offer to pay” in a fashion that would, if made, expose an insurer to a claim that it had violated its duty to its insured.3
The court’s conclusion that “offer” means “unconditional offer” would transform the term “offer” into a requirement of actual payment. See ante at 183. An “offer” that has no conditions whatsoever will always be accepted, as there is no reason to reject an offer that demands no concessions in return. In the context of personal injury litigation, an “unconditional offer” will inevitably result in payment, as no plaintiff would ever turn down an offer of money that still left the plaintiff free to pursue all claims against all defendants. Ironically, it is those cases *192interpreting policies that terminate interest only when the policy limit has been “paid or tendered or deposited into court” that hold that an unconditional offer is required, reasoning (correctly) that only an unconditional offer is the equivalent of payment, tender, or deposit. See Calder Race Course v. Illinois Union Ins. Co., supra; Southern Gen. Ins. Co. v. Ross, supra; Cochran v. Auto Club Ins. Ass’n, supra; Balder v. Haley, supra; Baughn v. Busick, supra. Here, the court’s insistence that Allstate make an “unconditional offer” incorrectly elevates the policy requirement of a mere “offer to pay” into the equivalent of actual payment. The term “offer to pay” the policy limit, as used in this policy, should be given the ordinary, sensible construction that the term had in the insurance field at the time in question, namely, an offer to pay conditioned on settlement of the claim against the insured. The policy requires only an “offer,” and nothing in the policy language or in the industry’s ordinary practices suggests that this court should insert the word “unconditional” to modify that contract term.4
The court reasons that, because the policy terminated interest only on an offer to “pay,” as opposed to an offer to “settle,” we must conclude that only an unconditional offer will suffice. This analysis overlooks the fact that, under an insurance policy, the only thing that an insurer does for a claimant is to “pay” money, be it in satisfaction of a judgment, partial satisfaction of a judgment, or in settlement of the claim. An “offer to pay” can, and routinely does, occur in the context of settlement, as a settlement with an insurance company can only result in “payment.” Nothing about the use of the term “pay” suggests that the “payment” anticipated by the offer can not be a payment in settlement. While quibbling over the ostensible distinction between “offer to pay” and “offer to settle,” the majority ignores the fact that what is required is only an “offer,” not an actual payment.
*193Beyond its erroneous interpretation of these contract terms, the court’s analysis has some disturbing ramifications. The court acknowledges that, where an insured has a potentially meritorious appeal, the insurer’s duty to defend obligates the insurer to pursue that appeal. And, pending the outcome of such an appeal, an insurer cannot abandon its insured simply by paying the policy limits without obtaining a release of the insured. See Lazaris v. Metropolitan Prop. & Cas. Ins. Co., supra at 506. Under the court’s interpretation, the insurer is penalized (by the obligation to pay interest on the entire judgment) for having honored its duty to defend.5 Put another way, the court’s interpretation provides a strong incentive for an insurer not to pursue an appeal, even if the appeal has a reasonable chance of success and should be undertaken pursuant to the duty to defend the insured. Where, as is often the case, the jury’s verdict is vastly in excess of the policy limit, the interest that mounts on the judgment during an appeal will soon eclipse the policy limit.6 Even with excellent prospects on appeal, it would be better for the insurance company to pay its paltry policy limit, leaving the insured to contend with the remaining massive liability for both interest and principal, rather than take an appeal and risk having to pay all postjudgment interest (as well as the policy limit).7 Allowing an insurer to terminate its liability for interest upon an offer to settle (which would, if accepted, *194eliminate the insured’s liability for both interest and principal) does no injustice to insureds. By definition, if the insurer is willing to pay its policy limit and forgo any appeal as long as its own insured is released, an appeal that is taken following the plaintiff’s rejection of such an offer is an appeal taken in order to protect the insured, not to protect the insurer. There is nothing unjust or unreasonable about requiring an insured to pay the interest that mounts during a good faith appeal that has been taken solely to protect the insured’s interests.
In terminating an insurer’s liability for interest on an “offer to pay,” the Massachusetts standard automobile insurance policy deviated from the interest provision most commonly used, which terminates liability for interest only when the policy limit is “paid or tendered or deposited in court.”8 Today, the majority *195assumes that Massachusetts adopted such different language for no reason, holding that the two distinct versions mean exactly the same thing. Normally, we would attach significance to the parties’ choice of words that so pointedly differed from an extant standard model. The wording is markedly different — an “offer” obviously means something other than actual payment — and there is a discernible reason for choosing one version over the other. I believe that we should ascribe meaning to the different language chosen for this insurance policy, and that we should interpret that language in a way that does not encourage insurers, who are willing to part with the policy limit, to abandon their insureds after the jury return a verdict substantially in excess of that policy limit. Today’s opinion will certainly reduce defense appeals in personal injury cases, but that reduction comes at the expense of insureds who may have had legitimate, good faith, and meritorious appeals. I therefore dissent.
2. G. L. c. 93A. I concur that further proceedings on the plaintiff’s claim under G. L. c. 93A are required, as Allstate’s delay in responding to the July 31, 1995, demand for the policy limit is potentially a violation of G. L. c. 93A. Once the $224,952 judgment against Allstate’s insured became final, Allstate’s obligation to pay its policy limit of $25,000 became absolute under G. L. c. 175, § 113. While Allstate’s attention may have been focused on the much larger sum of interest then being demanded by the plaintiff, at least $25,000 was undisputably owed by that time. Delay in paying the undisputed portion of its obligation can give rise to liability under G. L. c. 93A, and that aspect of the plaintiff’s G. L. c. 93A claim needs to be tried.
However, as I disagree with the court’s determination that Allstate is liable for postjudgment interest, I obviously disagree with the proposition that Allstate’s failure to pay postjudgment interest could be a violation of G. L. c. 176D, § 3 (9), and thereby a violation of G. L. c. 93A. Beyond the simple disagreement on the merits of the postjudgment interest issue, I do not see how Allstate’s decision to litigate an unsettled question of law, a question on which other courts have reached differing results, could violate G. L. c. 93A. A respected trial judge agreed with Allstate’s interpretation of its insurance policy, as do I, and as have several other courts. See Overbeek v. Heimbecker, 101 *196F. 3d 1225 (7th Cir. 1996); Farmers Alliance Mut. Ins. Co. v. Bethel, 812 F.2d 412 (8th Cir. 1987); Campbell v. Turner, 744 So. 2d 1261 (Fla. Dist. Ct. App. 1999). See also Weimer v. Country Mut. Ins. Co., 216 Wis. 2d 705 (1998).9 Faced with a demand of $228,236 in postjudgment interest, and armed with significant precedent from other jurisdictions supporting its assertion that it owed no interest at all, Allstate did not violate G. L. c. 176D, § 3 (9), or G. L. c. 93A, in litigating what was until today an unsettled question of law in Massachusetts. I see no need for any trial on that aspect of the plaintiffs G. L. c. 93A claim.

