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An Interest-ing Case for Insurers

February 2, 2010

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Roslyn Schiffer was injured in an automobile accident. Lancer Insurance Company insured the owner and driver of the other vehicle. The policy limit was $100,000.
The Lancer policy contained a provision that Lancer would pay "All interest on the full amount of any judgment that accrues after entry of judgment....but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance." This policy language closely tracked a NY Insurance Dept. regulation requiring that policies contain a provision that an insurer shall pay "all interest accruing after entry of judgment until the insurer has paid or tendered or deposited in court such part of such judgment as does not exceed the applicable policy limits..."
In the Schiffer personal injury case, Lancer Ins. Co. offered Schiffer its full policy limit of $100,000 before trial (and thus, obviously, before entry of judgment and the accrual of any interest). Schiffer rejected the offer and took her case to verdict. The verdict was $776,000. Judgment was entered on September 5, 2007.
Lancer sought a ruling that it owed no interest on the judgment because it had offered its full policy limit of $100,000 before the entry of judgment. A trial level court in New York has now ruled against Lancer. The court found that while Lancer had "offered" to pay its policy limit, this did not amount to "an unconditional tender of payment," which the court found was required by the language of the Insurance Dept. regulation. Thus, the court ruled, interest began to accrue at judgment and Lancer must now pay interest on the full amount of the judgement ($776,000). Given that judgment was entered 28 months ago, the interest due on the full judgment is 21%, which comes to $163,000.
In short, Lancer offered (tendered?) its policy limit of $100,000 before trial in a good faith effort to protect its insured but now must pay not only its policy limit of $100,000 but an additional $163,000 in interest.

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