Maxum Indemnity Company v. Drive West Insurance Services, Inc./Mulberry Insurance Services. Inc. et al

Filing 119

ORDER granting 116 Motion for Entry of Judgment under Rule 54(b. 1) NCAIGs motion for pre-judgment interest, post-judgment interest, and entry of final judgment is GRANTED; and a. NCAIG is entitled to recover from Maxum a final judgment of $ 2,000,000; b. Maxum shall pay NCAIG pre-judgment interest in the amount of $948,697.40 as provided by Cal. Civ. Code § 3287(a); c. Maxum shall pay NCAIG post-judgment interest as provided by 28 U.S.C. § 1961 at a rate of 2.67% until the judgment is satisfied. Signed by Judge Timothy S. Black on 10/23/2018. (bjc)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
MAXUM INDEMNITY COMPANY,
Plaintiff,
vs.
DRIVE WEST INSURANCE
SERVICES, INC. / MULBERRY
INSURANCE SERVICES, INC., et al.,
Defendants.

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Case No. 1:13-cv-191
Judge Timothy S. Black

ORDER GRANTING DEFENDANT’S MOTION FOR
PRE-JUDGMENT INTEREST, POST-JUDGMENT INTEREST, AND
FOR ENTRY OF FINAL JUDGMENT
This civil action is before the Court upon Defendant/Counterclaim Plaintiff
National Condo & Apartment Insurance Group (“NCAIG”)’s motion for pre-judgment
interest, post-judgment interest, and for entry of final judgment (Doc. 116), as well as
the parties’ responsive memoranda (Docs. 117 and 118).
I.

BACKGROUND

For the purposes of the pending motion, the Court need not recite this action’s
lengthy background in detail. (See Doc. 91 at 2–6). This case arises out of an insurance
coverage dispute initiated by Plaintiff/Counterclaim Defendant Maxum Indemnity
Company (“Maxum”) against numerous entities, including NCAIG, related to an
insurance policy (the “Maxum Policy”) that Maxum issued to Defendant Drive West
Insurance Services, Inc./Mulberry Insurance Services, Inc. (“Mulberry”).

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The Sixth Circuit overturned this Court’s initial Order granting summary judgment
in Maxum’s favor. (Doc. 91). This Court then entered an Order granting summary
judgment in favor of NCAIG. (Doc. 99). Following this, NCAIG, as a judgment
creditor, filed a counterclaim for breach of contract against Maxum for refusing to pay
$2,000,000 in policy limits under the Maxum policy.1 NCAIG also demanded an award
of pre-judgment and post-judgment interest. (Doc. 100 at 5).
Subsequently, Maxum filed a motion for summary judgment on the grounds of
rescission and NCAIG filed a motion for summary judgment on its counterclaim. (Doc.
103). This Court resolved the parties’ cross motions for summary judgment, granting
summary judgment for NCAIG. (Doc. 110). That Order was not a final judgment, as it
did not address the calculation of damages. The parties have now briefed NCAIG’s
request for pre-judgment and post-judgment interest and the case is ripe for entry of final
judgment.
II.

ANALYSIS

As an initial matter, the Sixth Circuit Court of Appeals has ruled that California
law governs the interpretation of the Maxum Policy application and the Maxum Policy
itself. (Doc. 91 at 8).
A.

NCAIG is Entitled to a Final Judgment of $2,000,000

In the Order resolving the parties’ cross-motions for summary judgment, the Court
emphasized that it had already found that Maxum was liable for the full $2,000,000

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NCAIG obtained a default judgment against Mulberry in the amount of $3,826,823.01 in
Amwins Brokerage of Texas, Inc. v. Nat’l Condo. & Apartment Ins. Group, et al., S.D. Ohio Case
No. 1:12-cv-00358 (June 2, 2014). (Doc. 85-1).
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policy limits under the Maxum Policy. (Doc. 110 at 14). This Court stressed that
“[t]here is no reason for this settled issue to be re-litigated.” (Id.). Yet in its response to
the present motion, Maxum has once again attempted to re-litigate the issue. Maxum
argues that the Court should enter judgment in the amount of $640,447 related to six
claims that were purportedly reported to Maxum in accordance with the Maxum Policy
terms. (Doc. 117 at 3–4). The Court again emphasizes that this argument is not welltaken. As the Court already found, Maxum “is liable under the Maxum policy for the
default judgments awarded against Mulberry . . . [b]ecause Maxum is liable for multiple
claims against Mulberry,” $2,000,000 is the appropriate limit. (Doc. 110 at 14).
Accordingly, the Court enters a final judgment of $2,000,000 against Maxum.
B.

