82 Ohio St. 3d 339 | Ohio | 1998
Lead Opinion
Two separate issues are raised in the controversy before us: (1) whether Landis is entitled to prejudgment interest pursuant to R.C. 1343.03(A) and (2) whether, Grange is liable for the attorney fees that Landis incurred pursuant to a contingency fee contract. For the reasons that follow, we answer the first question in the affirmative and the second question in the negative, and address each question separately.
R.C. 1343.03(A) states that “when money becomes due and payable upon any * * * instrument of writing * * * and upon all judgments * * * for the payment of money arising out of tortious conduct or a contract or other transaction, the creditor is entitled to interest at the rate of ten per cent per annum.”
Grange spent considerable effort attempting to persuade us that uninsured/underinsured motorist insurance (“UMI”) claims are based on tortious conduct and
In the declaratory judgment action, the trial court determined that Landis was covered by the UMI provision. According to the declaratory judgment, when Landis applied for UMI benefits, Grange should have paid them to him. In other words, the benefits were due and payable to him based on an instrument of writing, the insurance contract. R.C. 1343.03(A). That the benefits were denied in good faith is irrelevant because lack of a good faith effort to settle is not a predicate to an award of prejudgment interest pursuant to R.C. 1343.03(A), as it is under R.C. 1343.03(C). The proper way to fully compensate Landis is to award prejudgment interest. Royal Elec. Constr. v. Ohio State Univ. (1995), 73 Ohio St.3d 110, 116-117, 652 N.E.2d 687, 692.
In dissent below, Judge Glasser stated that “awarding prejudgment interest under the circumstances of this case clearly discourages litigation of reasonable issues.” We disagree; parties will remain free to litigate reasonable issues. However, when they litigate, they will be subject to a prejudgment interest award, not as a punishment but as a way to prevent them from using money then due and payable to another for their own financial gain. We affirm the judgment of the court of appeals as to prejudgment interest under R.C. 1343.03(A).
Grange argues that even if prejudgment interest under R.C. 1343.03(A) is proper, no money was due and payable until the arbitration award was reduced to judgment. We disagree. According to the declaratory judgment, the money was due and payable. That the amount remained undetermined until arbitration does not bar recovery of prejudgment interest. Royal Elec. Constr. v. Ohio State Univ., 73 Ohio St.3d 110, 652 N.E.2d 687, syllabus.
If Grange had not denied benefits, the issue of damages would have gone directly to an arbitrator and the benefits would have become due and payable no later than upon entry of the arbitrator’s award. But Grange did deny benefits, and it scarcely seems equitable that the denial of benefits contractually owed to another that led both parties on a lengthy and tortuous journey through the judicial system should redound to Grange’s benefit. A determination that the benefits became due and payable upon the entry of the arbitrator’s award would, in this case, work an injustice by rewarding Grange for improperly denying
Whether the prejudgment interest in this case should be calculated from the date coverage was demanded or denied, from the date of the accident, from the date at which arbitration of damages would have ended if Grange had not denied benefits, or some other time based on when Grange should have paid Landis is for the trial court to determine. Upon reaching that determination, the court should calculate, pursuant to R.C. 1343.03(A), the amount of prejudgment interest due Landis and enter an appropriate order.
The second issue concerns whether Grange can be held liable for the attorney fees that were incurred by Landis pursuant to a contingency fee contract to which Grange was not a party.
In Motorists Mut. Ins. Co. v. Brandenburg (1995), 72 Ohio St.3d 157, 648 N.E.2d 488, syllabus, this court stated that “a trial court has the authority under R.C. 2721.09 to assess attorney fees based on a declaratory judgment issued by the court. The trial court’s determination to grant or deny a request for fees will not be disturbed, absent an abuse of discretion.” Abuse of discretion “ ‘connotes more than an error of law or of judgment; it implies an unreasonable, arbitrary or unconscionable attitude on the part of the court.’ ” Pembaur v. Leis (1982), 1 Ohio St.3d 89, 91, 1 OBR 125, 127, 437 N.E.2d 1199, 1201, quoting Klever v. Reid Bros. Express, Inc. (1951), 154 Ohio St. 491, 43 O.O. 429, 96 N.E.2d 781, paragraph two of the syllabus.
