Court Upholds Insurer’s Post-Judgment Interest Obligation Under Policy
By Don R. Sampen, published, Chicago Daily Law Bulletin, January 12, 2021
The 1st District Appellate Court recently held that an insurer’s depositing with the court clerk its policy limit plus accrued post-judgment on the full judgment against its insured, stopped the further accrual of interest for which the insurer was responsible under the supplementary payments section of the policy, notwithstanding that such a deposit is not provided for under the Illinois post-judgment interest statute.
The case is Jacobs v. Yellow Cab Affiliation, Inc., 2020 IL App (1st) 182462 (Dec. 9). The plaintiffs, judgment creditors of underlying defendant insureds, were represented by Tomasik Kotin Kasserman LLC, Clifford Law Offices P.C. and Schwartz & Kanyock LLC, of Chicago. Sanchez Daniels & Hoffman LLP and Fox Rothschild LLP of Chicago represented American Country Insurance Company.
In 2015, the plaintiffs obtained a $26 million judgment against Yellow Cab and one of its drivers for injuries suffered by one of the plaintiffs in a severe car accident while riding in a Yellow Cab. The day after the judgment, Yellow Cab filed for bankruptcy, and subsequently its also driver did.
American, liability insurer for Yellow Cab and the driver, after obtaining permission from bankruptcy court, then deposited with the Cook County Circuit Court Clerk, the policy limit of $350,000, plus post-judgment interest on the full amount of the judgment. The deposit, totaling about $427,000, took place within two weeks of entry of the judgment.
In 2018, the plaintiffs commenced a citation proceeding against American seeking a turnover order. As part of the proceeding, they acknowledged the $427,000 deposit by American, but argued it was an insufficient tender under the Illinois interest statute to stop the continued accrual of post-judgment interest on the $26 million judgment. They thus claimed an additional $6.6 million interest accruing over the last three years.
American’s policy contained a supplementary payments section requiring American to pay post-judgment interest on the full amount of the judgment against its insureds until such time it paid, offered to pay, or deposited in court the part of the judgment within its policy limit.
The plaintiffs nonetheless contended that American’s deposit was not sufficient to stop the accrual of interest under the interest statute, 735 ILCS 5/2-1303. That statute permits a judgment debtor to stop the accrual of interest only by tendering payment of the judgment, costs and accrued interest to the judgment creditor.
The circuit court dismissed the citation proceeding on the ground that American had satisfied its obligation to its insureds by making its deposit, and it owed no further post-judgment interest. The plaintiffs took this appeal.
River Valley decision
In an opinion by Justice David W. Ellis, the 1st District affirmed. After discussing the purpose and effect of the interest statute, he observed that it governs the obligations of the judgment debtor, but that American — the entity from which the plaintiffs sought to recover $6.6 million — was governed by the terms of its policy.
Under the policy, moreover, American was obligated only to pay its insureds the policy limit and accrued interest up to the time of payment or deposit, and because the plaintiffs as judgment creditors stepped into the shoes of the defendants, American owed the plaintiffs nothing more.
Ellis said the Illinois Supreme Court used this approach in River Valley Cartage Co. v. Hawkeye-Security Insurance Co., 17 Ill.2d 242 (1959). The court there construed a supplementary payments section of a liability insurance policy similar to American’s. Under that section the court held that an insurer’s tender of the policy limit without post-judgment interest was insufficient to stop the accrual of interest. Ellis said such a holding is by now long settled state law.
According to Ellis, the River Valley court reached that conclusion on the basis of the policy language, not the interest statute. Another takeaway from the case was that the judgment creditor was entitled to no more than the insured-judgment debtor could collect from the insurer.
The plaintiffs nonetheless relied on Halloran v. Dickerson, 287 Ill.App.3d 857 (5th Dist. 1997), in arguing that a deposit with the court, rather than an offer or payment to the judgment creditor, is not sufficient to stop interest from accruing. Ellis disagreed.
He noted that, while Halloran did involve an insurer’s deposit with the court, the insurance policy involved in that case permitted only an “offer to pay” as the action that could be taken to stop the accrual of interest. The insurer’s deposit in that case also did not include all post-judgment interest owing at the time of the deposit. The insurer in that case therefore continued to owe interest on the full amount of the judgment following its deposit.
Under those circumstances, according to Ellis, the Halloran court was justified in relying on the interest statute, by analogy, in determining what constituted an adequate “tender.” He observed that an “offer to pay” under the policy is the functional equivalent of a “tender” under the interest statute.
In contrast to Halloran, American’s policy allows for a deposit with the court as one alternative to stop interest accrual, and American deposited both its policy limit and the full amount of accrued interest as of the time of the deposit.
Finally, Ellis found the supplementary payments section of American’s policy did not contravene public policy. While public policy and law require taxicabs to be insured to protect the public, neither public policy nor the law requires that the insurance procured cover the full amount of the judgment debtor’s obligations. The plaintiffs, moreover, did not claim that Yellow Cab’s coverage was below the statutory minimum.
American’s policy provisions, Ellis said, also do no violence to a judgment debtor’s obligations under the interest statute. The insureds here continue to owe post-judgment interest on the full amount of the judgment against them until the judgment is paid or the matter is resolved in bankruptcy.
The court therefore affirmed the dismissal in favor of American.
A supplementary payments section of a policy obligating an insurer to pay post-judgment interest on the judgment against its insured until it pays, offers to pay or deposits in court the amount of the judgment against the insured up to the policy limit, permits the insurer to fully terminate its post-judgment interest obligation by making the payment, offer or deposit in the amount of (1) the judgment up to the policy limit (2) plus all post-judgment interest then owing on the full amount of the judgment.