Pre-Judgment Interest
1. NCAIG is entitled to pre-judgment interest.

While federal law controls post-judgment interest, federal courts sitting in
diversity apply state law in assessing pre-judgment interest. Diggs v. Pepsi-Cola Metro.
Bottling Co., 861 F.2d 914, 924 (6th Cir. 1988). Under California law, “[e]very
person who is entitled to recover damages certain, or capable of being made certain by
calculation, and the right to recover which is vested in him upon a particular day, is
entitled also to recover interest thereon from that day....” Cal. Civ. Code § 3287(a). One
purpose of § 3287(a) is “to provide just compensation to the injured party for loss of use
of the award during the prejudgment period—in other words, to make the [injured party]
whole as of the date of the injury.” Lakin v. Watkins Associated Industries, 863 P.2d 179,
663 (Cal. 1993). Under § 3287(a), “the court has no discretion, but must award
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prejudgment interest upon request, from the first day there exists both a breach and a
liquidated claim.” North Oakland Med. Clinic v. Rogers, 76 Cal. Rptr. 2d 743, 746 (Cal.
Ct. App. 1998).
Here, Maxum’s brief in opposition does not dispute that NCAIG’s damages were
certain as of June 2, 2014 – the date NCAIG received its judgment against Mulberry and
Maxum was required to indemnify Mulberry for the $2,000,000 policy limit. Instead,
Maxum disputes that it has an obligation to pay pre-judgment interest to NCAIG because
(1) NCAIG is not entitled to supplementary payments under the Maxum Policy as a thirdparty beneficiary and (2) NCAIG’s claim for interest is subject to the applicable limits of
insurance in the Maxum Policy. (Doc. 117 at 4–11). Both arguments are without merit.
a. NCAIG’s status as a third-party beneficiary
Maxum argues that NCAIG is not entitled to pre-judgment insurance due to its
status as a third-party beneficiary of the Maxum Policy. First, Maxum argues that
“[b]ecause NCAIG is pursuing this action as a judgment creditor of Mulberry, and seeks
the contractual benefits due and owing under the policy issued to Mulberry, Maxum owes
no obligation to indemnify NCAIG for pre-judgment interest.” (Doc. 117 at 5). If
NCAIG were seeking pre-judgment interest under the Maxum Policy, Maxum may be
correct that NCAIG would not be entitled to pre-judgment interest. However, NCAIG is
not seeking pre-judgment interest pursuant to the Maxum Policy, it is seeking statutory
pre-judgment interest pursuant to § 3287(a), and thus this argument fails.
Second, Maxum argues that, because NCAIG is a third-party beneficiary, it is not
entitled to pre-judgment interest under the supplementary payment portion of the Maxum
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Policy. Maxum relies on two cases to support this theory. See Clark v. Cal. Ins.
Guarantee Assoc., 133, Cal. Reptr. 3d 1, 7 (Cal. Ct. App. 2011) (“[A] third party
judgment creditor may not enforce an award of costs and interest in a [Cal. Ins. Code
§ 11580] direct action against the insurer.”); San Diego Housing Comm. v. Indus. Indem.
Co., 95 Cal. App. 4th 669, 692 (Cal. Ct. App. 2002) (finding that in a claim under Cal.
Ins. Code § 11580, a judgment creditor is a third-party beneficiary of a contract “but only
as to those policy terms that inure directly to the benefit of a judgment creditor.”). In
both of these cases, a third-party beneficiary was seeking pre-judgment interest in a direct
action pursuant to the Cal. Ins. Code § 11580. Similar to Maxum’s first argument, if
NCAIG were seeking pre-judgment interest solely pursuant to Cal. Ins. Code § 11580,
Maxum would possibly prevail on its argument that it has no obligation to pay prejudgment interest. But, again, NCAIG is seeking pre-judgment interest under § 3287(a)
and judgment creditors are not restricted from receiving pre-judgment interest under this
statute, even when bringing a claim under Cal. Ins. Code § 11580. See, e.g., Howard v.
American Nat’l Fire Ins. Co., 115 Cal. Rptr. 3d 42 (Cal. Ct. App. 2010).
b. The Maxum Policy Limits
Maxum next argues that, even if the Court determines that NCAIG is entitled to
pre-judgment interest, Maxum has no potential exposure beyond the $2,000,000 limits of
the Maxum Policy. (Doc. 117 at 8). The Maxum Policy states that Maxum’s obligation
to make supplementary payments, including pre- and post-judgment interest, are within
and reduce the policy limits. (Doc. 3-2 at PAGEID # 271). Thus, Maxum contends that
the Maxum Policy strictly limits its obligations under the policy to $2,000,000. The
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Court agrees that the Maxum Policy states that Maxum’s obligation to pay pre- and postjudgment interest is within and reduces the limits of insurance. However, that does not
resolve the issue.
NCAIG argues that the award of pre-judgment interest under § 3287(a) is
mandatory and “the Maxum Policy simply cannot act to preclude an award of
prejudgment interest where it is warranted under this statute.” (Doc. 116 at 6).
California courts regularly award statutory prejudgment interest in excess of
policy limits. See, e.g., Howard, 115 Cal. Rptr. 3d at 75; State of California v. Cont’l Ins.
Co., 223 Cal. Rptr. 3d 716 (Cal. Ct. App. 2017); Pilmai v. Farmers Ins. Exch. Co., Cal.
Rptr. 3d 383 (Cal. App. Ct. 2005) superseded by 137 P.3d 939 (Cal. 2006). Yet, it is
unsettled whether § 3287 trumps language in an insurance policy that restricts the
payment of pre-judgment interest to the policy limit.
However, the Court need not address that issue here in order to determine that
NCAIG is entitled to pre-judgment interest in excess of the Maxum Policy limits. Here,
the issuance of pre-judgment interest actually aligns with the Maxum Policy, which
provides in the section “Conformity to Statute” that “[a]ny terms of this policy which are
in conflict with the terms of any applicable laws construing this policy, are hereby
amended to conform to such laws.” (Doc. 3-2 at PAGEID #274).
In Denham v. Bedford, the Supreme Court of Michigan addressed a similar issue
on whether a state statute or insurance policy term determined whether pre-judgment
interest was warranted. 407 Mich. 517, 526–35 (1980). The Court agrees with the

