Margaret Kosarko v. William A. Padula, Administrator of the Estate of Daniel L. Herndobler

ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Adam J. Sedia Robert J. Konopa
Rubino, Ruman, Crosmer, Smith, Sersic & Polen Mark D. Kundmueller
Dyer, Indiana Tuesley Hall Konopa, LLP
South Bend, Indiana
ATTORNEYS FOR AMICUS CURIAE ATTORNEYS FOR AMICUS CURIAE
INDIANA TRIAL LAWYERS ASSOCIATION DEFENSE TRIAL COUNSEL OF INDIANA
Frederick R. Hovde Robert F. Parker
Nicholas C. Deets Nancy Townsend
Hovde Dassow & Deets LLC Burke Costanza & Carberry LLP
Indianapolis, Indiana Merrillville, Indiana
Donald B. Kite
Gonzalez Saggio & Harlan LLP
Indianapolis, Indiana
______________________________________________________________________________
In the FILED
Indiana Supreme Court Dec 12 2012, 1:24 pm
_________________________________ CLERK
of the supreme court,
court of appeals and
tax court
No. 45S03-1206-CT-310
MARGARET KOSARKO, Appellant (Plaintiff),
v.
WILLIAM A. PADULA, ADMINISTRATOR OF THE ESTATE OF
DANIEL L. HERNDOBLER, DECEASED,
Appellee (Defendant).
_________________________________
Appeal from the Lake Superior Court, No. 45D04-0719-CT-268
The Honorable Gerald N. Svetanoff, Judge
_________________________________
On Transfer from the Indiana Court of Appeals, No. 45A03-1012-CT-668
_________________________________
December 12, 2012
Dickson, Chief Justice.
The plaintiff in this case, Margaret Kosarko, challenges the trial court's denial of her mo-
tion for prejudgment interest following a jury verdict awarding her monetary damages. We re-
verse and hold that the Tort Prejudgment Interest Statute abrogates and supplants the common
law prejudgment interest rules in cases covered by the statute.
On February 17, 2007, Kosarko filed a complaint for damages against Daniel Herndobler
for injuries she allegedly sustained in an automobile collision involving Herndobler. When
Herndobler subsequently passed away, Kosarko amended her complaint, substituting William
Padula in his capacity as administrator of Herndobler's estate. On March 18, 2008, Kosarko of-
fered to settle the lawsuit for $100,000, but no response was made by the defendant. The case
was then tried before a jury, which, on March 24, 2010, found in favor of Kosarko and awarded
her damages totaling $210,000. Kosarko then filed a motion asking the trial court to award her
prejudgment interest in the amount of $79,627.40 pursuant to the Tort Prejudgment Interest Stat-
ute ("TPIS"), Ind. Code §§ 34-51-4-1 to -9, and attorneys' fees. The trial court denied Kosarko's
motion for prejudgment interest because her damages were of an "ongoing and evolving nature"
and thus "were not ascertainable within a time frame that justifies" an award of prejudgment in-
terest. Appellant's App'x at 11–12. The Court of Appeals reversed and held that the trial court
had abused its discretion in denying prejudgment interest, concluding that Kosarko's damages
were sufficiently ascertainable. Kosarko v. Padula, 960 N.E.2d 810 (Ind. Ct. App. 2011). We
granted transfer.
As we discuss in our decision today in Inman v. State Farm Mut. Auto Ins. Co., we re-
view a trial court's denial of prejudgment interest under the TPIS for an abuse of discretion. ___
N.E.2d ___, ___ (Ind. 2012). The trial court abuses its discretion when its decision is "clearly
against the logic and effect of the facts and circumstances before the court or if the court has mis-
interpreted the law." State v. Willits, 773 N.E.2d 808, 811 (Ind. 2002).
The availability and computation of prejudgment interest in Indiana has evolved over the
years. Under the common law "Roper standard," announced in 1911, prejudgment interest can
only be awarded by the trial court where the damages are "complete" and "ascertain[able] as of a
particular time and in accordance with fixed rules of evidence and known standards of value."
N.Y., Chi. & St. Louis Ry. Co. v. Roper, 176 Ind. 497, 507, 96 N.E. 468, 472 (1911) (quoting
Fell v. Union Pac. Ry. Co., 88 P. 1003, 1007 (Utah 1907)); accord State Farm Fire & Cas. Ins.