There are cases where the policy language required an “offer to pay,” but the fact pattern at issue involved an actual payment or deposit being made by the insurer. See Cox v. Peerless Ins. Co., 774 F. Supp. 83, 87 (D. Conn. 1991); Boston Old Colony Ins. Co. v. Fontenot, 544 So. 2d 739, 741 (La. Ct. App. 1989); Fowler v. Roberts, 526 So. 2d 266, 279-281 (La. Ct. App. 1988); White v. Auto Club Inter-Ins. Exch., 984 S.W.2d 156, 159 (Mo. Ct. App. 1998); Sproles v. Greene, 329 N.C. 603, 612-615 (1991). A holding that an actual payment was sufficient to terminate liability for interest does not mean that actual payment was required in order to terminate that liability. Such cases shed no light on whether an offer of the policy limits conditioned on release or full settlement qualifies as an “offer to pay” the policy limits.

The policy at issue in this case, and the offer to pay the policy limit in Ml settlement, long predated Thaler v. American Ins. Co., 34 Mass. App. Ct. 639 (1993), which was subsequently overruled by Lazaris v. Metropolitan Prop. & Cas. Ins. Co., 428 Mass. 502 (1998), and an offer of the policy limit in exchange for a release of the insured has once again become the normal form of “offer” in this context.

On the facts of this case, it may well be that Allstate could have made an unconditional offer postjudgment without violating any duty to its insured. I agree with the court that the appeal of the underlying verdict was “a longshot at best," and the duty to defend does not require insurers to take “longshot” appeals. Ante at 187. However, the issue is not whether, at some point in the history of this case, Allstate could have made an unconditional offer to pay without violating its duty to its insured. Rather, the issue is whether, at any point during the history of the case, it did make an “offer to pay up to the limits” of the policy. Nothing in the policy language suggests that the term “offer to pay up to the limits” changes its meaning at different stages of the underlying litigation, and we must therefore give the term a meaning that would include the kind of “offer” that is ordinarily made prior to trial and that, for some cases, will be the only kind of “offer” that an insurer can properly make even after a verdict has been returned.

