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Medical Protective Co. v. Watson3/29/2005
ejudgment interest to Watson, a decision not appealed. Instead, the sole question in this appeal is whether MPC is liable to pay prejudgment interest, even though its policies provide that MPC is liable for prejudgment interest only if the prejudgment interest award, in combination with the damages award, does not exceed the limits of liability set forth in MPC's policies. MPC reasons that under contract law an insurance policy can exclude payment of anything in excess of the policies' limits of liability. In support of its overall contentions, MPC relies heavily on Lovewell v. Physicians Ins. Co. (1997), 79 Ohio St.3d 143.
{ } In Lovewell, a patient brought a medical malpractice action against a physician and insurer seeking payment of not only damages, but also prejudgment interest pursuant to R.C. 1343.03(C). The liability insurance contract at issue provided coverage for damages a physician was obligated to pay because of a "medical incident." The insured physician in Lovewell refused to sign a consent form to settle the case, and the resulting question was whether "a medical malpractice insurer can be held liable for an award of prejudgment interest when its insured, acting pursuant to a contract right, withholds consent to any settlement offer by the insurer." Lovewell, at 144.
{ } Lovewell acknowledged that generally, in the absence of a statutory mandate or contractual agreement, the liability for prejudgment interest falls to the named party in the litigation. Id. at 145, citing Peyko v. Frederick (1986), 25 Ohio St.3d 164 (noting that a defendant is ultimately responsible for payment of prejudgment interest, but that defendant's insurer may be liable if the insurer's conduct was the basis for an award). The court further observed "that the construction of contracts is a matter of law to be resolved by the court." Id. As the court explained, if the terms of the contract are unambiguous, the court is bound by them and may not expand its language to include coverage that was clearly not intended by either party. Id. at 147.
{ } Applying those rules, the court in Lovewell ultimately held that because the insurance policy did not expressly provide for paying prejudgment interest, the insurer was not liable for prejudgment interest awarded because of the insured physician's refusal to consent to settlement. Lovewell, at 147. Explaining, the court stated that " he proper inquiry, then, is * * * which party is responsible for the failure of good faith. In the absence of a finding by the trial court that the insurer was the party responsible for the failure to exercise good faith, we cannot imply a contractual term that does not exist in order to shift liability to the insurer." Id. at 148. Accordingly, even though nothing in Lovewell suggests the award, with interest, was outside the policy's liability limits, the court declined to saddle the insurer with the insured's refusal to settle in good faith.
{ } Appellees respond by relying on Gunckle. In Gunckle, the insureds brought an action against an automobile insurer to recover uninsured motorist ("UM") benefits. One of the issues specifically addressed was whether the insurer was liable for prejudgment interest pursuant to R.C. 1343.03(C), when the interest award, combined with the damage award, exceeded the insured's policy limits. Id. In resolving the issue, the court discussed the strong policy behind an award of prejudgment interest and held that an "insurer is liable for an entire award up to the insured's policy limit plus any prejudgment interest awarded on that policy limit." Id. at .
{ } Explaining its decision, the court stated that " f we were to adopt [the insurer's] position it would frustr
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