2
Co. v. Graham, 567 N.E.2d 1139, 1142 (Ind. 1991) (affirming Roper); Travelers Indem. Co. v.
Armstrong, 442 N.E.2d 349, 365–66 (Ind. 1982) (affirming Roper). Such interest is not permit-
ted where the damages are "incomplete" because the damages may be "continuing and may even
reach beyond the time of trial." Roper, 176 Ind. at 507, 96 N.E. at 472 (quoting Fell, 88 P. at
1006). Nor is such interest permitted where damages "are peculiarly within the province of the
jury to assess at the time of the trial" because the damages are not readily determinable by the
parties prior to the jury's verdict. See id. Accordingly, prejudgment interest is not available in
"personal injury cases, cases of death by wrongful act, libel, false imprisonment, and cases where
there is no standard of market or other value by which to measure the damages," nor in "cases
where punitive damages may be assessed, nor to those where the amount of recovery is fixed by
statute." Id. at 510, 96 N.E. at 473.
The General Assembly first provided for prejudgment interest in 1974 with the enactment
of Indiana Code Sections 24-4.6-1-101 to -103. This statute allows a prevailing party to collect
prejudgment interest from the time of a demand until the time of judgment at a rate of 8% per
annum, unless the parties agree to a different rate. Id. The statute has been interpreted to sup-
plement the Roper standard by allowing prejudgment interest in civil actions only where damag-
es are complete and ascertainable. Thor Electric, Inc. v. Oberle & Assocs., Inc., 741 N.E.2d 373,
380–81 (Ind. Ct. App. 2000) (allowing 8% interest under Indiana Code Sections 24-4.6-1-102,
-103 in a contract action where "the terms of the contract [made] the claim ascertainable"), trans.
not sought, disapproved on other grounds by Inman, ___ N.E.2d at ___; Blue Valley Turf Farms,
Inc. v. Realestate Mktg. & Dev., Inc., 424 N.E.2d 1088, 1090–91 (Ind. Ct. App. 1981) (stating
that under the statute, damages must be "ascertain[able] as of a particular time in accordance
with fixed rules of evidence and known standards of evaluation"), trans. not sought.
In 1988,1 the legislature enacted the TPIS, which sets forth certain conditions that must
be satisfied in order for a plaintiff to be eligible to receive prejudgment interest in "any civil ac-
1
Pub. L. No. 149-1988, § 5, 1988 Ind. Acts 1860.
3
tion arising out of tortious conduct." Ind. Code § 34-51-4-1.2 The crux of the statute is con-
tained in two provisions: the first, Section 34-51-4-6, requires the plaintiff to make a qualified
written offer of settlement3 within one year of filing a claim in order to be eligible to receive pre-
judgment interest on any judgment arising from that claim; the second, Section 34-51-4-5, em-
powers the defendant to avoid prejudgment interest on any judgment award if the defendant
makes a qualified offer of settlement4 within nine months of the time at which the claim is filed.
If a plaintiff makes a qualified settlement offer and the defendant fails to do so, the statute then
allows the trial court to award prejudgment interest, id. § 34-51-4-7, and grants the court the dis-
cretion to determine the time period for accrual, id. § 34-51-4-8, and the rate of interest, id. § 34-
51-4-9.
On appeal, Kosarko contends that the trial court abused its discretion when it applied the
common law Roper standard to deny her request for prejudgment interest.5 She and amicus curi-
ae Indiana Trial Lawyers Association ("ITLA") maintain that the TPIS completely abrogates the
application of the common law prejudgment interest rules in cases covered by the TPIS, and that
because this is such a case, the trial court may not properly deny prejudgment interest on grounds
that damages were of an "ongoing and evolving nature" and therefore not readily ascertainable.
They argue instead that the trial court may only look to the statutory conditions imposed by the
TPIS when determining whether or not to award prejudgment interest. The defendant, Padula,
and amicus curiae Defense Trial Counsel of Indiana ("DTCI") wholly disagree and argue that the
TPIS and the common law Roper standard are complementary legal rules designed to supple-
2
The statute expressly excludes "claims against the patient’s compensation fund," Ind. Code
§ 34-51-4-2, punitive damages claims, Ind. Code § 34-51-4-3, and claims against state and political sub-
divisions, Ind. Code § 34-51-4-4, from its purview.
