Munoz v. Am. Family Mut. Ins. Co. , 425 P.3d 1128 ( 2018 )

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ADVANCE SHEET HEADNOTE
September 10, 2018
2018 CO 68No. 17SC247, Munoz v. Am. Fam. Ins. Co.—Prejudgment Interest—Statutory
Interpretation
In this case, the supreme court considers whether an insured is entitled to collect
prejudgment interest when he settles an uninsured motorist claim with his insurer. We
hold that, under the plain language of the prejudgment interest statute, § 13-21-101,
C.R.S. (2017), an insured is entitled to prejudgment interest only after (1) an action is
brought, (2) the plaintiff claims damages and interest in the complaint, (3) there is a
finding of damages by a jury or court, and (4) judgment is entered. Because Munoz did
not meet all of these conditions, this court concludes he is not entitled to prejudgment
interest.
The Supreme Court of the State of Colorado
2 East 14th Avenue • Denver, Colorado 80203
2018 CO 68Supreme Court Case No. 17SC247
Certiorari to the Colorado Court of Appeals
Court of Appeals Case No. 16CA416
Petitioner:
Joel Munoz,
v.
Respondent:
American Family Mutual Insurance Company.
Judgment Affirmed
en banc
September 10, 2018
Attorneys for Petitioner:
Franklin D. Azar & Associates, PC
Patricia A. Meester
Keith R. Scranton
Aurora, Colorado
Levy Law, P.C.
Marc R. Levy
Englewood, Colorado
Attorneys for Respondent:
Campbell Latiolais & Averbach, LLC
Clifton J. Latiolais, Jr.
Denver, Colorado
Attorneys for Amici Curiae Colorado Civil Justice League and Colorado Defense
Lawyers Association:
Taylor Anderson, LLP
Lee A. Mickus
Denver, Colorado
Attorneys for Amicus Curiae The Colorado Trial Lawyers Association:
The Gold Law Firm, LLC
Michael J. Rosenberg
Greenwood Village, Colorado
JUSTICE BOATRIGHT delivered the Opinion of the Court.
2
¶1 In this matter, we consider whether an insured is entitled to collect prejudgment
interest when he settles an uninsured motorist claim (“UM claim”) with his insurer in
lieu of filing a lawsuit and proceeding to judgment.1 We hold that, under the plain
language of the prejudgment interest statute, § 13-21-101, C.R.S (2017), an insured is
entitled to prejudgment interest only after (1) an action is brought, (2) the plaintiff
claims damages and interest in the complaint, (3) there is a finding of damages by a jury
or court, and (4) judgment is entered. Because Munoz did not meet all of these
conditions, he is not entitled to prejudgment interest. We therefore affirm the court of
appeals.
I. Facts and Procedural History
¶2 After Joel Munoz was injured in a car crash with an uninsured motorist, he filed
a UM claim with his insurer, American Family Insurance Company (“American
Family”). During settlement negotiations, Munoz asked American Family to include
prejudgment interest in its offer, but it declined to do so, stating that because
prejudgment interest is required only after a judgment, it would not consider interest in
settlement negotiations.
1 Specifically, we granted certiorari to review the following issue:
1. Whether, pursuant to section 10-4-609(4), C.R.S. (2016), an insured is
“legally entitled” to prejudgment interest under section 13-21-101(1),
C.R.S. (2016), when the insured chooses to settle an uninsured motorist
claim with his insurer in lieu of filing a lawsuit and proceeding to
judgment.
3
¶3 American Family ultimately offered Munoz $10,008 to settle his claim, not
including prejudgment interest. Munoz stated that he would accept the offer, but again
asked American Family to add prejudgment interest, suggesting that he would
otherwise sue. American Family did not consider that a true acceptance, and the parties
were unable to resolve their dispute.
¶4 Munoz then sued. In his complaint, he alleged that American Family had
breached its contract by refusing to pay all that he was entitled to under the uninsured
motorist policy, which he viewed as including prejudgment interest. Munoz also
alleged that American Family did not have a reasonable basis to deny him this benefit
and that it had acted in bad faith by compelling him to litigate his claims to recover his
full benefits.
¶5 Munoz then filed a motion for determination of law, asking the court to decide
whether an insurance company must pay prejudgment interest on money received from
a settlement. Munoz argued that according to this court’s opinion in USAA v. Parker,
200 P.3d 350 (Colo. 2009), American Family was required to pay prejudgment interest
on its settlement offer. Parker stated that the uninsured motorist statute, § 10-4-609(4),
C.R.S. (2017), requires that an insured be able to recover the same amount of damages
from an insurance company as he would from a direct action against the tortfeasor. 200
P.3d at 353. Because prejudgment interest is an element of damages, Munoz reasoned
that he should be able to recover interest from the insurance company.
