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USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-1641
MELINDA RYAN ARMACOST,
Plaintiff, Appellee,
v.
AMICA MUTUAL INSURANCE COMPANY,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Raymond J. Pettine, Senior U.S. District Judge]
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Before
Torruella, Circuit Judge,
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Bownes, Senior Circuit Judge,
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and Stahl, Circuit Judge.
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Thomas R. Bender, with whom David P. Whitman, and Hanson, Curran,
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Parks & Whitman were on brief for defendant-appellant.
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Mark S. Mandell, with whom Mandell, DeLuca & Schwartz, Ltd. were
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on brief for plaintiff-appellee.
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December 10, 1993
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BOWNES, Senior Circuit Judge. The principal issue
BOWNES, Senior Circuit Judge.
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in this automobile accident diversity case is whether a Rhode
Island statute requires that an insurer pay prejudgment
interest over and above its policy limits to the plaintiff.
We hold that the statute does so require. Some background
facts are necessary.
I.
I.
Plaintiff-appellee, Melinda Ryan Armacost, was a
pedestrian in Newport, Rhode Island, when she was struck by
an automobile owned and operated by Stephen B. Owen, a
resident of New York. Owen was insured by defendant-
appellant, Amica Mutual Insurance Company (Amica) of
Providence, Rhode Island. A complaint was filed in the
district court against Owen, but the summons was returned non
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est inventus. Plaintiff promptly amended her complaint,
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naming Amica as defendant under Rhode Island's direct action
statute.1 After discovery was completed, but prior to
trial, Amica admitted negligence by its insured. The only
issue for trial, therefore, was the amount of damages.
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1. The statute, R.I. Gen. Laws 27-7-2, provides in
pertinent part:
An injured party, or, in the event of
that party's death, the party entitled to
sue therefor, in his or her suit against
the insured, shall not join the insurer
as a defendant. If, however, the officer
serving any process against the insured
shall return that process "non est
inventus," . . . the party . . . may
proceed directly against the insurer.
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Shortly prior to the trial date, plaintiff's
counsel made a written demand "equal to the coverage limits
of $500,000" to settle the case. The demand specifically
referred to the statute at issue, R.I. Gen. Laws 27-7-2.2.
Amica rejected the demand and made a counter offer of
$175,000. This was spurned by plaintiff. During the trial
Amica again offered to settle for $175,000; the offer was
again rejected. The jury returned a verdict of $750,000.
The district court amended the judgment by reducing it to the
amount of Amica's contractual liability under its policy
$495,000.2 The district court then held that Amica was
required under the statute to pay plaintiff prejudgment
interest on the amended judgment, "even though such interest,
when added to the amended judgment, requires Amica to pay an
amount which exceeds the limits of its liability under the
applicable insurance policy." Armacost v. Amica Mut. Ins.
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Co., 821 F. Supp. 75, 82 (D.R.I. 1993).
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II.
II.
The statute at issue has not been interpreted by
the Rhode Island Supreme Court. The only court to have
considered it is the United States District Court in the
opinion from which this appeal has been taken. This means
that we are called upon to decide how the Rhode Island
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2. The original policy limits of $500,000 had been reduced
by $5,000 because of a payment in that amount to settle the
claim of plaintiff's husband.
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Supreme Court would construe the statute in the context of
this case. The standard of review of the district court's
opinion is de novo. We do not accord deference to the
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district court's determination of Rhode Island law. Salve
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Regina College v. Russell, 499 U.S. 225, 231-35 (1991).
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The statute to be construed provides:
Interest on judgment Payment by
Interest on judgment Payment by
insurer. In any civil action in which
insurer.
the defendant is covered by liability
insurance and in which the plaintiff
makes a written offer to the defendant's
insurer to settle the action in an amount
equal to or less than the coverage limits
on the liability policy in force at the
time the action accrues and the offer is
rejected by the defendant's insurer then
the defendant's insurer shall be liable
for all interest due on the judgment
entered by the court even if the payment
of the judgment and interest thereon
totals a sum in excess of the policy
coverage limitation. This written offer
shall be presumed to have been rejected
if the insurer does not respond within a
period of thirty (30) days.
R.I. Gen. Laws 27-7-2.2.
