HAITH v. HARFORD MUTUAL INSURANCE GROUP, INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

J.H.,1 et al., )

)

Plaintiffs, )

)

v. ) 1:21cv856

)

HARFORD MUTUAL INSURANCE, )

GROUP, INC., et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

The Court recently resolved the parties’ competing motions for

judgment on the pleadings. (See Docket Entry 39 (the “Opinion”) at

1-38.)2 As relevant here, Plaintiffs’ Amended Complaint sought

(A) “a judgment declaring that Harford Mutual has an obligation

under the [Big Boss Excess Policy and the NC Champions Policy] to

make payments to Plaintiffs as entered in the Underlying Action,”

(B) “a declaration of the amount to be paid under each policy,” and

(C) “[p]re-judgment and post-judgment interest as provided by law.”

(Docket Entry 22 at 16-17.) As further relevant here, in briefing

the cross-motions, Plaintiffs asserted that “Defendant must pay

1 Federal Rule of Civil Procedure 5.2(a)(3) mandates the use

of initials when referring to J.H. and E.H., minors. Further, for

legibility purposes, this Opinion omits the word “the” in front of

“Plaintiffs” and “Defendants.”

2 Pursuant to the parties’ consent, Chief United States

District Judge Thomas D. Schroeder referred this case to the

undersigned United States Magistrate Judge for all proceedings.

(See Docket Entry 38 at 1.) [Docket Entry page citations utilize

the CM/ECF footer’s pagination.]

$2,000,000.00 to [them] under the Big Boss [Excess Policy]” (Docket

Entry 31 at 19), to which Defendants responded: “The amount of

coverage under any policy is not in dispute and has been clearly

established by stipulation. The only dispute is whether coverage

exists at all.” (Docket Entry 34 at 14 n.2.)3 For the reasons

specified in the Opinion, the Court granted in part and denied in

part the cross-motions, ruling that “judgment shall be entered in

Plaintiffs’ favor for $2 million under the Big Boss Excess Policy,

but Plaintiffs shall take nothing under the NC Champions Policy.”

(Docket Entry 39 at 37.) The Court further ordered “Defendants

[to] show cause why the judgment should not include pre-judgment

and post-judgment interest.” (Id.) Having fully considered the

parties’ submissions and the relevant law, the Court will award

prejudgment and post-judgment interest as specified herein.

A. Prejudgment Interest

Defendants removed this action to federal court on the basis

of diversity jurisdiction. (See, e.g., Docket Entry 1 at 2.)

“State law governs the award of prejudgment interest in a diversity

case.” Parkway 1046, LLC v. U.S. Home Corp., 961 F.3d 301, 311

(4th Cir. 2020) (internal quotation marks omitted). North Carolina

3 Notably, in briefing the cross-motions, Defendants never

asserted entitlement to any credit against the “Upfront Monies”

(Docket Entry 22-6 at 3 (all-cap and bold font omitted)) paid

pursuant to the Litigation Agreement (see Docket Entries 28, 29,

34, 36).

2

General Statute Section 24-5 governs prejudgment interest and

provides that, as relevant here:

any portion of a money judgment designated by the fact

finder as compensatory damages bears interest from the

date the action is commenced until the judgment is

satisfied. . . . Interest on [such] an award . . . shall

be at the legal rate.

N.C. Gen. Stat. § 24-5(b);4 see Nationwide Mut. Ins. Co. v. Mabe,

342 N.C. 482, 489-90, 467 S.E.2d 34, 38-39 (1996). Notwithstanding

this provision, the North Carolina Supreme Court has explained,

“the language of a liability carrier’s policy controls the

liability carrier’s obligation to pay prejudgment interest in

addition to its stated limits.” Nationwide, 342 N.C. at 490, 467

S.E.2d at 39.

The Big Boss Excess Policy provides, in pertinent part:

When we have the duty to defend, we will indemnify the

insured for:

*****

5. Pre-judgment interest awarded against the Insured on

that part of any judgment covered under this policy. If

we offer the applicable Limit of Insurance in settlement

of a claim or suit, we will not indemnify the Insured for

any pre-judgment interest imposed or earned after the

date of such offer.

6. All interest earned on that part of any judgment

within the Limit of Insurance after entry of the judgment

and before we have indemnified the Insured, offered to

indemnify, or deposited in court that part of any

4 As relevant here, “the legal rate of interest shall be

eight percent (8%) per annum for such time as interest may accrue,

and no more.” N.C. Gen. Stat. § 24-1.

3

judgment that is within the applicable Limit of

Insurance.

Payments under this section of the policy, as well as

payments for all expenses we incur, will not reduce the

Limit of Insurance.

(Docket Entry 22-4 at 10 (emphasis added) .)