¶6 The trial court disagreed. It concluded that American Family was not required to
include prejudgment interest in any settlement offer because the claim did not result in
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a judgment through litigation. In so doing, the trial court distinguished Parker, finding
that it did not address whether an insurer must pay prejudgment interest on a
settlement, and ruling that requiring an insurer to do so would be contrary to the
uninsured motorist statute and lead to “an inconsistent and bizarre result.”2
¶7 Munoz then appealed the trial court’s determination of law. The court of appeals
agreed with the trial court, holding that insurance companies are not required to pay
prejudgment interest on a settlement. Munoz v. Am. Family Ins. Co., 2017 COA 25, ¶ 1,
__ P.3d __. The division looked to the plain language of section 13-21-101 and
concluded that a court’s authority to award prejudgment interest exists only “if a
plaintiff has lawfully requested prejudgment interest, there is a jury verdict or court
finding that the plaintiff has damages, and a judgment is entered.” Id. at ¶ 10. Because
those prerequisites were not met here, the court of appeals concluded that Munoz was
not entitled to prejudgment interest. See id. at ¶¶ 10–13. The division also agreed with
the trial court’s interpretation of Parker, stating that while some language from that
opinion could be construed to support Munoz’s position, the opinion read as a whole
does not imply that an insured may collect prejudgment interest without first filing an
action and proceeding to judgment. Id. at ¶¶ 11–12.
¶8 Munoz filed a petition for certiorari, which we granted.
2 After the trial court’s ruling, the parties settled their remaining claims, understanding
that the settlement did not resolve the dispute over prejudgment interest.
5
II. Standard of Review
¶9 We review questions of law and statutory interpretations de novo. Goodman v.
Heritage Builders, Inc., 2017 CO 13, ¶ 5, 390 P.3d 398, 401. In interpreting a statute, we
attempt to discern the General Assembly’s intent first by looking to the text of the
statute and giving words and phrases their plain and ordinary meaning. State Farm
Mut. Auto. Ins. Co. v. Fisher, 2018 CO 39, ¶ 12, 418 P.3d 501, 504. Only if the language
is ambiguous do we then resort to other interpretive rules of statutory construction; if
the language is clear, we apply it as written. Id.III. Analysis
¶10 In deciding whether Munoz is entitled to prejudgment interest, we first turn to
the text of the applicable statute. We conclude that the plain language of section
13-21-101 requires that certain conditions be met for a party to receive prejudgment
interest, and because Munoz did not meet these conditions, he is not entitled to
prejudgment interest.
¶11 Section 13-21-101 governs whether and when a party is entitled to collect
prejudgment interest. It requires that the court add prejudgment interest to the
damages claimed by the plaintiff and assessed by the fact-finder:
In all actions brought to recover damages for personal
injuries . . . it is lawful for the plaintiff in the complaint to
claim interest on the damages claimed from the date the
action accrued. When such interest is claimed, it is the duty
of the court in entering judgment for the plaintiff in the
action to add to the amount of damages assessed by the
verdict of the jury, or found by the court, interest on such
amount . . . .
6
§ 13-21-101(1) (emphases added). As the court of appeals noted, there are several
clauses in the statute indicating that prejudgment interest applies only after a judgment.
The following conditions must be met: (1) an action must be brought, (2) the plaintiff
must claim damages and interest in the complaint, (3) there must be a finding of
damages by a jury or the court, and (4) judgment must be entered. See Munoz, ¶ 10.
The statute is not ambiguous. It requires that all four conditions be satisfied for
prejudgment interest to be awarded.
¶12 A pre-claim settlement does not satisfy any of these four conditions. When
parties reach a settlement prior to litigation, no action is brought, no damages or
interest are claimed in a complaint, no finding of damages is made by a jury or court,
and no judgment is entered. Such was the case here when American Family offered the
settlement; none of the conditions had been met, and so American Family was not
required to include prejudgment interest. And while Munoz has now filed an action
and demanded damages and interest in his complaint—thereby technically meeting the
first two requirements—he did so to determine whether he was entitled to prejudgment
interest on the settlement offered rather than to obtain a judgment on his underlying
claim. Thus, he has not met the required conditions to be entitled to prejudgment
interest.
¶13 This reading of the statute is consistent with what we have previously held to be
its purpose: “[T]o compensate the plaintiff for the time value of the amount of his or her
judgment.” Morris v. Goodwin, 185 P.3d 777, 780 (Colo. 2008); see also Seaward Constr.
