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Bowen v. Farmers Insurance Exchange5/2/1996
us. If no agreement is reached, the decision will be made by arbitration.
Based on the policy language, the trial court found that prejudgment interest did not begin to accrue until the date of the stipulation because benefits were not due until either an arbitration award had been entered or the parties had reached an agreement on liability and the amount of damages.
Interpretation of a contract, including an insurance contract, is a matter of law which an appellate court reviews de novo. Union Insurance Co. v. Houtz, 883 P.2d 1057 (Colo. 1994). Here, we agree with plaintiff that the quoted policy provision concerning legal entitlement and the amount of damages merely prescribes how the insurer's obligation is to be determined and does not establish when the obligation arises.
We reject Farmers' contention that an agreement between the parties or a final arbitration decision was a condition precedent to Farmers' obligation to pay UIM benefits.
The above-quoted provision does not contain language specifying that the insurer has no liability to the insured unless or until an agreement has been reached or an arbitration proceeding completed. At a minimum, this provision is ambiguous to the extent that it can, as indicated, be read to establish only the method of determining the extent of the insurer's obligation, and not the effective date of such obligation.
Ambiguities in an insurance policy must be construed against the insurer. American Family Mutual Insurance Co. v. Johnson, 816 P.2d 952 (Colo. 1991); Tepe v. Rocky Mountain Hospital, 893 P.2d 1323 (Colo. App. 1994). Such a construction here leads us to reject Farmers' argument that it had no obligation to pay prejudgment interest before December 15, 1993, the date of the stipulation as to Farmers' liability and the amount of damages.
Farmers' interpretation of the policy, if adopted, would tend to encourage insurance companies to stall and delay in the payment of claims, thereby frustrating the purpose of the statute. See Mesa Sand & Gravel Co. v. Landfill, Inc., supra.
However, we also disagree with Bowen's primary contention that she was entitled to interest from the date of the accident. Her claim, as is evident from the complaint, is one for breach of contract. Under § 5-12-102(1)(b), C.R.S. (1992 Repl. Vol. 2), the non-breaching party is entitled to recover prejudgment interest from the date of the breach. Mesa Sand & Gravel v. Landfill, Inc., supra.
Since this is a suit on the policy, rather than a tort claim, the date of the accident is not relevant to the issue of determining prejudgment interest based on a wrongful withholding. Cf. State Farm Mutual Auto Insurance v. Springle, 870 P.2d 578 (Colo. App. 1993) (rejecting contention that claim for UIM benefits accrued at time of accident for purposes of statute of limitations).
The breach of contract by Farmers consisted of its wrongful refusal or failure to pay following the demand made on behalf of Bowen. While the record indicates that Bowen made demand for payment under the policy on February 14, 1992, we are unable to ascertain the date of Farmers' subsequent refusal to pay.
Accordingly, we conclude that a remand is necessary for the trial court to determine the actual date of Farmers' breach by refusal to pay and also to make an award of prejudgment interest under § 5-12-102(1) from that date.
The judgment is therefore reversed, and the cause is remanded for further proceedings in accordance with this opinion.
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