Thus, the Big Boss Excess Policy explicitly provides for

payment of prejudgment and post-judgment interest, even in excess

of its insurance liability limit (see id.), rendering such

prejudgment interest appropriate here, see Nationwide, 342 N.C. at

490, 467 S.E.2d at 39. Defendants’ arguments to the contrary do

not alter this conclusion.

To begin, Defendants argue that “[t]he language of the Policy

does not permit payment of interest in excess of the policy limit.”

(Docket Entry 40 at 5 (bold font omitted).)° This argument ignores

5 In so doing, Defendants somewhat confusingly appear to

argue that because, “[a]s part of the Litigation Agreement,

Defendants offered the applicable limit of insurance in settlement

of the Underlying Litigation” and “subpart 5 [of the Big Boss

Excess Policy] states that Defendants will not be responsible for

the payment of pre-judgment interest imposed after the date

Defendants offer the applicable limit of insurance in settlement of

a claim,” “Defendants are not obligated to pay pre-judgment

interest in excess of the Policy Limit.” (Id. at 6.) This

argument misses the mark. First, the referenced provision operates

only to stop the accruing of prejudgment interest when the insurer

offers its policy limits to settle a claim; it does not prevent the

subsequent payment of prejudgment interest accrued prior to such

event. (See Docket Entry 22-4 at 10.) Second, Defendants did not

“offer the applicable Limit of Insurance in settlement of

[Plaintiffs’] claim[s]” (id.) in the Litigation Agreement. (See

generally Docket Entry 22-6.) Instead, Defendants entered into an

agreement “to streamline the litigation” over “the merits of the

insurance coverage issues” (id. at 2), conceding only that, “[ilf

the Court determines that coverage exists under the Harford

the policy’s explicit statement that “[p]layments under thle

indemnification] section of the policy . . . will not reduce the

Limit of Insurance” (Docket Entry 22-4 at 10). (See Docket Entry

40 at 5-6.) Accordingly, Defendants’ policy language argument

lacks merit.®

Defendants next argue that “North Carolina Law considers

pre-judgment interest part of compensatory damages, which are not

recoverable in excess of the applicable Policy Limit.” (Id. at 6

(bold font omitted); see id. at 6-7.) The North Carolina Supreme

Court has indeed “conclude[d] that interest paid to compensate a

plaintiff for loss-of-use of the money during the pendency of a

insurance policy(ies), then the Harford Insurers are obligated to

tender the limits of insurance under the policy or policies that

provide coverage, if any, as determined by the Court, the amount of

such limits to be decided by the Court” (id. at 4). Thus, “subpart

5” provides Defendants no relief here.

6 In their reply brief, Defendants additionally assert, for

the first time, that “[t]he Policy only contemplates payment of

judgment interest on a judgment” and, “[b]ecause no judgment has

been entered [in the Underlying Litigation], the Supplementary

Payments provision of the Policy does not apply.” (Docket Entry 42

at 3 (bold font omitted); see id. at 2-4.) As an initial matter,

“[t]he Parties [to the Litigation Agreement] agree[d] to a Consent

Judgment against Big Boss, NC Champions, and Carlos Alberto Ramirez

in the amount of $3,200,000.00, which is attached and incorporated

as Exhibit A [to the Litigation Agreement].” (Docket Entry 22-6 at

2.) The existence of that Consent Judgment, regardless of its

filing, undercuts Defendants’ new argument. In any event, “{[al]

party waives an argument by failing to present it in its opening

brief or by failing to develop its argument — even if its brief

takes a passing shot at the issue.” Grayson O Co. v. Agadir Int’l

LLC, 856 F.3d 307, 316 (4th Cir. 2017) (brackets and internal

quotation marks omitted). Because Defendants failed to develop

such argument in their initial memorandum (see Docket Entry 40 at

1-8), they waived it, see Grayson, 856 F.3d at 316.

lawsuit is an element of that plaintiff’s damages,” explaining that

“the plaintiff has been deprived of the use of funds to which

plaintiff was entitled from the time of the injury resulting from

the wrong giving rise to the claim for relief. The prejudgment

interest statute merely recognizes this entitlement and provides

for its recovery (in the case of a tort) from the date the

plaintiff judicially demands payment by filing suit.” Baxley v.

Nationwide Mut. Ins. Co., 334 N.C. 1, 8-9, 430 S.E.2d 895, 900

(1993). Nevertheless, the North Carolina Supreme Court has also

held that “a liability insurer’s obligation to pay interest in

addition to its policy limits is governed by the language of the

policy.” Id. at 6, 430 S.E.2d at 898 (emphasis in original);

accord Nationwide, 342 N.C. at 491, 467 S.E.2d at 40 (explaining

that “th[e North Carolina Supreme] Court will look to the specific

terms of a policy in deciding whether a liability carrier is

required to pay prejudgment interest in addition to its limit of

liability”). Here, the Big Boss Excess Policy explicitly provides

for payment of prejudgment (and post-judgment) interest beyond the

limits of liability. (See Docket Entry 22-4 at 10.) As such,

Defendants’ compensatory damages contentions fall short.