Grange and Landis stipulated that the contingency fee agreement between Landis and Murray & Murray was “normal, ordinary, and customary.” As the court of appeals noted, “[s]uch agreements permit persons of ordinary means access to a legal system which can sometimes demand extraordinary expense. The mechanism by which this is accomplished is a contract between client and attorney whereby some or all of the risk involved in litigation is shifted to the attorney. The quid pro quo for relieving the client of this risk is that the agreement normally calls for the attorney to receive a percentage of any possible recovery. * * * To be sure, the contingency percentage is an arbitrary figure but, like liquidated damages in other contracts, is proper because it is a bargained for result.” (Citation omitted.)
This reasoning does not apply to Grange, an insurance company of considerable means. For instance, Grange did not receive the benefit of transferring risk to an attorney. Further, and most important, Grange did not bargain for the contingency fee contract. That the contingency fee agreement was normal and customary as to Landis and Murray & Murray does not mean that it can be
Accordingly, we affirm the judgment of the court of appeals and remand to the trial court for determination of the amount of prejudgment interest and determination of an award of reasonable attorney fees pursuant to R.C. 2721.09. See Bittner v. Tri-County Toyota, Inc. (1991), 58 Ohio St.3d 143, 569 N.E.2d 464; DR 2-106(B).
Grange also argues that the trial court did not follow the procedural mandate of R.C. 2721.09 in awarding attorney fees. We agree with the court of appeals that the remand moots the issue.
Judgment affirmed.
Concurrence in Part
concurring in part and dissenting in part. I concur with the majority in affirming the court of appeals on the prejudgment interest issue. I respectfully dissent as to the attorney fees issue.
In Motorists Mut. Ins. Co. v. Brandenburg (1995), 72 Ohio St.3d 157, 648 N.E.2d 488, we said, at the syllabus, that “[a] trial court has the authority under R.C. 2721.09 to assess attorney fees based on a declaratory judgment issued by the court. The trial court’s determination to grant or deny a request for fees will not be disturbed, absent an abuse of discretion.” In the case at bar, the trial court awarded attorney fees in the amount it cost the Landises to recover from their own insurance carrier what was due them pursuant to their underinsured motorist coverage. To allow them, as the majority apparently does, less than what they paid to obtain what was owed to them results in the Landises’ being left less than whole. It is, indeed, a curious world in which we live. Buy insurance; have coverage denied; sue your company; win at the trial court, the court of appeals, and the Supreme Court levéis; have attorney fees case law on your side; yet be awarded attorney fees in a sum less than what you paid attorneys to obtain the coverage you contracted for. Confucius said: “Do to
Concurrence in Part
dissenting in part and concurring in part. Against the grain of its customary treatment of uninsured/underinsured motorist issues, a majority of this court has now decided successive appeals by recognizing the contractual nature of the relationship between insurer and insured. In Ross v. Farmers Ins. Group of Cos. (1998), 82 Ohio St.3d 281, 695 N.E.2d 732, the majority permitted plaintiffs to avoid the setoff provision of R.C. 3937.18(A)(2) by applying former R.C. 3937.18(A)(2) as interpreted by Savoie v. Grange Mut. Ins. Co. (1993), 67 Ohio St.3d 500, 620 N.E.2d 809, on the basis that it was the law in effect at the time of contracting. Today’s majority holds that uninsured/underinsured motorist claims are based in contract and, pursuant to R.C. 1343.03(A), permits the plaintiffs to collect prejudgment interest on their underinsured motorist claim without a showing of bad faith.
Overlooked, but not overruled, are this court’s decisions in State Farm Auto. Ins. Co. v. Alexander (1992), 62 Ohio St.3d 397, 583 N.E.2d 309, and Miller v. Progressive Cas. Ins. Co. (1994), 69 Ohio St.3d 619, 635 N.E.2d 317, which would seem to contain contrary logic. Alexander overruled Dairyland Ins. Co. v. Finch (1987), 32 Ohio St.3d 360, 513 N.E.2d 1324, paragraph two of the syllabus, reasoning that “R.C. 3937.18(A)(1) and (2) are premised on the tortfeasor’s legal liability to the injured insured.” (Emphasis sic.) Alexander, 62 Ohio St.3d at 400, 583 N.E.2d at 312. Based on that reasoning, the Alexander court held that “[a]n automobile insurance policy may not eliminate or reduce uninsured or underinsured motorist coverage, required by R.C. 3937.18, to persons injured in a motor vehicle accident, where the claim or claims of such person arise from causes of action that are recognized by Ohio tort law.” Id. at syllabus.
