85 N.Y.2d 657 (1995)
In a bifurcated personal injury action where damages exceed policy limits, an insurer is only liable for prejudgment interest on the portion of the judgment within the policy limits, unless the insurance contract contains a more generous provision.
Summary
Joyce Dingle was injured in a car accident caused by Patricia Virga, who was insured by Prudential. After a bifurcated trial, Virga was found 100% liable, and Dingle was awarded $592,672.21 in damages, exceeding Virga’s $100,000 policy limit. The insurance contract was silent regarding interest between the liability and damages verdicts. Prudential paid its policy limit plus interest on that amount, as well as interest on the entire judgment from the date of the damages award. Dingle sued, arguing she was owed interest on the entire judgment from the liability verdict date. The New York Court of Appeals held that Prudential was only liable for interest on the portion of the judgment within its policy limits for the period between the liability and damages verdicts.
Facts
Joyce Dingle sustained injuries in a car accident caused by Patricia Virga’s negligence.
Virga was insured by Prudential with a $100,000 policy limit.
The trial was bifurcated, addressing liability and damages separately.
Virga was found 100% liable for the accident in the first phase.
Dingle was later awarded $592,672.21 in damages, exceeding the policy limit.
Prudential paid the $100,000 policy limit, interest on the policy limit from the liability verdict to the damages award, interest on the full judgment from the damages award to payment, and costs.
The insurance policy was silent about interest between the liability and damages phases.
Procedural History
Dingle sued Prudential, claiming she was owed interest on the entire judgment from the date of the liability verdict to the damages verdict.
The Supreme Court granted summary judgment to Prudential, finding they had paid all that was legally required.
The Appellate Division affirmed.
The New York Court of Appeals granted leave to appeal.
Issue(s)
Whether, in a bifurcated personal injury action with damages exceeding policy limits, the insurer is liable for prejudgment interest on the entire judgment or only on the portion within the policy limits, specifically for the time between the liability and damages verdicts.
Holding
No, the insurer is only liable for prejudgment interest on the portion of the judgment within the policy limits because 11 NYCRR 60-1.1(b) requires insurers to pay interest only on the amount of their obligation up to the policy limits, absent a more generous provision in the insurance contract.
Court’s Reasoning
The court relied on 11 NYCRR 60-1.1(b), which mandates that insurers pay “all interest accruing after entry of judgment until the insurer has paid…such part of such judgment as does not exceed the applicable policy limits.”
The Court stated that the language in the regulation substantially incorporates language which has long been embodied in contracts of insurance. Thus, the customary construction given to that standard contract clause provides guidance in interpreting the similarly worded regulation.
The court referenced the traditional construction of similar contract clauses, limiting the insurer’s responsibility to interest on the amount they are obligated to pay up to the policy limits, citing Home Indem. Co. v Corie, 206 Misc 720, affd without opn 286 App Div 996; Holubetz v National Fire Ins. Co., 13 AD2d 228; Shnarch v Empire Mut Ins. Co., 144 AD2d 795.
The rationale is that interest compensates for the use or retention of another’s money. The insurer should only be liable for interest on the portion of the judgment they retained and benefited from – the amount of their liability.
The court rejected the argument that the insurer should pay interest on the entire judgment due to its control over the litigation, citing Love v State of New York, 78 NY2d 540. They reasoned that assigning responsibility for delay should not govern who pays prejudgment interest, as it would penalize parties for exercising legitimate rights, such as taking an interlocutory appeal.
The court held that responsibility for prejudgment interest should align with who retained or benefited from the money. The insurer should pay for the use of the portion of the judgment they are responsible for under the policy, and the insured is responsible for the excess.
The court noted that Prudential’s agreement to pay interest on the entire judgment from the date of the damages verdict was more generous than required by the regulation.