Defendants additionally contend that “[t]he Litigation

Agreement establishes a maximum amount Defendants must pay towards

resolution of the Underlying Litigation” (Docket Entry 40 at 4

(bold font omitted)) and “was a settlement of the Underlying

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Litigation and did not contemplate the payment of pre-judgment or

post-judgment interest” (id. at 7 (bold font omitted)). (See id.

at 4-5, 7.) To the contrary, the Litigation Agreement explicitly

provides that

it is the Parties’ mutual intent that all coverage issues

pending in the Declaratory Judgment Action, including the

issue of indemnification, remain ripe. .. . Further,

all [d]efendants in the Underlying Action agree to assign

all rights under the Harford Insurers’ policies to

[Plaintiffs] in order to enable them to recover money

under the policies upon a determination in the

Declaratory Judgment Action that there is coverage. The

Harford Insurers specifically agree that thle Litigation]

Agreement and the Covenant Not to Enforce Judgment in no

way relieve the Harford Insurers of any obligation to pay

money under the policies, in the event the Court

determines that the policy or policies provide coverage.

(Docket Entry 22-6 at 4 (emphasis added).) As noted, the Big Boss

Excess Policy provides indemnification for prejudgment (and post-

judgment) interest above the limits of liability. (See Docket

Entry 22-4 at 10.) Thus, the Litigation Agreement specifically

contemplates indemnification of Plaintiffs for prejudgment (and

post-judgment) interest under the Big Boss Excess Policy above the

$2 million policy limit, belying Defendants’ contentions. As such,

Defendants’ contentions on this front lack merit.

Defendants further maintain that the $25,000 in upfront money

they paid under the Litigation Agreement should count against their

$2 million obligation under the Big Boss Excess Policy. (See

Docket Entry 40 at 5-6.) This argument fails. To begin,

Plaintiffs’ Amended Complaint sought a determination of the amount

due under each insurance policy. (See Docket Entry 22, ¶ 89.) In

moving for judgment on the pleadings, Plaintiffs similarly sought

a declaration that Defendants owed them a total of “$3,000,000”

under the policies (Docket Entry 30 at 3), including $2 million

under the Big Boss Excess Policy (see, e.g., Docket Entry 31 at 19

(“Defendant must pay $2,000,000.00 to Plaintiffs under the Big Boss

[Excess Policy].”)). In response, Defendants did not assert a

credit for the $25,000 paid pursuant to the Litigation Agreement

(see Docket Entries 28, 29, 34, 36); instead, they stated that

“[t]he amount of coverage under any policy is not in dispute and

has been clearly established by stipulation” (Docket Entry 34 at 14

n.2; see also id. (“The only dispute is whether coverage exists at

all.”)). Because Defendants failed to assert any entitlement to a

$25,000 credit in briefing the cross-motions for judgment on the

pleadings, they waived such argument. See Grayson O Co. v. Agadir

Int’l LLC, 856 F.3d 307, 316 (4th Cir. 2017) (“A party waives an

argument by failing to present it in its opening brief or by

failing to develop its argument — even if its brief takes a passing

shot at the issue.” (brackets and internal quotation marks

omitted)).

Moreover, the Litigation Agreement does not support

Defendants’ new argument. The Litigation Agreement recognizes

Plaintiffs’ entitlement to $3.2 million in personal injury damages

arising from the underlying car accident, with allocations of

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$3 million to Chambers and $100,000 each to E.H. and J.H.

specified. (See Docket Entry 22-6 at 2, 22.) In paragraph 4, the

Litigation Agreement provides for $200,000 in “Upfront Monies,”

including $25,000 from Defendants, “to be paid to Plaintiffs within

21 days of the execution of th[e] Litigation Agreement.” (Id. at

3 (all-cap and bold font omitted).) Nowhere in the Litigation

Agreement does it allocate the $25,000 to either insurance policy

or provide that the $25,000 constitutes a credit against either

policy. (See id. at 1-6.) Rather, in paragraph 5 it provides:

The Parties hereby agree that the Harford Insurers may also

be obligated to pay additional monies over the [$25,000] to

Plaintiffs depending on the outcome of the Declaratory Judgment

Action. If the Court determines that coverage exists under the

Harford insurance policy(ies), then the Harford Insurers are

obligated to tender the limits of insurance under the policy or

policies that provide coverage, if any, as determined by the

Court, the amount of such limits to be decided by the Court, but

in no event shall the Harford Insurers be obligated to tender

more than $1,000,000.00 under the NC Champions Policy (No.