3
For a plaintiff's settlement offer to qualify under the TPIS, the offer must be filed "within one
(1) year after a claim is filed in the court, or any longer period determined by the court to be necessary
upon a showing of good cause," be in writing, be made to the party or parties against whom the claim is
filed, "provide for payment of the settlement offer within sixty (60) days after the offer is accepted," and
not exceed "one and one-third (1 1/3) of the amount of the judgment awarded." Ind. Code § 34-51-4-6.
4
For a defendant's settlement offer to qualify under the TPIS, the offer must be made by "one (1)
or more of the parties against whom the claim is filed," be filed "within nine (9) months after a claim is
filed in the court, or any longer period determined by the court to be necessary upon a showing of good
cause," be in writing, be made "to the party receiving a judgment," provide for "payment within sixty (60)
days after the offer is accepted," and be "at least two-thirds (2/3) of the amount of the judgment award."
Ind. Code § 34-51-4-5.
5
The trial court relied on Wayne Twp. v. Lutheran Hosp. of Fort Wayne, Inc., 590 N.E.2d 1130
(Ind. Ct. App. 1992), trans. denied, for the same proposition as is contained in Roper.
4
ment one another such that the TPIS should be understood as establishing an additional set of
disqualifying circumstances governing the availability of prejudgment interest in cases arising
out of tortious conduct. We agree with Kosarko and hold that the TPIS abrogates and supplants
the common law rules governing the availability of prejudgment interest in cases covered by the
statute.
When resolving a conflict between the common law and a statute, we presume that the
legislature did not intend to alter the common law unless the statute declares otherwise "in ex-
press terms or by unmistakable implication." Indianapolis Power & Light Co. v. Brad Snod-
grass, Inc., 578 N.E.2d 669, 673 (Ind. 1991). Whether a statute abrogates the common law by
"unmistakable implication" is a highly fact-intensive inquiry not specifically constrained to any
uniform set of identifying characteristics. See, e.g., Caesars Riverboat Casino, LLC v. Kephart,
934 N.E.2d 1120, 1123–24 (Ind. 2010) (holding that the statutes regulating riverboat gambling
abrogated the common law by unmistakable implication because the "statutory scheme cover[s]
the entire subject of riverboat gambling" and is "so incompatible [with the common law] that
they cannot both occupy the same space"); Willits, 773 N.E.2d at 812–14 (holding that the stat-
ute governing the return of property seized during a search or arrest was not intended to allow
monetary damages for damaged property because (1) the common law rule did not provide for,
and the statute did not specifically reference, monetary damages; (2) by providing for the return
of property without reference to monetary damages, the exclusion of monetary damages by the
statute is implied; and (3) monetary damages caused by the tortious conduct of government ac-
tors was provided for in a separate statute); Forte v. Connerwood Healthcare, Inc., 745 N.E.2d
796, 800 (Ind. 2001) (holding that the Child Wrongful Death Statute precluded any award of pu-
nitive damages available under the common law for the death of a child because the statute "con-
tained an exclusive list of damages recoverable" which does not include punitive damages and
thus by implication intended to exclude such damages); Hinshaw v. Bd. of Comm'rs of Jay
Cnty., 611 N.E.2d 637, 640 (Ind. 1993) (holding that the Tort Claims Act did not confer tort im-
munity on government actors where both a government actor and a non-governmental third party
contribute to a loss because the "general pattern" of the statute indicates that the legislature only
intended to grant immunity where the loss results entirely from the action of a non-governmental
third party); N. Ind. Pub. Serv. Co. v. Citizens Action Coal. of Ind., 548 N.E.2d 153, 159–61
5
(Ind. 1989) (holding that the Public Service Commission Act did not abrogate the common law
right to receive interest on monetary judgments for the return of utility fees owed to a ratepayer
by a public utility because "there [was] nothing in [the] general regulatory scheme that is irrec-
oncilable" with the common law right to interest, given that the statute was intended only to reg-
ulate "the way in which the utility operates, not the rights of consumers"). Where a statute abro-
gates the common law, it "must be strictly construed" so that only those portions of the common
law which the legislature specifically intended to address are modified. See Indianapolis Power
& Light Co., 578 N.E.2d at 673.