The Alexander court’s abandonment of earlier holdings that R.C. 3937.18 does not displace ordinary principles of contract law (see Stanton v. Nationwide Mut. Ins. Co. [1993], 68 Ohio St.3d 111, 113, 623 N.E.2d 1197, 1199, explicitly acknowledging the abandonment) was followed by a series of cases steadily eroding the contractual nature of the relationship between the insurer and the insured. See, e.g., Holt v. Grange Mut. Cas. Co. (1997), 79 Ohio St.3d 401, 683 N.E.2d 1080 (policy definition of “insured” party inapplicable to exclude coverage of an insured’s wrongful death beneficiary); Schaefer v. Allstate Ins. Co. (1996), 76 Ohio St.3d 553, 668 N.E.2d 913 (policy provision that subjects both a person sustaining bodily injury and a person asserting a derivative claim for loss of
The Miller court invalidated a policy provision requiring the plaintiffs to commence any action against their insurance carrier within one year of the accident causing injury. Bypassing the notion that uninsured/underinsured motorist claims are actions sounding in contract, the Miller court ultimately held that the R.C. 2305.10 two-year statute of limitations for bodily injury limited the parties’ ability to contract for a shorter time period. Accordingly, based on a statute of limitations designed to cover tort actions, the Miller court overruled the holding in Colvin v. Globe Am. Cas. Co. (1982), 69 Ohio St.2d 293, 295, 23 O.O.3d 281, 282, 432 N.E.2d 167, 169, that “[generally, in the absence of a controlling statute to the contrary, a provision in a contract may validly limit, as between the parties, the time for bringing an action on such contract to a period less than that prescribed in a general statute of limitations provided that the shorter period shall be a reasonable one.”
Despite these cases which elevate the tort underpinnings of uninsured/underinsured motorist claims over their contractual origin, the majority today says that for purposes of awarding prejudgment interest, uninsured/underinsured motorist claims are based in contract and therefore governed by R.C. 1343.03(A). This decision comes despite R.C. 1343.03(C)’s employment of the expansive phraseology “based in tortious conduct.” The significance of this language was noted by the Franklin County Court of Appeals in deciding Woods v. Farmers Ins. of Columbus, Inc. (1995), 106 Ohio App.3d 389, 396, 666 N.E.2d 283, 288: “Had the General Assembly wanted R.C. 1343.03(C) to apply only in tort cases, it could have used the simpler phrase ‘tort action,’ rather than ‘civil action based on tortious conduct.’ Indeed, the phrase ‘based on tortious conduct’ appears to be unique in the Revised Code to R.C. 1343.03. Elsewhere in the Revised Code, the terminology encompassing tort actions is less expansive * * *.”
Accordingly, with respect to prejudgment interest, support for treating uninsured/underinsured motorist claims under rules of tort rather than contract can actually be found in the language of the statute. Present in this case, then, is a
With respect to attorney fees, I concur in the majority’s decision to remand the issue to the trial court for further proceedings. Before calculating reasonable fees pursuant to Bittner v. Tri-County Toyota, Inc. (1991), 58 Ohio St.3d 143, 569 N.E.2d 464, however, the trial court, pursuant to the procedures set forth in R.C. 2721.09, must first determine whether attorney fees are “necessary or proper.” See Motorists Mut. Ins. Co. v. Brandenburg (1995), 72 Ohio St.3d 157, 160, 648 N.E.2d 488, 490.
. The phrase “based on tortious conduct” now appears in R.C. 2743.18, dealing with interest on judgments in the Court of Claims, and in uncodified Section 6(A) of Am.Sub.H.B. No. 350,146 Ohio Laws, Part II, 3867, 4029, referring to amendments to several other Revised Code sections dealing with interest on judgments.
