§49.15 Uninsured Motorist Cases – Prejudgment Interest

The Case: Ferguson v. Jenkins , No. E2007-02501-COA-R3-CV, 2008 WL 4949233 (Tenn. Ct. App. Nov. 20, 2008).

The Basic Facts: "The issue in this case is whether the trial court erred in awarding interest against an uninsured motorist ("UM") insurer that resulted in an award in excess of the applicable UM coverage limits." 2008 WL 4949233 at *1.

The Bottom Line:

• "Consumers relies on the decisions of this court in Malone v. Maddox, No. E2002-01403C-OA-R3-CV, 2003 WL 465668 ([Tenn. Ct. App. Feb. 25, 2003]) and Thurman v. Harkins, No. W2004-01023-COA-R3-CV, 2005 WL 1215959 ([Tenn. Ct. App. May 25, 2005]) in support of its argument that the trial court erred in awarding prejudgment interest resulting in a judgment exceeding the applicable limit of UM coverage of $50,000 pursuant to the policy. We agree that Malone and Thurman compel the conclusion that the trial court's award of prejudgment interest was erroneous." Id. at *3.
• "In Malone, the same issue as in the present case was squarely presented to this court, and we affirmed the trial court's ruling that 'the policyholder's uninsured motorist carrier . . . cannot be held liable for prejudgment interest under the facts of this case because such an award would cause the total judgment against the UM carrier to exceed the UM coverage limit in the policy.' Malone, 2003 WL 465668, at *1. TheMalone court noted that prejudgment interest is defined at Tenn. Code Ann. § 47-14-123 as 'an element of, or in the nature of, damages,' Id. at *5, and further reasoned as follows:.

  Contrary to the policyholder's assertion, there is no ambiguity in the policy pertaining to the issue of prejudgment interest. The UM coverage extends to 'all damages.' (Emphasis added). As we have previously noted, prejudgment interest, by the language of the applicable statute, is 'an element of, or in the nature of, damages.' Tenn. Code Ann. § 47-14-123. In the instant case, the UM carrier contracted to pay 'all damages.' Prejudgment interest is an element of damages. Therefore, prejudgment interest is covered by the language of the policy pertaining to that which can be recovered under the UM coverage.
  
  We reject the policyholder's argument that the language 'all damages' does not include prejudgment interest . . . . Under the UM coverage, it is a part of the covered damages because 'all damages' means just that, all damages, and, by statute, prejudgment interest is an element of the injured party's damages.

  Id. at *5. In the instant case, the policy at issue similarly provides that regarding the UM coverage, '[t]he most we will pay for all damages resulting from any one "accident" is the limit of Uninsured Motorists Coverage shown in the Schedule.' (Emphasis added)." Id.
• "Two years later, the Thurman decision applied and followed the Malone ruling when presented with UM policy language very similar to the language in both Malone and this case. The Thurman court stated as follows in pertinent part:.

  The policy contains an additional provision limiting the amount Great River [the UM insurer] is obligated to pay: '[r]egardless of the number of covered 'autos', 'insureds', premiums paid, claims made or vehicles involved in the 'accident', the most we will pay for all damages is the limit of UNINSURED MOTORISTS COVERAGE shown in the schedule.' (emphasis added). These limits are very similar to those at issue in Malone v. Maddox wherein this Court addressed this same issue. Malone, 2003 Tenn. App. LEXIS 147, at *8, 2003 WL 465668.
  
  As this Court previously noted, pre-judgment interest is 'an element of, or in the nature of, damages.' Tenn. Code Ann. § 47-14-123 (2001); Malone, 2003 Tenn. App. LEXIS 147, at *16, 2003 WL 465668. Because the policy on its face limits the amount Great River is required to pay for 'all damages' in the event the uninsured/underinsured motorist coverage is triggered and pre-judgment interest is an element of damages, pre-judgment interest is encompassed by the limiting language of the policy. See Malone, 2003 Tenn. App. LEXIS 147, at * 16, 2003 WL 465668.
  
  [W]e hold that the trial court did not err when it 'capped' the amount of damages, including pre-judgment interest, pursuant to the limit stated in the policy.

  Thurman, 2005 WL 1215959, at *5-6." Id. at *3-*4.
• "We are of the opinion that the circumstances presented here are indistinguishable from Malone and Thurman, and that Malone, a decision of the Eastern Section of this court, is binding and controlling precedent. Because the operative policy language in this case provides that the cap for 'all damages' is the UM coverage policy limit and prejudgment interest is included in "all damages," the trial court erred in awarding prejudgment interest resulting in a judgment in excess of $50,000 in this case. Mr. Ferguson cites the case of Gaston v. Tenn. Farmers Mut. Ins. Co., No. 2006-01103-COA-R3-CV, 2007 WL 1775967 ([Tenn. Ct. App. June 21, 2007]), in support of his argument, but we believe the Gaston case is of no avail to him because the court in that case affirmed an award in excess of the UM coverage limits pursuant to a claim brought under the Tennessee Consumer Protection Act ("TCPA"), not the insurance policy, Id. at *15, and there is no TCPA claim here." Id. at *4.