In Stryker Corp. v. XL Insurance America Inc., Download Stryker Corp. v. XL Insurance America, Inc. (W.D. Mich. Case No. 4.01CV157, Opinion Filed June 24, 2010)(FREE ACCESS) also published as 2010 WL 2584026 (W.D. Mich. June 24, 2010)(Westlaw subscription required to access Westlaw), the Federal Court grappled with issues of Interest under Michigan Statutes.
First, the Stryker Court reminded readers that it had previously held that Michigan's Uniform Trade Practices Act, § 500.2006,applied to this Third-Party Insurance Case even though the Michigan Statute contains language referencing a "Proof of Loss". Stryker, 2010 WL 2584026 at *1. This holding allowed the Plaintiffs-Insureds to 12% interest per year. The question in this decision was when did that entitlement begin to accrue.
The Federal Court in Michigan held that, under current Michigan law, interest on the Insured's settlement amounts in the underlying case would begin to run at least "from the time that interest would otherwise begin to run under § 500.2006until the time that Defendant paid the Pfizer Settlement." Id. at *6. The entitlement was not destroyed, only the amount remained to be determined after this holding. The Court determined: "Plaintiffs are entitled to accrual of interest under that statute from the time that they settled the third-party claims." Id. at *8.
Further, the Stryker Court construed Section 500.2006's"reasonably in dispute" limitation. Under the Michigan Statute, "the 'reasonably in dispute' limitation applies to a 'third party tort claimant'; it does not apply to a claimant that is an 'insured ....'" Id. at *7. The Federal Court therefore held in that case, that "the insured under a contract of insurance is entitled to interest under § 500.2006for late payment of claims, even if the underlying insurance claim was reasonably in dispute." Id. at *7. [Emphasis by the Court.]
There were also claims against the non-defending Liability Insurance Company in that case, for the costs of defense. "In addition to the amounts paid by Plaintiffs to settle the third-party claims, the judgment in this matter also includes the costs of defense incurred by Plaintiffs for defending the third-party claims." id. at *11. Interest accrued under the Michigan Statute, Section 500.2006, without the limitation the Court previously applied to the Plaintiffs' settlement expenditures. Parenthetically, while that holding is clearly stated, it is not entirely clear from the Court's opinion how much interest would apply to the costs of defense expended by the Insureds, nor when exactly that entitlement accrued in that case, at least as seen from the perspective of the outside observer. See also Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 13:5, "Compensatory Damages--Judgment Interest Owing to Third Party" (Shepard's/McGraw-Hill First Edition, West Publishing Co. Second Edition and 2010 Supplement).
Prejudgment Interest, TOO? The Stryker Court also dealt with the Insureds' claim for prejudgment interest under another Michigan Statute in that case, Mich. Comp. Laws § 600.6013(8). As applied by the Federal Court in that case, that Statute "allows the prevailing party to recover prejudgment interest on a money judgment." Id. at *13. "Under § 600.6013(8), interest accrues from the date of the filing of the complaint. [Citation omitted.] Thus, interest starts to run under§ 600.6013(8)earlier than under § 500.2006for third-party claims of which Defendant received notice after Plaintiffs filed their complaint." Id. The amount of interest under Section 600.6013(8)was left open for determination, but the Federal Court held that the Plaintiffs-Insureds are entitled to prejudgment interest under that Statute in that case. Id. See also Dennis J. Wall, supra, § 13:11, "Prejudgment Interest".
Old saying for Liability Insurance Companies with a Duty to Defend: "When in Doubt, Defend" which may also be called not only a rule of thumb but also a rule of "interest" to which might successfully be added, and when in doubt, file a Declaratory Judgment Action while defending under a Reservation of Rights where that option is available. See generally Dennis J. Wall, supra, § 3:4, "Informing the Insured--Reservation of Rights".
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