Co. v. Bradley, 817 P.2d 971, 975 (Colo. 1991) (“The interest is compensatory and is
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awarded to indemnify the plaintiff for the loss of earnings on that money due to its
delayed payment.” (quoting Coale v. Dow Chem. Co., 701 P.2d 885, 890 (Colo. App.
1985))). When deciding whether to pursue a settlement or proceed to trial, parties must
weigh the benefit of an earlier resolution and the risk of going to trial. Judgments as a
result of a trial can take a long time to obtain, so the General Assembly has decided to
compensate a party for that waiting period. Though there is also some waiting period
before resolution by settlement, if the General Assembly had wanted to award interest
for that time period, it would have written the statute to reflect that outcome. It did not.
¶14 While Munoz attempts to argue otherwise, we find those arguments
unconvincing. Munoz first points to two cases—Morris and Seaward—where we held
that section 13-21-101 was ambiguous, urging us to do the same here. In those cases,
however, we interpreted section 13-21-101 in materially different contexts.
¶15 In Morris, we held that the statute was ambiguous as to how to calculate
prejudgment interest, not as to when a party was entitled to prejudgment interest. 185
P.3d at 779–80. In Seaward, we considered whether the court should award
prejudgment interest on punitive damages. 817 P.2d at 975. We found that because the
statute did not expressly say whether prejudgment interest applies to punitive
damages, and because language in the statute could be construed either way, the statute
was ambiguous on that point. See id. at 974 (highlighting that the language “personal
injuries sustained” and “damages claimed” suggests interest is available for only
compensatory damages, but that the language “damages assessed by the verdict of the
jury” suggests interest is available for punitive damages as well (emphases added)).
8
But because both punitive damages and compensatory damages presuppose litigation
and judgment, the ambiguity identified in Seaward is irrelevant to our interpretation
here.
¶16 Munoz also relies on Parker, where we considered which statute a court should
calculate prejudgment interest under when an insured succeeds in a UM claim against
his insurer. 200 P.3d at 353. In that case, Parker was injured in an accident by a
motorist who could not completely cover his damages. Id. at 354. He filed a UM claim
with his insurance company and ultimately received a judgment against the company
at trial. Id. A dispute then arose as to whether the insurance company owed Parker
prejudgment interest under the personal injury statute, calculated at nine percent per
annum, see § 13-21-101(1), or the wrongful withholding statute, calculated at eight
percent per annum, see § 5-12-102(1)(b), C.R.S. (2017). Parker, 200 P.3d at 354–56.
¶17 In answering this question, we stated that the uninsured motorist statute entitles
an insured to recover all the damages that he could recover in an action directly against
the tortfeasor, and that prejudgment interest is a form of damages. Id. at 358. We
concluded, therefore, that an insured may recover prejudgment interest against an
insurer. See id. Following this reasoning, we held that because prejudgment interest in
a direct action against a tortfeasor is calculated under the personal injury statute at nine
percent per annum, so too must prejudgment interest be calculated in a case against an
insurer. Id. at 359. Otherwise, an insured would recover less in a case against an
insurer than in one directly against the tortfeasor, in violation of the uninsured motorist
statute. See § 10-4-609(4).
9
¶18 Munoz extrapolates the holding and language in Parker to mean that he is
entitled to prejudgment interest against his insurer in this case. But Parker did not hold
that an insured is entitled to collect prejudgment interest when he settles a claim with
his insurer. Instead, it pertained to collecting prejudgment interest from an insurer only
after obtaining a judgment against said insurer. See Parker, 200 P.3d at 354 (explaining
that the case against the insurer was tried to a jury, and after a mistrial and stipulation
to a court decision, the trial court awarded the insured a judgment including damages).
Munoz also argues that without prejudgment interest he would recover less against his
insurer than in a direct action against the tortfeasor (just like the plaintiff in Parker).
But again, Munoz is comparing a judgment to a settlement. Thus, the outcomes could
be different regardless of whether they were against a tortfeasor or an insurer. Under
the proper comparison, Munoz is actually in the exact same position as a plaintiff who
sues a tortfeasor. Neither receives prejudgment interest if they settle, and both may
receive prejudgment interest if a jury or court awards a judgment in their favor.
¶19 Hence, an insured is not entitled to collect prejudgment interest against an
insurer on a settlement.
IV. Conclusion
¶20 The text of section 13-21-101 is unambiguous, and we are unpersuaded by
Munoz’s arguments in the alternative. As a result, we hold that under the plain
language of section 13-21-101, an insured is entitled to prejudgment interest only after
(1) an action is brought, (2) the plaintiff claims damages and interest in the complaint,
(3) there is a finding of damages by a jury or the court, and (4) judgment is entered.
10
Because Munoz did not meet all of these conditions, he is not entitled to prejudgment
interest. We therefore affirm the court of appeals.
11