IN THE SUPREME COURT OF FLORIDA OWNERS INSURANCE COMPANY, a Michigan Corporation, Petitioner, CASE NO.: SC04-1977 L.T. CASE NO.: 2D03-2188 v. L.T. CASE NO.: 2D03-3182 THE HARTFORD FIRE INSURANCE COMPANY, a Connecticut corporation, Respondent, ON PETITION FOR DISCRETIONARY REVIEW FROM THE DISTRICT COURT OF APPEAL, SECOND DISTRICT OF FLORIDA PETITIONER S JURISDICTIONAL BRIEF MICHAEL S. RYWANT, ESQ. FLORIDA BAR #240354 KERRY C. MCGUINN, JR., ESQ. FLORIDA BAR #982644 RYWANT, ALVAREZ, JONES RUSSO & GUYTON, P.A. 109 N. Brush St., Ste. 500 Post Office Box 3283 Tampa, Florida 33601 (813) 229-7007 Attorney for Petitioner, Owners Insurance Company
TABLE OF CONTENTS TABLE OF CONTENTS...ii TABLE OF AUTHORITIES...iii QUESTIONS PRESENTED...1 STATEMENT OF THE FACTS AND OF THE CASE...1 SUMMARY OF ARGUMENT...3 ARGUMENT...4 The Decision Below has the Effect of Providing a Windfall to Hartford by Awarding it Prejudgment Interest for a Period of Time Before it Actually Made Payment on the Claim...4 The Decision Below has the Effect of Awarding Prejudgment Interest to Hartford as a Penalty for the Alleged Wrongful Act of Disputing a Claim Found to be Just and Owing...6 CONCLUSION & RELEIF REQUESTED...9 CERTIFICATE OF SERVICE...10 CERTIFICATE OF FONT COMPLIANCE...10 ii
TABLE OF AUTHORITIES Cases Page Argonaut Ins. Co. v. May Plumbing, 474 So.2d 212 (Fla. 1985)... 1, 3, 4, 5, 6, 7, 8, 9 Biscayne Supermarket, Inc. v. Travelers Ins. Co., 485 So. 2d 861 (Fla. 3d DCA 1986)...2 Broward County v. Finlayson, 555 So.2d 1211 (Fla. 1990)...3, 4 Flack v. Graham, 461 So.2d 82 (Fla. 1984)...9 State of Florida v. Family Bank of Hallandale, 623 So.2d 474 (Fla. 1993)...3, 9 Taylor v. New Hampshire Insurance Co., 489 So. 2d 207 (Fla. 2d DCA 1986)...2 Volkswagen of America, Inc. v. Smith, 690 So.2d 1328 (Fla. 1 st DCA 1997)... 3, 5, 9 iii
QUESTIONS PRESENTED (1) Whether the decision below expressly and directly conflicts with Argonaut Ins. Co. v. May Plumbing, 474 So.2d 212 (Fla. 1985), and its progeny, by providing a windfall to HARTFORD in awarding it prejudgment interest for a period of time before HARTFORD actually made payment to its insured; and (2) Whether the decision below expressly and directly conflicts with Argonaut, supra, because awarding prejudgment interest for the time before payment was made amounted to a penalty against OWNERS for the alleged wrongful act of disputing a claim. STATEMENT OF THE FACTS AND OF THE CASE The Plaintiff, HARTFORD, filed an Amended Complaint for Equitable Subrogation against Defendant, OWNERS. The case arises out of money HARTFORD paid to its insured contractor (Clark) under a Builder s Risk Policy. Payments were made for property damage that occurred in 1997 from a rainstorm at the construction site of the new Federal Courthouse in Tampa. OWNERS issued a liability policy to a subcontractor (BCI) that was allegedly at fault. The trial court found that Clark submitted an insurance claim to OWNERS, as an additional insured, that was denied. Clark also submitted the claim to HARTFORD which paid the claim under its policy. After making such payment to Clark, HARTFORD sought to recover this money in equitable subrogation directly from OWNERS. The trial court entered a Partial Summary Judgment on liability in favor of HARTFORD and against OWNERS. The only issue raised by OWNERS in the notice to invoke discretionary review by this Court relates to that portion of the 1
opinion below that awarded HARTFORD prejudgment interest starting from the date that HARTFORD contended the proceeds would have been due and payable to its insured (Clark) under the OWNERS liability insurance policy if OWNERS had not denied the claim. The trial Court ruled that HARTFORD was only entitled to be paid prejudgment interest starting from the date it actually made payment to Clark, which was well after Clark submitted the claim to OWNERS. 