Janice Bailey BOWEN, Plaintiff-Appellant, v. FARMERS INSURANCE EXCHANGE, Defendant-Appellee.
No. 95CA0141
Colorado Court of Appeals, Div. IV.
May 2, 1996
Rehearing Denied June 27, 1996
Certiorari Denied Jan. 13, 1997.
Significantly, this language does not refer to the introducing broker, which omission we regard as purposeful and from which we can reasonably infer that the parties did not intend that the introducing broker be a beneficiary of the arbitration clause. See Mowbray v. Moseley, Hallgarten, Estabrook & Weeden, Inc., supra.
Defendant contends that plaintiff‘s intent to designate it as a third-party beneficiary is evident from the fact that plaintiff received account statements from it for several months prior to plaintiff‘s execution of the margin agreement. However, plaintiff averred that, at the time she signed the margin agreement, she was unaware of any relationship she may have had with defendant. The trial court resolved this conflict and held that plaintiff “never sought a relationship” with defendant and therefore could not be bound by a purported agreement between the parties.
Even if we were to deem the contractual language to be ambiguous, the extrinsic evidence offered here does not support defendant‘s contention. Rather, the trial court‘s finding that plaintiff never sought a relationship with defendant, which has record support and is binding on appeal, can reasonably support the inference that plaintiff did not intend to confer a benefit on defendant as a third-party beneficiary. Obviously, if plaintiff was unaware of any relationship between herself and defendant, she could not have intended to benefit defendant merely by signing a margin agreement with a clearing broker.
Hence, the plain language of the brokerage agreements as well as the majority of persuasive authorities cited support the trial court‘s refusal to stay court proceedings pending arbitration here.
The order is affirmed.
STERNBERG, C.J., and JONES, J., concur.
Elder & Phillips, P.C., Mark R. Luff, Grand Junction, for Defendant-Appellee.
Opinion by Judge KAPELKE.
In this action for recovery of underinsured motorist (UIM) benefits, plaintiff, Janice Bailey Bowen, challenges the amount of prejudgment interest that the trial court awarded in her favor and against defendant, Farmers Insurance Exchange (Farmers). We reverse and remand with directions.
On May 6, 1989, Bowen was injured in an automobile accident. On February 14, 1992, she made demand on Farmers for UIM benefits under the policy covering the car she was driving at the time of the accident. With Farmers’ consent, Bowen settled her liability claim against the underinsured driver on August 5, 1993.
In December of 1993, Farmers stipulated as to the liability of the other driver and the amount of Bowen‘s damages. Thereafter, a dispute arose as to the amount of UIM benefits to which plaintiff was entitled.
Bowen brought this action against Farmers for breach of contract and declaratory judgment and sought prejudgment interest pursuant to
In this appeal, Bowen contends that the trial court erred in awarding interest from the date of the stipulation rather than from the date of the accident. In the alternative, she argues that she was entitled to interest from the date Farmers should have informed her of the available coverage, or from the date she demanded payment of UIM benefits under the policy. We agree that the trial court erred in calculating prejudgment interest.
Section 5-12-102(1), which governs the award of prejudgment interest here, states, in pertinent part:
(a) When money or property has been wrongfully withheld, interest shall be an amount which fully recognizes the gain or benefit realized by the person withholding such money or property from the date of the wrongful withholding to the date of payment or to the date judgment is entered, whichever occurs first.
(b) Interest shall be at the rate of eight percent per annum ... for all moneys ... after they are wrongfully withheld or after they become due to the date of the payment or to the date judgment is entered, whichever occurs first. (emphasis added).
The purpose of
Prejudgment interest is available under the statute from the time a claim accrues, and the prevailing party is not required to establish tortious conduct on the part of the losing party in order to recover. In an action on a contract, the non-breaching party is entitled to recover interest from the time of the breach. Mesa Sand & Gravel Co. v. Landfill Inc., supra.
Under the policy at issue here, UIM coverage was coextensive with uninsured motorist (UM) protection. The UM provision stated, in pertinent part:
We will pay all sums which an insured person is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by the insured person.... Determination as to whether an insured person is legally entitled to recover damages or the amount of damages shall be made by agreement between the insured person and us. If no agreement is reached, the decision will be made by arbitration.
Based on the policy language, the trial court found that prejudgment interest did not begin to accrue until the date of the stipulation because benefits were not due until either an arbitration award had been entered or the parties had reached an agreement on liability and the amount of damages.
Interpretation of a contract, including an insurance contract, is a matter of law which an appellate court reviews de novo. Union Insurance Co. v. Houtz, 883 P.2d 1057 (Colo.1994). Here, we agree with plaintiff that the quoted policy provision concerning legal entitlement and the amount of damages merely prescribes how the insurer‘s obligation is to be determined and does not establish when the obligation arises.
We reject Farmers’ contention that an agreement between the parties or a final arbitration decision was a condition precedent to Farmers’ obligation to pay UIM benefits.
