Westport Insurance Corporation v. California Casualty Management Co.
3:16-cv-01246
N.D. Cal.May 30, 2017Background
- Westport (insurer for the School District and excess insurer) paid $1.8M (Doe 3) and $14M (Does 1 & 2) to settle underlying sexual molestation claims after primary limits were exhausted; total settlements $15.8M.
- California Casualty provided excess insurance covering the Administrators (three of four defendants) but declined to contribute to the settlements, disputing that its coverage was triggered.
- District court granted Westport summary judgment, allocating liability equally among four underlying defendants and awarding Westport $2.6M against California Casualty, plus interest; the judgment did not specify prejudgment interest amount.
- Westport moved under Rule 60(a) to correct the judgment to specify prejudgment interest of $755,637.20 (10% per annum) calculated from settlement payment dates (July 29, 2013 and June 26, 2014).
- California Casualty argued (1) the proper interest rate is 7% (equitable contribution), (2) damages were unliquidated so prejudgment interest is discretionary, and (3) interest should start no earlier than the filing date.
- The court treated the motion as a Rule 60(a) correction, held Westport’s claim was liquidated and mandatory prejudgment interest applied at 10% per annum, and corrected the judgment to add $755,637.20 (total judgment $3,355,637.20).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Westport’s damages were "certain" so mandatory prejudgment interest under Cal. Civ. Code §3287(a) applies | Westport: damages became liquidated and calculable when it paid the settlements | California Casualty: damages depended on court allocation and were unliquidated | Court: damages were liquidated upon payment; dispute was legal priority of policies, so interest is mandatory from payment dates |
| Proper procedural vehicle to set prejudgment interest | Westport: motion to set interest; judgment allowed interest but lacked amount, so Rule 60(a) correction is appropriate | California Casualty: (implicitly contested timing/amount) | Court: Rule 60(a) correction appropriate because final judgment expressly awarded interest but omitted amount |
| Applicable interest rate (10% vs. 7%) | Westport: claim sounds in contract/equitable subrogation so 10% statutory post-breach contract rate applies | California Casualty: claim is equitable contribution so 7% rate applies | Court: claim is equitable subrogation/contract-based (not equitable contribution); 10% rate applies under Cal. Civ. Code §3289 |
| Prejudgment interest start dates | Westport: interest should run from settlement payment dates (July 29, 2013 and June 26, 2014) | California Casualty: interest should not start earlier than the filing date | Court: interest runs from the dates Westport paid the settlements (the dates the claim vested) |
Key Cases Cited
- McCalla v. Royal MacCabees Life Ins. Co., 369 F.3d 1128 (9th Cir. 2004) (Rule 60(a) can correct a judgment that allows prejudgment interest but omits the amount)
- U.S. Fid. & Guar. Co. v. Lee Investments LLC, 641 F.3d 1126 (9th Cir. 2011) (prejudgment interest in diversity actions governed by state substantive law)
- Olson v. Cory, 35 Cal.3d 390 (Cal. 1983) (amounts due must be certain to trigger Cal. Civ. Code §3287(a); uncertainty exists when amounts depend on disputed facts)
- Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915 (9th Cir. 2009) (vesting requirement satisfied when damages are certain or calculable)
- Thompson v. Asimos, 6 Cal. App. 5th 970 (Cal. Ct. App. 2016) (prejudgment interest as of right where amount is fixed by contract; not allowed where damages depend on conflicting evidence)
- Hartford Accident & Indem. Co. v. Sequoia Ins. Co., 211 Cal. App. 3d 1285 (Cal. Ct. App. 1989) (policy priority questions are legal issues and do not make damages unliquidated)
- Wisper Corp. v. California Commerce Bank, 49 Cal. App. 4th 948 (Cal. Ct. App. 1996) (a defendant’s denial of liability does not render damages uncertain under §3287)
- Safeco Ins. Co. of Am. v. Superior Court, 140 Cal. App. 4th 874 (Cal. Ct. App. 2006) (defines equitable contribution among insurers sharing same level of liability)