Liberty Mutual Insurance Company v. Bartolo Tavarez, Administrator of the Estate of Bartolo A. Tavarez

Summary

The Rhode Island Supreme Court held that a Superior Court could add prejudgment interest and allowable costs beyond uninsured-motorist policy limits when confirming an arbitration award, because the insurer had denied coverage and refused to arbitrate. The court held that interest accrued from the insurer’s wrongful denial of coverage, rather than from the insured’s death, and rejected compounding interest. It vacated the award of expert-witness fees and other nonrecoverable expenses as costs and remanded for recalculation.

Holdings

1. A Superior Court justice retaining jurisdiction over a declaratory-judgment action may grant supplemental relief, including prejudgment interest and allowable costs, when confirming an uninsured-motorist arbitration award, even when those additions cause the judgment to exceed the policy limits.
2. Prejudgment interest on the insured's damages accrued from the date Liberty wrongfully denied the uninsured-motorist claim and thereafter refused to arbitrate, not from the date of the insured's death.
3. On remand, interest must be calculated at twelve percent per annum on the $300,000 policy limit from May 3, 1996, when Liberty denied coverage, through the date Liberty paid $300,000, with the payment applied first to accrued interest and then to principal; interest may then accrue on any unpaid remainder until final judgment.
4. The Superior Court erred by awarding postjudgment interest on prejudgment interest that had accrued through the arbitration date; prejudgment interest may not be compounded absent specific legislative authorization.
5. Expert-witness fees are not recoverable as ordinary costs, and only costs authorized by G.L. 1956 chapter 22 of title 9 and Rule 54 of the Superior Court Rules of Civil Procedure may be included in the judgment.

Questions Presented

1. Whether the Superior Court had authority, in the declaratory-judgment action and while confirming the arbitration award, to add prejudgment interest and allowable costs beyond the uninsured-motorist policy limits.
2. Whether prejudgment interest accrued from the date of the insured's death or from the date Liberty wrongfully denied coverage and refused to arbitrate.
3. Whether the Superior Court improperly compounded prejudgment interest by awarding postjudgment interest on previously accrued interest.
4. Whether expert-witness fees and other litigation expenses were recoverable as costs.

Disposition

reversed_and_remanded