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sentiments expressed in Denham when that court analyzed a boilerplate term similar to
the one here requiring the policy to conform to state laws:
Since there is an obvious conflict between the provisions of
this policy which provide for postjudgment interest only and
the Prejudgment Interest Statute which provides for interest
from the date of filing the complaint, it may be
considered that this boilerplate language amends the
insurance policy to conform with the mandate of the
Prejudgment Interest Statute. This notion gains particular
force when viewed in light of the hackneyed but oft-quoted
judicial maxim that the language of an insurance policy
should be strictly construed against the writer and the policy
should be interpreted in favor of the insured.
Id. at 530–32.
Here, the Maxum Policy should be interpreted in favor of the insured, therefore
the “Conformity to Statute” provision amends the Maxum Policy to conform to
§ 3287(a), which mandates pre-judgment interest. Thus, since California courts applying
§ 3287(a) award pre-judgment interest in excess of policy limits, NCAIG is entitled to
pre-judgment insurance in excess to the $2,000,000 Maxum Policy limit. Importantly,
the award of prejudgment interest advances California’s policy goal of putting an injured
party in the position it would have been in had the breach of contract not occurred.
Accordingly, the Court finds that, due to Maxum’s breach of contract, NCAIG
was entitled to receive $2,000,000 in damages as of June 2, 2014, and therefore is entitled
to pre-judgment interest pursuant to § 3287(a) as of that date. See Howard v., 115 Cal.
Rptr. 3d at 75 (finding that the plaintiffs were entitled to prejudgment interest in excess of
a policy limit owed by the insurer to indemnify the insured for the plaintiffs’ certain
judgment).
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2. NCAIG is entitled to pre-judgment interest at a rate of 10%
Absent a contractual provision, the statutory rate of pre-judgment interest in
California is 10% per annum. Cal. Civ. Code § 3289(b); see also Michelson v. Hamada,
36 Cal. Rptr. 2d 343, 353 (Cal. Ct. App. 1994). The Maxum Policy does not include a
provision on the statutory rate of pre-judgment interest. However, Maxum argues that,
even though California law applies to the determination of whether pre-judgment interest
is warranted, Ohio law governs any such award of pre-judgment interest. (Doc. 117 at
11–12). This argument lacks merit and the Court need not spend significant time
addressing it.
Applying Ohio’s choice of law principles in a diversity action, the Sixth Circuit
has found that the state’s law governing an underlying breach of contract claim also
governs the pre-judgment interest rate. Truform, Inc. v. Gen. Motors Corp., 80 F. App'x
968, 975 (6th Cir. 2003) (“The district court correctly applied the [rate of the state whose
law governed the breach of contract claim] to calculate the prejudgment interest. In
diversity cases, state law governs an award of prejudgment interest.”). Here, California
law applies to the underlying breach of contract claim and therefore the California prejudgment interest rate applies.
Accordingly, pursuant to § 3289(b), NCAIG is entitled to pre-judgment interest at
a rate of 10%. Calculated from June 2, 2014 (the date NCAIG received its judgment
against Maxum’s insured) to June 28, 2018 (the day before NCAIG filed the present
motion), NCAIG is entitled to $948,697.40 in statutory pre-judgment interest. (See Doc.
116 at 11–12).
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C.

