July 20, 2018

Colorado Court of Appeals: Prejudgment Interest is Form of Compensatory Damages and Is Confined to Policy Limits

The Colorado Court of Appeals issued its opinion in White v. Estate of Soto-Lerma on Thursday, March 8, 2018.

Probate—Prejudgment Interest Costs—Insurance Policy—Liability LimitsOffer of Settlement.

Plaintiff’s claim arose from a car accident that occurred about a year before decedent died from unrelated causes. More than two years after decedent’s death, plaintiff filed suit, asserting that decedent had been negligent. Decedent’s estate consisted solely of his automobile insurance policy, which had a policy limit of $50,000 per person injured. Defendant rejected plaintiff’s pretrial statutory offer of settlement for the insurance policy limit of $50,000. After trial, a jury awarded plaintiff $100,000 in damages. The court reduced the award to $50,000, but ultimately entered judgment for $79,218, which included $11,600 in costs and $17,618 in prejudgment interest.

On appeal, defendant contended that the trial court erred in awarding plaintiff prejudgment interest. C.R.S. § 15-12-803(1)(a) bars all claims against a decedent’s estate that arose before the decedent’s death and were not presented within the statutory time frame. It was undisputed that plaintiff’s claim was not timely presented. C.R.S. § 15-12-803(3)(b) states that nothing prevents a proceeding to establish decedent’s liability to the limits of his insurance protection. This statute conflicts with C.R.S. § 13-21-101(1), which requires a court to award prejudgment interest. The court of appeals concluded that prejudgment interest is part of the underlying liability claim against an estate and is therefore subject to the insurance policy limits and the C.R.S. § 15-12-803(3)(b) bar on claims above that limit. C.R.S. § 15-12-803 bars an award of prejudgment interest above defendant’s $50,000 policy limit.

Plaintiff cross-appealed the judgment, arguing that the court should have entered judgment for the jury’s $100,000 damages award plus corresponding costs and prejudgment interest. Plaintiff contended that regardless of whether she could collect the jury award from defendant’s insurance company, judgment in excess of the policy limits was proper to leave open the possibility that plaintiff could be assigned the right to bring a bad faith claim against defendant’s insurer. The statutory language is clear that any untimely liability claim in excess of policy limits is barred.

Defendant also argued it was error to award costs in the final judgment, because such an award ignores the bar on claims in excess of insurance policy limits. Plaintiff argued for costs only under C.R.S. § 13-17-202, which provides that a plaintiff must be awarded costs only if the final judgment exceeds the settlement offer. Given that the final judgment did not and could not exceed the policy limit, which was also the amount of the settlement offer, plaintiff was not entitled to costs under C.R.S. § 13-17-202 and the trial court erred in entering a costs judgment above the policy limit.

The judgment was reversed and the case was remanded for entry of judgment for plaintiff in the amount of $50,000.

Summary provided courtesy of Colorado Lawyer.