1 The Second District Court of Appeal opinion (attached at Appendix Tab 1) reversed the trial court and awarded HARTFORD prejudgment interest for a period of time before it made payment to Clark and held in part as follows: The trial court determined that prejudgment interest was due from the date of Hartford's payment to Clark and calculated the prejudgment interest on that basis. In the circumstances present here where Hartford's claim against Owners was based on Clark's status as an additional insured under the Owners policy the prejudgment interest awarded by the trial court was inadequate. In Taylor v. New Hampshire Insurance Co., 489 So. 2d 207, 207 (Fla. 2d DCA 1986), we held that where a claim for property damage is made by an insured on an insurance policy "prejudgment interest [is due] from the date that the proceeds would have been due under the policy." See also Biscayne Supermarket, Inc. v. Travelers Ins. Co., 485 So. 2d 861 (Fla. 3d DCA 1986). The principle set forth in Taylor applies to the instant case. We therefore reverse the order awarding prejudgment interest with instructions that the trial court recalculate the prejudgment interest based on the date the proceeds for the loss would have been due under the Owners policy. 1 The underlying loss suffered by Clark when the water actually entered the federal courthouse occurred on April 26, 1997, and the trial court found that thereafter Clark submitted the claim to OWNERS and it was denied. However, it was not until August 2, 1999 that HARTFORD actually paid Clark for the loss under its policy with HARTFORD. 2
SUMMARY OF ARGUMENT This Court has jurisdiction to review the decision below under the jurisdictional grant of Fla.Const.Art. V, Section 3(b)(3), because this decision expressly and directly conflicts with the decisions of the other district courts of appeal and the Supreme Court on the same points of law for the following reasons: (1) The decision below has the effect of providing a windfall to HARTFORD by awarding it prejudgment interest for a period of time before it actually made payment to its insured, which expressly and directly conflicts with Argonaut Ins. Co. v. May Plumbing, 474 So.2d 212 (Fla. 1985), and its progeny; and (2) The decision below conflicts with Argonaut, supra, because awarding prejudgment interest to HARTFORD (starting from the date the loss was allegedly suffered by Clark when it presented the claim to OWNERS, as opposed to the date HARTFORD actually suffered its own loss by paying the money to Clark) amounted to a penalty against OWNERS for the alleged wrongful act of disputing a claim found to be just and owing by OWNERS. By mechanically quoting the holding of Taylor with respect to the correctness of awarding prejudgment interest from the date of the loss, but without correctly considering how the date of the loss should be determined, the court below achieved a result that directly and expressly conflicts with Argonaut Ins. Co. v. May Plumbing, 474 So.2d 212, 215 (Fla. 1985), State of Florida v. Family Bank of Hallandale, 623 So.2d 474 (Fla. 1993), Broward County v. Finlayson, 555 So.2d 1211 (Fla. 1990), and Volkswagen of America, Inc. v. Smith, 690 So.2d 1328 (Fla. 1 st DCA 1997) with respect to equitable considerations 3
underlying the purpose and intent of prejudgment interest. ARGUMENT I. THE DECISION BELOW HAS THE EFFECT OF PROVIDING A WINDFALL TO HARTFORD BY AWARDING IT PREJUDGMENT INTEREST FOR A PERIOD OF TIME BEFORE IT ACTUALLY MADE PAYMENT ON THE CLAIM This Court should accept jurisdiction to resolve conflict created by the Second District s decision to award HARTFORD prejudgment interest well before HARTFORD ever made payment to Clark. In particular, the decision of the lower court in this case conflicts with the holding of Argonaut, supra, since that case held that Florida has adopted the position that prejudgment interest is merely another element of pecuniary damages Id at 214. The lower court s ruling in effect provides a windfall to HARTFORD, since it did not sustain the loss of use of the money until it actually made payment to Clark, which occurred after the period of time for which it was awarded prejudgment interest. The decision also conflicts with Broward County v. Finlayson, 555 So.2d 1211 (Fla. 1990), a case involving failure to pay overtime wages. The issue on appeal was whether the Defendant should have to pay prejudgment interest starting from when the wages accrued or when the claim was first made. Id at 1213. Relying on Argonaut, and other cases, this Court held that the law on prejudgment interest is not absolute and may depend on equitable considerations. Id. This court also held that it would be inequitable to allow the recovery of prejudgment interest 4