The Court of Appeals has considered the interplay of the TPIS and the common law on
several occasions and, with one exception,6 concluded that the statute abrogates the common law
prejudgment interest rules in cases falling within its scope. Gregory & Appel Ins. Agency v.
Phila. Indem. Ins. Co., 835 N.E.2d 1053, 1065 (Ind. Ct. App. 2005) (holding that the TPIS "co-
vers the entire subject of the conditions for awarding prejudgment interest in tort cases and was
clearly designed as a substitute for the common law"), trans. denied; Simon Prop. Grp., L.P. v.
Brandt Constr., Inc., 830 N.E.2d 981, 994 (Ind. Ct. App. 2005) ("In our view, in passing this
statute the legislature intended to preempt common law prejudgment interest in tort cases. To
hold otherwise would be to render the statute and its requirements virtually meaningless—a party
who failed to fulfill the statute's requirements could merely turn to the common law for relief."),
trans. denied; accord Hanson v. Valma M. Hanson Revocable Trust, 855 N.E.2d 655, 665 (Ind.
Ct. App. 2006), trans. not sought; Clary v. Lite Machs. Corp., 850 N.E.2d 423, 442 (Ind. Ct.
App. 2006), trans. not sought; see also Loudermilk v. Jet Credit Union, No. 49A02-1006-PL-
665, 2011 WL 5927428, *2–*3 (Ind. Ct. App. Nov. 29, 2011) (holding that failure to comply
with condition of TPIS was fatal to claim for prejudgment interest in action for conversion),
trans. not sought; c.f. Van Winkle v. Nash, 761 N.E.2d 856, 860–61 (Ind. Ct. App. 2002) (hold-
ing that award of prejudgment interest under TPIS does not require absence of disputed issues as
6
In Lumbermens Mut. Cas. Co. v. Combs, 873 N.E.2d 692, 724–25 (Ind. Ct. App. 2007), trans.
denied, the Court of Appeals reversed a trial court's award of prejudgment interest for a bad faith breach
of contract claim because the jury's verdict was general and did not specify the elements of the plaintiff's
damages and thus the court could not have determined if any portion of those damages were ascertainable
in accordance with the Roper standard. Notably, the court in Lumbermens did not specifically consider
the abrogation issue. The court only assumed that the common law Roper standard applied based on gen-
eral statements about prejudgment interest contained in earlier cases. Id. To the extent that Lumbermens
conflicts with our decision today, it is disapproved.
6
required by common law prejudgment interest rules), trans. not sought.
The plain language of the TPIS makes no reference to the common law rules governing
prejudgment interest, including the common law requirement that prejudgment interest can be
awarded only where the damages are complete and ascertainable. But the comprehensive nature
of the TPIS and the codification of two common law rules convince us that the legislature in-
tended the statute to be the exclusive source governing the award of prejudgment interest in cas-
es falling within its ambit. Not only does the statute establish preconditions for an award of pre-
judgment interest, Ind. Code §§ 34-51-4-5, -6, it also affirmatively authorizes the court to award
prejudgment interest as part of a judgment, id. § 35-51-4-7, specifies the types of actions to
which the statute applies and does not apply, id. §§ 34-51-4-1 to -4, and limits the time period
and rate of any prejudgment interest awarded under the statute, id. §§ 34-51-4-8, -9. The statute
spans the entire subject of prejudgment interest and is capable of being implemented without ref-
erence to the common law. Further, both Indiana Code Section 35-51-4-7 (authorizing the court
to award prejudgment interest as part of a judgment) and Section 34-51-4-3 (exempting punitive
damages from prejudgment interest) codify rules that already existed at common law for more
than one hundred years. See Roper, 176 Ind. at 509–510, 96 N.E. at 473. Were the TPIS merely
supplemental in nature, as the defendant and amicus curiae DTCI contend, then these provisions
would be unnecessary since any matters not addressed by the statute would be subject to the
common law rules. In light of the wide-ranging treatment of the subject matter, considered in
conjunction with the fact that the TPIS expressly adopts only selected portions of the common
law, we conclude that the TPIS unmistakably implies the legislature's intent to substitute the
statute for the common law with respect to cases falling within the scope of the TPIS.7
As noted above, the trial court abuses its discretion when it "misinterpret[s] the law."