Rhode Island's prejudgment interest statute
provides:
Interest in civil action. In any
Interest in civil action.
civil action in which a verdict is
rendered or a decision made for pecuniary
damages, there shall be added by the
clerk of the court to the amount of
damages, interest at the rate of twelve
per cent (12%) per annum thereon from the
date the cause of action accrued which
shall be included in the judgment entered
therein. This section shall not apply
until entry of judgment or to any
contractual
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obligation where interest is already
provided or as to any condemnation
action.
Id. 9-21-10.
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The question is whether the prejudgment interest
statute, 9-21-10, applies to the rejected-settlement-offer
statute, 27-7-2.2. Ordinarily, we would certify to a state
supreme court a question of first impression involving the
interpretation of a state statute. In this case, however,
the language of the implicated statutes, the evident purpose
of the statutes, and the case law are so clear that we think
certification would be a waste of judicial resources.
Amica raises two issues: whether the Rhode Island
Supreme Court would construe 27-7-2.2 as not applicable to
direct action suits against insurers; and whether the Rhode
Island Supreme Court would limit the interest due on cases
arising under 27-7-2.2 to that accruing after judgment.
A. The Applicability of 27-7-2.2 to the Direct Action
A. The Applicability of 27-7-2.2 to the Direct Action
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Statute
Statute
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Amica's argument on the first issue runs as
follows. The starting point is that statutes granting
interest on judgment must be strictly construed because they
are in derogation of the common law. So construed, 27-7-
2.2 applies only to actions "in which the defendant is
covered by liability insurance." Amica therefore contends
that, because it is an insurer, and not, in the words of the
statute, "a defendant covered by liability insurance," it
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does not come within the compass of the statute. It argues
that the phrase "written offer to the defendant's insurer" is
directed at the situation where the decision to settle is not
within the control of the defendant, but lies with
defendant's insurer. The purpose of the statute, Amica
concludes, is to protect a defendant who is insured from
interest liability in excess of the policy limits due to a
decision made by the insurer.
This is an ingenious argument; it uses the strict
construction doctrine to avoid the plain meaning of the
statute. But it ignores the legal fact that the action
against the insurer is a derivative action. Amica was the
insurer of defendant Owen. The complaint was originally
brought against Owen. Amica was made a defendant under the
direct action statute, 27-7-2, because its insured could
not be served with process. Amica stands in Owen's shoes.
It is both defendant and insurer. This case started out, in
the words of 27-7-2.2, as a "civil action in which the
defendant is covered by liability insurance." If process had
been served on Owen, Amica's handling of the case would have
been no different, and it would be making the same argument
as to prejudgment interest because in either case it would
have to pay the amount found due. We see no basis in logic
or common sense for the argument that 27-7-2.2 is not
applicable to the insurer under the direct action statute.
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B. Construing the Statute
B. Construing the Statute
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Amica makes a number of arguments attacking the
district court's construction of the statute. The
overarching argument is that the district court did not apply
the rules of statutory construction that would have been
applied by the Rhode Island Supreme Court and, as a result,
improperly construed the statute. Because our review is de
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novo without any deference to the district court, we do not
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think it necessary to discuss point-by-point defendant's
attack on the district court opinion. The only question is
whether the ultimate conclusion of the district court should
be affirmed. We are not concerned with the route taken by
the court in reaching its result.
We start our analysis with a determination of the
purpose of the rejected-settlement-offer statute, 27-7-2.2.
Although the construction of this statute is one of first
impression, the purpose of the prejudgment interest statute,
9-21-10, has been articulated by the Rhode Island Supreme
Court. In Martin v. Lumberman's Mutual Casualty, 559 A.2d
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1028 (R.I. 1989), the Rhode Island Supreme Court held that
the prejudgment interest did not apply to condemnation cases.
In the course of its opinion it stated:
Statutes that award prejudgment interest
generally serve the dual purposes of
encouraging the early settlement of
claims, Pray v. Narragansett Improvement
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Co., 434 A.2d 923, 930 (R.I. 1981), and
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compensating plaintiffs for waiting for
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recompense to which they were legally
entitled, Dennis v. Rhode Island Hosp.
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Trust Nat'l Bank, 744 F.2d 893, 901 (1st
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Cir. 1984).
Martin, 559 A.2d at 1031; see also Isserlis v. Director of
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Public Works, 300 A.2d 273, 274 (R.I. 1973) (clear purpose of
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such legislation was to accelerate settlement of tort cases).
We have echoed this finding of settlement purpose. Roy v.
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Star Chopper Co., 584 F.2d 1124, 1135 (1st Cir. 1978) ("The
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Rhode Island prejudgment statute was enacted to promote the
expeditious settlement of claims.").