prior to the time of the first claim for overtime pay. Id at 1214. Similarly, the decision of the lower court in this case conflicts with the decisions of other District Courts of Appeal related to the interpretation of Argonaut and the principles that guide an award of prejudgment interest under same. In Volkswagen of America, Inc. v. Smith, 690 So.2d 1328 (Fla. 1 st DCA 1997), the Plaintiff brought claims under the UCC, breach of warranty, and violation of the Florida Unfair Trade Practices Act in connection with the purchase of an automobile. The trial court awarded prejudgment interest starting from the date of purchase of the automobile not only on the purchase price of the vehicle, but also on the amounts awarded by the jury in excess of the purchase price. While the facts of Volskwagen involved an allegation of waiver of a portion of the prejudgment interest, in reversing the trial court, the First District Court of Appeal generally interpreted Argonaut as follows: We must decide on these facts whether the trial court erred in awarding prejudgment interest during the time between Smith s initial election to proceed only against Griffin and Smith s subsequent election to proceed only against Volkswagen. There is not precise answer in the Florida case law. We conclude, however, that the general principles in Argonaut... require reversal of the judgment. * * * The Argonaut decision did not establish an inflexible rule that requires trial judges to assess prejudgment interest in every case regardless of the circumstances. Depending on the equities of a given case, an award of prejudgment interest may be a windfall to the plaintiff and an unfair burden on the defendant. * * * Application of the prejudgment interest rule in its literal form would nether promote fairness in administration nor prevent an 5
injustice under the circumstances (emphasis added) In the case herein, HARTFORD was a subrogating insurer. While it stands in the shoes of the insured (Clark), it has no more or less rights than its insured with respect to the payment it made to the insured. If Clark had made a claim to HARTFORD and been paid prejudgment interest for the period of time between when Clark submitted the claim to OWNERS and when HARTFORD actually paid the claim to Clark, then HARTFORD would be entitled to recover this amount as part of the damages from OWNERS. However, since HARTFORD did not pay money to Clark for this prejudgment interest, it amounts to a windfall for HARTFORD to now be entitled to recover this amount from OWNERS. By the decision below, HARTFORD was awarded prejudgment interest not from the date it contends its own claim arose, but rather from the date Clark sustained a loss (i.e. when Clark submitted the claim to OWNERS). II. THE DECISION BELOW HAS THE EFFECT OF AWARDING PREJUDGMENT INTEREST TO HARTFORD AS A PENALTY FOR THE ALLEGED WRONGFUL ACT OF DISPUTING A CLAIM FOUND TO BE JUST AND OWING This Court should also accept jurisdiction to resolve conflict created by the Second District s decision to award HARTFORD prejudgment interest starting from the date of the loss sustained by Clark, since the decision in effect awards prejudgment interest for a period of time as a penalty against OWNERS. In particular, in Argonaut, supra, this Court quoted legal principles over a century old 6
in regard to the purpose of awarding prejudgment interest: On general principles, once admit that interest is the natural fruit of money, it would seem that, whatever a verdict liquidates a claim and fixes it as of a prior date, interest should follow from that date Id at 214. The Argonaut Court further discussed the purpose behind Florida s pre-judgment interest rule in more modern terms as follows: Thus... Florida has adopted the position that prejudgment interest is merely another element of pecuniary damages. While doing so, the Court recognized and rejected an alternative but traditional rationale -that prejudgment interest was to be awarded as a penalty for defendant s wrongful act of disputing a claim found to be just and owing. This view is still the rule of some jurisdictions. Id. at 214-215. The Trial Court held that interest would only start to accrue from the date HARTFORD paid the money to Clark, not the date Clark made the claim to OWNERS. The Second District Court of appeal reversed and incorrectly relied upon cases interpreting Argonaut when it held that HARTFORD was entitled to prejudgment interest from a date back in time when Clark allegedly made the claim to OWNERS. In this case, OWNERS recognizes that, under the aforementioned cases, if HARTFORD had paid Clark a separate sum for prejudgment interest starting from the date Clark made the claim to OWNERS, and if HARTFORD sought to recover that separate sum from OWNERS, then HARTFORD as the victorious subrogating insurer would be entitled to recover that prejudgment interest from OWNERS. 7
