Summary
The Third Circuit held that, under Pennsylvania law, a life insurer owes prejudgment interest as a matter of right on policy proceeds from the date proof of death is received until the proceeds are deposited into court in an interpleader action. The court rejected an exception based on the insurer's lack of unreasonable delay and directed entry of judgment for interest at the statutory six percent rate, crediting interest already paid.
Topics
Practice areas
Questions Presented
- Under Pennsylvania law, is a life-insurance beneficiary entitled as a matter of right to prejudgment interest on policy proceeds from the date proof of death is received until the proceeds are deposited into court in an interpleader action?
- Does the insurer's prompt and reasonable institution of an interpleader action eliminate or limit the beneficiary's entitlement to prejudgment interest?
- Does interest continue to accrue against the stakeholder after the disputed proceeds are deposited into the court registry?
Holdings
- Under Pennsylvania law, prejudgment interest on a definite contractual sum is recoverable as a matter of legal right from the date the amount becomes payable, because interest compensates for the loss of use of the money.
- Institution of an interpleader action in response to competing claims does not defeat the claimant's entitlement to prejudgment interest for the period before the proceeds are deposited into court.
- Interest accrued at Pennsylvania's statutory legal rate of six percent from June 7, 1984, the date Security received proof of death, until September 11, 1984, when the proceeds were deposited into court, with credit for interest already paid.
Key quotations
“We conclude that under Pennsylvania law interest is payable as a matter of right for loss of use of the principal.” (¶1)
“Ultimately, the one entitled to the principal sum has been deprived of its use and must be compensated for that loss under state law.” (¶18)
“We hold, therefore, that the obligation to pay interest at the statutory rate of six percent began on that date, June 7, 1984.” (¶22)
Factual background
Melvin Atlin, a Pennsylvania resident, died on May 15, 1984, while insured under a Security-Connecticut life-insurance policy naming his widow, Lillian Atlin, as primary beneficiary. Security received proof of death on June 7, 1984, and the policy provided that the proceeds were payable upon receipt of that proof. After National Paragon asserted a competing claim, Security filed an interpleader counterclaim and deposited the policy proceeds into the court registry on September 11, 1984, paying interest at 3.5 percent from receipt of the proof of death. Atlin sought interest at the Pennsylvania legal rate for the period before the deposit.
Procedural history
The district court granted summary judgment for Security-Connecticut on the plaintiff's claim for prejudgment interest and dismissed the insurer from the suit. After a nonjury trial on the competing claims to the policy proceeds, the district court entered judgment for Atlin on the proceeds claim. Atlin appealed the rulings concerning interest and discovery; only the interest issue was decided on appeal.
Remand instructions
The court directed entry of judgment for the outstanding interest. The parties were instructed to submit within ten days a calculation of six-percent interest from June 7, 1984, to September 11, 1984, less interest already paid.