In practice, an insurance company never makes an “unconditional offer” to pay the policy limit. Plaintiffs make demands for the policy limit, and insurers who do not intend to obtain anything in return simply pay on that demand. There is no “offer” that precedes such a payment, and no purpose would be served by prefacing payment with an “unconditional offer.” Interpreting the interest provision as hinging on an “unconditional offer” makes the termination of interest contingent on an event that simply never occurs.

The duty to defend encompasses a duty to pursue an appeal, and hence the duty to insist on a release of the insured as a condition of payment during the appeal, “if reasonable grounds exist to believe that the insured’s interest might be served by the appeal.” Ante at 180. Where there are such “reasonable grounds” for an appeal, an insurer who pursues an appeal is not “stonewall[ing]” or “unnecessarily prolong[ing] the litigation.” Ante at 187 n.13. There is no justification for penalizing good faith appeals that are taken to protect insureds. The taking of “an appeal that has no reasonable likelihood of success in an effort to grind down a successful claimant,” id,., is a violation of G. L. c. 176D, § 3 (9), and, by way of G. L. c. 93A, § 9 (3) and (4), makes the insurer liable for two to three times the underlying judgment plus attorney’s fees. There is no need to impose interest as a penalty on insurers for taking good faith (but ultimately unsuccessful) appeals simply to have that penalty available for those who take bad faith appeals.

Here, for example, the interest that accrued during the appeals came to almost ten times the policy limit.

The court suggests, in an oblique fashion, that an insurer “may be able to control its postjudgment interest obligations by paying the policy limits (with accrued interest) into court,” but then “leave[s] the availability of this *194procedure for another day.” Ante at 187 n.13. The contract terminates interest only on an “offer to pay” the policy limit, which the court now construes as an “unconditional offer” to pay. A deposit into court (which would only be paid to the plaintiff if the insurer’s appeal were unsuccessful) is not an “offer to pay” and is certainly not an “unconditional offer.” The contract here does not suggest that a deposit of the policy limit into court relieves the insurer of the obligation to pay interest on the entire judgment if the appeal is unsuccessful.
Nor is there any authority for permitting such a deposit into court. Deposits into court may be made pursuant to Mass. R. Civ. P. 67, 365 Mass. 835 (1974), but only with leave of court. Such a deposit is normally not allowed if the depositor is still contesting liability. See Tarpey v. Crescent Ridge Dairy, Inc., 47 Mass. App. Ct. 380, 393 (1999), citing J.W. Smith & H.B. Zobel, Rules Practice § 67.2 (1981). Even assuming an insurer were allowed to make a deposit pending an appeal on the issue of liability, that deposit would probably not toll the accrual of interest on the judgment. See O’Malley v. O’Malley, 419 Mass. 377, 381 n.5 (1995) (“[w]e need not decide whether rule 67 may be used to stop interest from running on a judgment while the losing party takes an essentially no-risk appeal . . .”); Augustine v. Rogers, 47 Mass. App. Ct. 901, 902-903 & n.2 (1999) (declining to address the issue, but noting that rule 67 itself “makes no provision for interest”). While I wish that there were some procedural mechanism by which to prevent the adverse consequences of today’s misinterpretation of the standard automobile insurance policy (a policy that governs an enormous number of claims before our courts), there does not appear to be any such mechanism.

The treatises cited by the court refer to the “paid or tendered or deposited in court” version as the “standard” interest clause. See 8A J.A. Appleman & J. Appleman, Insurance Law and Practice § 4894.25, at 82 (rev. 1981 & Supp. 2000); 12 G. Couch, Insurance § 170.32, at 170-51 (3d ed. 1998). The “offer to pay” version that we address today is sufficiently rare that it is not even mentioned in either treatise.

Albeit in an unpublished opinion, the United States Court of Appeals for the Sixth Circuit has also ruled that this version of an interest provision is satisfied by an offer to pay the policy limit in settlement of the claim. Dicus vs. Laipply, No. 92-3074 (6th Cir. 1992) (where policy terminated interest if insurer made “offer to pay,” offer to pay $100,000 policy limit “in full satisfaction” of $250,000 judgment sufficed to avoid liability for interest). While an unpublished opinion lacks value as precedent, its existence at least confirms Allstate’s view that such an interpretation of the contract is reasonable and plausible.