NCAIG is Entitled to Post-Judgment Interest

As noted supra federal law controls post-judgment interest. Diggs, 861 F.2d at
924. “The purpose of post-judgment interest is to compensate the successful plaintiff for
being deprived of compensation for the loss from the time between the ascertainment of
the damages and the payment by the defendant.” Kaiser Aluminum & Chem. Corp. v.
Bonjorno, 494 U.S. 827, 827 (1990). The statute governing the calculation of postjudgment interest provides in relevant part:
Interest shall be allowed on any money judgment in a civil
case recovered in a district court . . . . Such interest shall be
calculated from the date of the entry of the judgment, at a rate
equal to the weekly average 1-year constant maturity
Treasury yield, as published by the Board of Governors of the
Federal Reserve System, for the calendar week preceding the
date of the judgment.
28 U.S.C. § 1961.
Other than Maxum’s arguments that NCAIG is not entitled to pre- or postjudgment under California, Maxum does not dispute the issuance of post-judgment
interest. Having found that NCAIG is entitled to pre-judgment interest in excess of the
Maxum Policy, the Court finds that NCAIG is also entitled to post-judgment interest at a
rate of 2.67%2 as provided by 28 U.S.C. § 1961 until the judgment is satisfied.

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Available at www.federalreserve.gov.
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1.

CONCLUSION

Wherefore, for the reasons stated above:
1) NCAIG’s motion for pre-judgment interest, post-judgment interest, and
entry of final judgment is GRANTED; and
a. NCAIG is entitled to recover from Maxum a final judgment of
$2,000,000;
b. Maxum shall pay NCAIG pre-judgment interest in the amount of
$948,697.40 as provided by Cal. Civ. Code § 3287(a);
c. Maxum shall pay NCAIG post-judgment interest as provided by
28 U.S.C. § 1961 at a rate of 2.67% until the judgment is
satisfied.
IT IS SO ORDERED.
Date: October 23, 2018

/s/ Timothy S. Black
Timothy S. Black
United States District Judge

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