We think it plain from its terms that the rejected-
settlement-offer statute has the same purpose as the
prejudgment interest statute to accelerate the settlement
of tort cases. This purpose is readily apparent from its
provision that if the plaintiff's offer of settlement
is rejected by the defendant's insurer
then the defendant's insurer shall be
liable for all interest due on the
judgment entered by the court even if the
payment of the judgment and interest
thereon totals a sum in excess of the
policy coverage limitation.
27-7-2.2.
This language tells the insurer in no uncertain terms that it
runs the risk of paying a stiff price for shrugging off an
offer of settlement.
We next turn to the wording of the two implicated
statutes. The prejudgment interest statute says: "In any
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civil action in which a verdict is rendered or a decision is
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made for pecuniary damages," interest shall be added to the
amount of damages from the date the cause of action accrued.
9-21-10. It is beyond cavil that this case was a civil
action, that plaintiff's offer of settlement was for an
amount "equal to . . . the coverage limits in the liability
policy in force at the time the action accrue[d], and the
offer was rejected by the insurer." 27-7-2.2. It is
manifest that the prejudgment interest statute applies
directly to the case at bar.
It also seems evident to us that, by its very
words, 27-7-2.2 requires the payment of prejudgment
interest. It says that if the plaintiff's offer is rejected
"then the defendant's insurer shall be liable for all
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interest due on the judgment entered by the court even if the
payment of the judgment and interest thereon totals a sum in
excess of the policy coverage limitation." (Emphasis added.)
Despite the labored argument of defendants to the contrary,
it seems obvious that "all interest" can only mean
prejudgment and postjudgment interest. And this is the only
interpretation that makes sense if the purpose of the statute
is to promote settlement, as is obvious. There would be no
pressure on the insurer to consider a settlement offer if all
it had to pay for rejecting the offer was post-judgment
interest. Defendant's suggested construction of the statute
would take all of the bite out of it.
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We think the following statement by the Rhode
Island Supreme Court applies to the statute in issue:
In the face of a statute so clear and
unambiguous there is no room for the
application of the usual canons of
statutory construction. In such a case
the statute declares itself. Vezina v.
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Bodreau, 86 R.I. 87, 133 A.2d 753; Long
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v. Langlois, R.I., 170 A.2d 618. We may
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not where no ambiguity exists search
beyond the statute for a different
meaning. Hathaway v. Hathaway, 52 R.I.
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39, 156 A. 800. Even hardship does not
justify a court in reading into a statute
something contrary to its unequivocal
language. Clark v. Orabona, 1 Cir., 59
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F.2d 187. Only when the legislature
sounds an uncertain trumpet may the court
move in to clarify the call. But when
the call is clear and certain as it is
here we may not consider whether the
statute as written comports with our
ideas of justice, expediency or sound
public policy. In such circumstances
that is not the court's business. Blais
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v. Franklin, 31 R.I. 95, 77 A. 172.
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Kastal v. Hickory House, Inc., 187 A.2d 262, 264-65 (R.I.
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1963).
Out of an abundance of caution we have examined
similar statutes in other jurisdictions because we think the
Rhode Island Supreme Court might possibly have done so. Of
the more than thirty states surveyed, many have prejudgment
interest statutes accompanied by rejected-settlement-offer
provisions, or separate statutes that are invoked in tandem
to expedite claims settlement. See, e.g., Cal. Civ. Code
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3291 (West Supp. 1993); Conn. Gen. Stat. 52-192a(b); Minn.
Stat. Ann. 549.09(c) (West Supp. 1993); Mo. Ann. Stat.
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408.040.2 (Vernon 1990); Ohio Rev. Code Ann. 1343.03(c)
(Anderson Supp. 1993). Our survey has not disclosed a single
instance where prejudgment interest has been held not to
apply to a rejected- settlement-offer statute. Given the
rejected-settlement-offer statute's plain language and the
Rhode Island courts' long history of applying the prejudgment
interest statute in tort cases, we think the Rhode Island
Supreme Court would apply its prejudgment interest statute to
the rejected-settlement-offer statute.
Affirmed. Costs on appeal awarded to appellee.
Affirmed. Costs on appeal awarded to appellee.
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Document Info
Docket Number： 93-1641
Filed Date： 12/10/1993
Precedential Status： Precedential
Modified Date： 9/21/2015