In March 2005, the federal district court in Puerto Rico entered a $6 million judgment for a personal injury plaintiff. In late September 2005, the relevant insurer paid into court its remaining policy limit of $75,000. Nearly seven years later, the US Court of Appeals for the First Circuit held that the insurer was also liable for post-judgment interest on the entire verdict for the period between entry of judgment and the tender of limits. A copy of the decision in Vaszquez-Filippetti v. Cooperativa de Seguros Multiples de Puerto Rico, No. 11-1208 (1st Cir. Jul. 15, 2013), is available here.

The First Circuit’s decision arose out of a horrific accident. Yomar Vazquez-Filippetti was standing on a sidewalk, withdrawing money from an ATM owned by Banco Popular de Puerto Rico, when she was struck from behind by a car being driven by Jose Toro-Rodriguez. Ms. Vazquez-Filippetti lost her right leg. Mr. Toro-Rodriguez was insured under an automobile liability insurance policy issued by Cooperativa, which had a limit of $100,000 for bodily injury to any one person. The policy’s named insured was Mr. Toro-Rodriguez’s brother Felix, who owned the car.  

Ms. Vazquez-Filippetti and her relatives brought suit against the bank, the Toro brothers, Cooperativa, and Banco Popular. The plaintiffs argued that the bank had negligently designed the ATM facility, and that the remaining defendants were liable for Mr. Toro-Rodriguez’s negligent driving. A jury returned a $6 million verdict against the defendants, apportioning 75% of the fault to the bank and the remaining 25% to Cooperativa and its insureds. Judgment entered on March 22, 2005. On August 16, 2005, the judgment was amended to specify that the defendants were jointly and severally liable for the full amount of the judgment.

Cooperativa and its insureds did not appeal the judgment. On September 29, 2005, Cooperativa paid its policy’s remaining limit into court. The bank (but no other defendants) then appealed the substantive verdict. The First Circuit reversed, based on the legal insufficiency of evidence supporting the jury’s verdict. With the bank out of the picture, the plaintiffs renewed their efforts to hold Cooperativa liable for the full $6 million judgment, notwithstanding the policy’s limit.

In subsequent motion practice, the plaintiffs argued that Cooperativa had waived its policy limit. The district court rejected the contention out of hand, and the First Circuit affirmed in late 2009. Having lost the battle to set aside the policy limit, the plaintiffs sought to compel Cooperativa to pay post-judgment interest on the full judgment – about $1.6 million – in addition to the limit. The district court denied the motion as untimely.

The First Circuit closely examined the insurance policy at issue, and concluded that the plaintiffs were entitled to post-judgment interest from Cooperativa in addition to the limit. The court easily concluded that federal law granted the plaintiffs a substantive right to post-judgment interest on the entire verdict, notwithstanding the fact that the plaintiffs had waited to demand interest. The court went on to hold that the Cooperativa policy featured a “standard interest clause,” under which a supplementary payments provision provided that Cooperativa would pay, “[in] addition to [the] liability limits,” “interests [sic] accrued after having issued [sic] a ruling in any judicial claim we defend” (the policy provisions cited by the court had been translated from the original Spanish). The appeals court held that a majority of courts, including the Supreme Court of Puerto Rico, had concluded that a standard interest clause obligates an insurer to pay post-judgment interest on the entire amount of the judgment against an insured.

But the court sharply limited the amount of the plaintiffs’ interest claim. Citing a policy provision which stated that Cooperativa’s “duty of paying interests [sic] ends when we offer to pay the corresponding part of the ruling that does not exceed our liability limit for that coverage,” the First Circuit held that Cooperativa’s liability for post-judgment interest ran only from the date of entry of the original judgment to the date when Cooperativa paid its policy limits into court. The case was remanded for further proceedings in Puerto Rico.

The First Circuit’s decision shows that courts will enforce the terms of an insurance policy according to their plain meaning, and in such a way as to give effect to all of a policy’s terms. The court, in fact, forcefully rejected the plaintiffs’ arguments that Cooperativa was liable for all post-judgment interest accrued as of the date of the deposit of limits into court, and that, because such interest had not been tendered in 2005, interest on the full judgment continued to accrue against Cooperativa. To conclude that Cooperativa had to pay accrued post-judgment interest to satisfy payment for the policy’s liability limit would, the appeals court stated, eviscerate the policy’s plain language.