Armacost v. Amica

• Court: Court of Appeals for the First Circuit
• Decided: December 10, 1993
• Docket: 93-1641
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 93-1641

                                MELINDA RYAN ARMACOST,

                                 Plaintiff, Appellee,

                                          v.

                           AMICA MUTUAL INSURANCE COMPANY,

                                Defendant, Appellant.

____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

[Hon. Raymond J. Pettine, Senior U.S. District Judge]
                                          __________________________

                                 ____________________

                                        Before

                               Torruella, Circuit Judge,
                                          _____________
                            Bownes, Senior Circuit Judge,
                                    ____________________
                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

            Thomas R. Bender, with whom David P. Whitman, and Hanson,  Curran,
            ________________            ________________      ________________
        Parks & Whitman were on brief for defendant-appellant.
        _______________
            Mark S. Mandell, with  whom Mandell, DeLuca & Schwartz, Ltd.  were
            _______________             ________________________________
        on brief for plaintiff-appellee.

____________________

                                  December 10, 1993
                                 ____________________

BOWNES, Senior Circuit Judge.   The principal issue
                      BOWNES, Senior Circuit Judge.
                              ____________________

            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
                                                                      ___

            est  inventus.   Plaintiff  promptly  amended her  complaint,
            ___  ________

            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.

____________________

            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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                                          2

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.
                                             ________    ________________

            Co., 821 F. Supp. 75, 82 (D.R.I. 1993).
            ___

                                         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

____________________

            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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                                          3

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
                        __  ____

            district  court's determination of  Rhode Island law.   Salve
                                                                    _____

            Regina College v. Russell, 499 U.S. 225, 231-35 (1991).
            ______________    _______

                      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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                                          4

obligation  where  interest   is  already
                      provided  or   as  to   any  condemnation
                      action.

            Id.   9-21-10.
            ___

                      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
                ____________________________________________________
                Statute
                Statute
                _______

                      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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                                          5

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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                                          7

B.  Construing the Statute
            B.  Construing the Statute
                ______________________

                      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
                                                                       __

            novo without any  deference to the district court,  we do not
            ____

            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
                        ______     ____________________________

            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
                              ____     ________________________
                      Co., 434  A.2d 923, 930  (R.I. 1981), and
                      ___
                      compensating plaintiffs  for waiting  for

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recompense  to  which they  were  legally
                      entitled,  Dennis v.  Rhode Island  Hosp.
                                 ______     ___________________
                      Trust Nat'l Bank, 744 F.2d  893, 901 (1st
                      ________________
                      Cir. 1984).

            Martin, 559  A.2d at 1031;  see also Isserlis v.  Director of
            ______                      ___ ____ ________     ___________

            Public Works, 300 A.2d 273, 274 (R.I. 1973) (clear purpose of
            ____________

            such legislation was to accelerate settlement of tort cases).

            We have  echoed this finding  of settlement purpose.   Roy v.
                                                                   ___

            Star Chopper Co.,  584 F.2d 1124, 1135 (1st  Cir. 1978) ("The
            ________________

            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
                                                                      ___

            civil action in which a verdict is rendered or a  decision is

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                                          9

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
                                                                      ___

            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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                                          10

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.
                                                      ______
                      Bodreau, 86 R.I.  87, 133 A.2d 753;  Long
                      _______                              ____
                      v.  Langlois, R.I., 170 A.2d 618.  We may
                          ________
                      not  where  no  ambiguity  exists  search
                      beyond  the   statute  for   a  different
                      meaning.  Hathaway  v. Hathaway, 52  R.I.
                                ________     ________
                      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
                                 _____     _______
                      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
                                                          _____
                      v. Franklin, 31 R.I. 95, 77 A. 172.
                         ________

            Kastal v.  Hickory House,  Inc., 187  A.2d 262,  264-65 (R.I.
            ______     ____________________

            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  
                                             ___  ____

            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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