Willits, 773 N.E.2d at 811. A trial court has broad discretion under the TPIS to award or deny
prejudgment interest. However, it must support its determination with findings consistent with
7
In Whited v. Whited, 859 N.E.2d 657 (Ind. 2007), we applied both Section 34-51-4-8(b) of the
TPIS and the common law prejudgment interest rules in reviewing the denial of prejudgment interest un-
der Indiana Code Section 31-16-12-2, which permits "interest" on delinquent child support payments.
859 N.E.2d at 664–65. In that case, we did not consider whether the TPIS was intended to abrogate the
common law prejudgment interest rules. To the extent that our holding in Whited differs from our con-
clusion in this case, it is disapproved.
7
the statute, not the abrogated common law standard. In light of our holding, we must conclude
that the trial court abused its discretion in applying the common law prejudgment interest rule
requiring the prevailing party's damages to be complete and ascertainable. We therefore reverse
the judgment and remand the case to the trial court for a prejudgment interest determination con-
sistent with this opinion.
While we agree with the majority of the Court of Appeals that the trial court abused its
discretion in denying Kosarko's motion for prejudgment interest, Kosarko, 960 N.E.2d at 813,
we depart with the Court of Appeals in our reasoning and in our remedy. On transfer, Padula
asserts that the Court of Appeals erred when it remanded the case to the trial court for entry of an
order awarding Kosarko the full amount of prejudgment interest she requested. Appellee's
Trans. Br. at 8. We agree. Because the trial court denied Kosarko's motion for prejudgment in-
terest on the prior common law grounds that her damages were of an ongoing and evolving na-
ture and were not readily ascertainable within an appropriate time frame, it never reached the is-
sue of whether Kosarko's requested prejudgment interest was proper under the TPIS. We elect to
remand this issue to the trial court for the exercise of its discretion under the TPIS.8 In exercis-
ing its discretion, the trial court should consider the objectives of the statute: to encourage set-
tlement, to incentivize expeditious resolution of disputes, and to compensate the plaintiff for the
lost time value of money arising from unreasonable delay. See Johnson v. Eldridge, 799 N.E.2d
29, 33 (Ind. Ct. App. 2003) (citing Cahoon v. Cummings, 734 N.E.2d 535, 547 (Ind. 2000)),
trans. denied.
Conclusion
We hold that the Tort Prejudgment Interest Statute abrogates and supplants the common
law prejudgment interest rules in cases covered by the statute and also hold that the plaintiff's
motion for prejudgment interest should have been evaluated as provided in the statute, and not on
abrogated common law. We remand the case to the trial court for reconsideration of the motion
accordingly. On remand, the trial court has broad discretion to determine whether to award pre-
8
The TPIS grants discretion to the "court," which, as defined under Indiana Code Section
34-46-2-31, refers to "the court awarding a judgment," or, as here, the trial court. See also Inman, ___
N.E.2d at ___ n.6.
8
judgment interest, what interest rate to use, what time period to use, and whether to calculate in-
terest on the full $210,000 awarded by the jury, or on the amount of $100,000, representing in-
surance liability coverage limits, that was deposited with the clerk and released to Kosarko.9
Appellant's App'x at 2–3. The trial court's discretion is restricted only by the limits expressly
enacted by the legislature in the TPIS.
Rucker, David, Massa, Rush, JJ., concur.
9
$100,000 reflects the policy limit of the insurance policy held by Daniel L. Herndobler, against
whose estate judgment was entered at trial. Appellant's Br. at 2. In another case handed down today, we
hold that prejudgment interest can be awarded in excess of an insured's UIM policy because prejudgment
interest is a "collateral litigation expense imposed at the discretion of the trial court as a penalty for the
defendant's failure to conduct litigation consistent with the legislatively ordained policy of expediency."
Inman, ___ N.E.2d at ___. We extend that reasoning to situations involving a defendant's insurance poli-
cy, as here, but again reiterate that it is completely within the discretion of the trial court.
9