The above-quoted provision does not contain language specifying that the insurer has no liability to the insured unless or until an agreement has been reached or an arbitration proceeding completed. At a minimum, this provision is ambiguous to the extent that it can, as indicated, be read to establish only the method of determining the extent of the insurer‘s obligation, and not the effective date of such obligation.
Ambiguities in an insurance policy must be construed against the insurer. American Family Mutual Insurance Co. v. Johnson, 816 P.2d 952 (Colo.1991); Tepe v. Rocky Mountain Hospital, 893 P.2d 1323 (Colo.App.1994). Such a construction here leads us to reject Farmers’ argument that it had no obligation to pay prejudgment interest before December 15, 1993, the date of the stipulation as to Farmers’ liability and the amount of damages.
Farmers’ interpretation of the policy, if adopted, would tend to encourage insurance companies to stall and delay in the payment of claims, thereby frustrating the purpose of the statute. See Mesa Sand & Gravel Co. v. Landfill, Inc., supra.
However, we also disagree with Bowen‘s primary contention that she was entitled to interest from the date of the accident. Her claim, as is evident from the complaint, is one for breach of contract. Under
Since this is a suit on the policy, rather than a tort claim, the date of the accident is
The breach of contract by Farmers consisted of its wrongful refusal or failure to pay following the demand made on behalf of Bowen. While the record indicates that Bowen made demand for payment under the policy on February 14, 1992, we are unable to ascertain the date of Farmers’ subsequent refusal to pay.
Accordingly, we conclude that a remand is necessary for the trial court to determine the actual date of Farmers’ breach by refusal to pay and also to make an award of prejudgment interest under
The judgment is therefore reversed, and the cause is remanded for further proceedings in accordance with this opinion.
MARQUEZ, J., concurs.
BRIGGS, J., dissents.
Judge BRIGGS dissenting.
In my view, the trial court‘s ruling should be affirmed. I therefore respectfully dissent.
As an initial matter, the record on appeal is insufficient to warrant reversal of the trial court‘s ruling.
An insurance policy is a contract and should be construed in accordance with general principles of contractual interpretation. Wota v. Blue Cross & Blue Shield, 831 P.2d 1307 (Colo.1992). Thus, like any other contract, the provisions of an insurance contract should not be read in isolation but rather as a whole. See Worsham Construction Co. v. Reliance Insurance Co., 687 P.2d 988 (Colo.App.1984).
Plaintiff, however, has not included the complete policy in the record on appeal, making it impossible to construe the contract as a whole. Accordingly, the trial court‘s ruling should be presumed correct. See Schuster v. Zwicker, 659 P.2d 687 (Colo.1983).
If the merits of plaintiff‘s claim are to be addressed based on the record before us, I would reach the same result as the trial court. Although not addressed by the parties, I reach this result because of what I believe to be the proper interplay between
The point at which any sums may be considered to be “wrongfully withheld” by the insurer, resulting in interest accruing under
We will pay all sums which an insured person is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injuries sustained by an injured person.... Determination as to whether an insured person is legally entitled to recover damages or the amount of the damages shall be made by agreement between the insured person and us. If no agreement is reached, the decision will be made by arbitration.
Thus, under the express terms of the insurance contract, the insured is not “legally entitled” to any amounts unless and until an agreement has been reached or an arbitration award rendered. No amount can be “wrongfully withheld” under this provision until the insured is so legally entitled.
This policy provision is similar to an indemnity provision in that any amount due from the insurer remains inchoate until it is determined whether and to what extent the insured is legally entitled to recovery from the insurer. Only then can the insured be said to have a claim for relief. See Duncan v. Schuster-Graham Homes, Inc., 194 Colo. 441, 578 P.2d 637 (1978).
This is not to say that the insurer may thereby avoid any liability for interest before
The difficulty in recovering interest arises when the damage award, with accrued prejudgment interest, exceeds the policy limitations. In that case, depending on the language in the policy, the only interest that can be recovered in excess of the policy limitation may be that accruing after the amounts payable under the policy become due. See Allstate Insurance Co. v. Starke, supra; see generally G. Couch, Cyclopedia of Insurance Law § 56:15 (2d ed.1983). Although the entire policy is not before us, the parties appear to have assumed that prejudgment interest under
In my view, an insured in these circumstances should be entitled to recover from the UIM insurer interest accruing under
The only exception would be for interest accruing after the insured is legally entitled to a recovery. For example, if the insurer refused to agree on the amount of recovery or to arbitrate after a request by the insured, the insurer would be in breach of the contract. Interest on the amount of any recovery to which the insured was entitled would then accrue under
Under this analysis the trial court reached the right result. It first concluded that the policy language clearly requires an agreement or arbitration award before UIM benefits are due, with interest accruing under
The trial court further correctly reasoned that such a construction balances the respective rights of the parties. It is the insured who decides when to submit a UIM claim after an accident. If no agreement can be reached, the insured can require arbitration. All the while interest continues to accrue, but under
I would therefore affirm the trial court‘s award of interest on the judgment.