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Medical Protective Co. v. Watson3/29/2005
ate the policy of encouraging settlement, since there would be little incentive for an insurer to settle a meritorious claim. The insurer in such a situation, knowing that its loss is confined to the insured's policy limit, has less incentive to prevent protracted litigation in which the insured is deprived of the use of the money. Once a lengthy litigation process is complete, the insured is not compensated for the lapse of time between the accrual of the claim and judgment. The insurer would clearly have the benefit of retaining control over, and earning interest on, money due and payable to their insured. * * * uch a result would clearly contradict the well-established statutory and common-law basis for prejudgment interest." Id. at .
{ } While we recognize that factual differences distinguish both Lovewell and Gunckle from the case before us, Gunckle is the more persuasive under the facts presented here. Initially, contrary to MPC's suggestion, we see no reason to limit Gunckle's holding to UM cases. The policy behind an award of prejudgment interest is premised on a lack of good-faith efforts to resolve the case short of trial, an issue that arises in both medical malpractice and UM cases.
{ } Although MPC also suggests that the policy underlying an award of prejudgment interest can be vindicated through the insured's ability to sue its insurer for bad faith, this case belies MPC's contentions. Here, the trial court awarded prejudgment interest because of MPC's lack of good faith, but at the same time concluded MPC did not act in bad faith. As a result, under the scenario MPC posits, Dr. Cahill and OSO would be left with no remedy against MPC, despite MPC's lack of good faith in refusing to settle Watson's claims and their own willingness to settle the matter.
{ } MPC nonetheless points out that, unlike Gunckle, the policies at issue here contain language that limits MPC's liability to $4 million, including any prejudgment interest. Relying on that language, MPC asserts that Gunckle cannot dispose of the issue before us. Because neither Lovewell nor Gunckle is factually identical to MPC's policy language, we are required to apply the rationale of those cases in resolving MPC's contentions.
{ } To that end, the pertinent question in prejudgment interest cases, as recognized in Lovewell, is "which party is responsible for the failure of good faith." Lovewell, at 148. Relying on the public policy that supports the statutory award of prejudgment interest in Ohio, the Ohio Supreme Court similarly determined in Gunckle that if the insurer fails to exercise good faith, it must pay prejudgment interest over the policy limit. Indeed, the common thread in both Lovewell and Gunckle is the Supreme Court's determination that the party responsible for the failure of good faith is responsible for payment of the prejudgment interest award. To hold otherwise would reward the wrongly recalcitrant and punish the other despite its appropriate willingness to settle the matter short of trial.
{ } Similarly, enforcement in this case of MPC's limits of liability provisions would violate the public policy that supports the award of prejudgment interest. Dr. Cahill and OSO specifically authorized MPC to settle the case, but in response to Watson's good-faith offers, MPC's adjuster "failed to make a good faith monetary settlement offer or respond in good faith to numerous demands from Plaintiff." (Watson Motion for Summary Judgment Ex. A, 30.) To enforce the policy language would allow MPC to refuse to settle a case that properly should be settled, knowing that its actions not only gained for it the interest accruing during the duration of the litigation, but also exposed it t
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