Since HARTFORD did not suffer that loss itself by paying that money to Clark, the decision below expressly and directly conflicts with Argonaut and creates a windfall for the benefit of HARTFORD 2 ; in effect, it creates an incentive for an insurer to pay claims at a later date, accrue interest on the money they hold during this time, and then receive a windfall of prejudgment interest even though the insurer did not forgo a loss of the money until it is paid at a later date. It is respectfully submitted that when determining whether there is express and direct conflict as alleged herein, this Court should not consider the holding of Argonaut in a vacuum. In fact, the general rule annunciated in Argonaut for the awarding of prejudgment interest arises in the context of a situation where an insurer fails to pay the insured for a loss, and the insured is then rewarded with prejudgment interest for the time value of the lost money back to the date of the insured s casualty loss. It is well settled that an award of prejudgment interest is not simply mechanical or absolute in nature, and in determining the scope of prejudgment interest awardable, the court should consider equity and other general 2 However, even if such payment had been made for prejudgment interest by HARTFORD to Clark, than that amount would simply be subsumed within the total sum for which HARTFORD sought to recover in subrogation from OWNERS in the underlying action. To allow HARTFORD to seek subrogation for all the moneys it paid to Clark, and then receive an additional award for prejudgment interest prior to the date it made payment for whatever elements of damage it paid to Clark, expressly and directly conflicts with Argonaut. 8
considerations. In State of Florida v. Family Bank of Hallandale, 623 So.2d 474 (Fla. 1993), this Court again addressed the considerations that must guide courts when awarding prejudgment interest: However, the law is not absolute and a judicial determination regarding interest may depend on equitable considerations and whether the nature of the claim warrants a prejudgment interest award...in Flack [v. Graham, 461 So.2d 82 (Fla. 1984)], this Court refused to permit the recovery of prejudgment interest against the state, holding: Interest is not recoverable according to a rigid theory of compensation for money withheld, but is given in response to considerations of fairness. It is denied when its exaction would be inequitable. Id at 479. While Hallandale dealt with sovereign immunity issues, the holding is not so qualified with respect to the considerations that must be followed when applying the principles set forth in Argonaut with respect to prejudgment interest. By awarding HARTFORD prejudgment interest for a period of time before it paid the money to Clark, the lower court s decision expressly and directly conflicts with the Hallandale with respect to the equitable considerations that must be followed in making such an award. CONCLUSION & RELIEF REQUESTED The decision of the Second District Court of Appeal directly and expressly conflicts with Argonaut Ins. Co. v. May Plumbing, 474 So.2d 212, 215 (Fla. 1985), State of Florida v. Family Bank of Hallandale, 623 So.2d 474 (Fla. 1993), Broward County v. Finlayson, 555 So.2d 1211 (Fla. 1990), and Volkswagen of America, 9
Inc. v. Smith, 690 So.2d 1328 (Fla. 1 st DCA 1997), with respect to the prejudgment interest start date on HARTFORD S claim. Based on the foregoing, it is respectfully submitted that this Honorable Court should accept discretionary jurisdiction pursuant to authority granted in Fla.Const.Art. V, Section 3(b)(3), and consider the merits. CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing has been furnished by U.S. Mail to: Scott S. Katz, Esquire & Anthony Russo, Esquire, 6200 Courtney Campbell Causeway, Suite 1100, Tampa, Florida 33607, on this day of October, 2004. MICHAEL S. RYWANT, ESQ. FLORIDA BAR #240354 KERRY C. MCGUINN, JR., ESQ. FLORIDA BAR #982644 RYWANT, ALVAREZ, JONES RUSSO & GUYTON, P.A. 109 N. Brush St., Ste. 500 Post Office Box 3283 Tampa, Florida 33601 (813) 229-7007 Attorney for Petitioner, Owners Insurance Company CERTIFICATE OF FONT COMPLIANCE I hereby certify that Times New Roman, 14 point font, was used in this Discretionary Brief. KERRY C. MCGUINN, JR., ESQ. FLORIDA BAR #982644 10