9180396) and/or $2,000,000.00 under the Big Boss Excess Policy

(No. 7981019).

If the Court determines that there is not coverage under the

Harford policies, then there will be no recovery by Plaintiffs

over and above the amounts set forth in paragraph (4).

(Id. at 4 (emphasis added).)

To tender means to “[o]ffer (money) as payment.” Tender,

Oxford Dictionaries. Oxford University Press.

https://premium.oxforddictionaries.com/definition/american_englis

h/tender (accessed via Oxford Dictionaries Online on June 20,

2023). Thus, the Litigation Agreement envisions Defendants paying

Plaintiffs $3 million if the Court determined coverage existed

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under both insurance contracts, including $2 million under the Big

Boss Excess Policy, bringing Plaintiffs’ total to the $3.2 million

amount that the parties agreed Plaintiffs were “entitled to recover

. . . for [their] personal injury damages” (Docket Entry 22-6 at

22). (See id. at 2-4.) Therefore, reducing Plaintiffs’ $2 million

recovery under the Big Boss Excess Policy by $25,000 does not

comport with the Litigation Agreement.

Finally, Defendants maintain — without further development

(see Docket Entry 40 at 7-8) — that, “[s]hould the Court determine

that pre-judgment interest applies, it should only be applied from

the date of the filing of this declaratory judgment action and not

from the date of the filing of the Underlying Litigation” (id. at

7). “Prejudgment interest serves to compensate for the loss of use

of money due as damages from the time the claim accrues until

judgment is entered, thereby achieving full compensation for the

injury those damages are intended to redress.” West Va. v. United

States, 479 U.S. 305, 310 n.2 (1987). Here, Plaintiffs’ claims for

personal injury damages accrued on October 27, 2018, the date of

the car accident. (See Docket Entry 22-6 at 1.) They “ha[ve] been

deprived of the use of funds to which [they were] entitled from the

time of the injury resulting from the wrong giving rise to the

claim for relief. [North Carolina’s] prejudgment interest statute

merely recognizes this entitlement and provides for its recovery

(in the case of a tort) from the date [Plaintiffs] judicially

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demand[ed] payment by filing suit.” Baxley, 334 N.C. at 9, 430

S.E.2d at 900. Here, Plaintiffs judicially demanded payment for

their injuries by filing suit against the underlying tortfeasors on

October 2, 2019. (See Docket Entry 22, ¶ 20; Docket Entry 25,

¶ 20.) Awarding prejudgment interest from that date therefore best

complies with North Carolina law as to prejudgment interest.7

In sum, Defendants must pay prejudgment interest on the

$2 million they owe Plaintiffs under the Big Boss Excess Policy at

an annual rate of eight percent from October 2, 2019, through the

date of the judgment.

B. Post-judgment Interest8

“Federal law, rather than state law, governs the calculation

of post-judgment interest in diversity cases.” Hitachi Credit Am.

Corp. v. Signet Bank, 166 F.3d 614, 633 (4th Cir. 1999). As

relevant here, federal law provides:

7 Notably,

[r]equiring [Defendants] to pay prejudgment interest

[from this date] is not a harsh result since [Defendants]

ha[ve] had the opportunity to invest the money during the

pendency of the[se] suit[s]. In addition, it [wa]s

within [Defendants’] power to stop the accrual of

prejudgment interest by offering[, in settlement of

Plaintiffs’ claims, their] policy limit.

Baxley, 334 N.C. at 9, 430 S.E.2d at 900.

8 Defendants largely combined their interest arguments,

raising no separate arguments against imposition of post-judgment

interest. (See Docket Entries 40, 42.) For the reasons discussed

above, and in light of 28 U.S.C. § 1961, those arguments afford

Defendants no relief.

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(a) Interest shall be allowed on any money judgment in a

civil case recovered in a district court. . . . Such

interest shall be calculated from the date of the entry

of the judgment, at a rate equal to the weekly average

1-year constant maturity Treasury yield, as published by

the Board of Governors of the Federal Reserve System, for

the calendar week preceding[] the date of the judgment.

The Director of the Administrative Office of the United

States Courts shall distribute notice of that rate and

any changes in it to all Federal judges.[9]

(b) Interest shall be computed daily to the date of

payment . . ., and shall be compounded annually.

28 U.S.C. § 1961 (emphasis added) (footnote omitted).

“The purpose of postjudgment interest is to compensate the

successful plaintiff for being deprived of compensation for the

loss from the time between the ascertainment of the damage and the

payment by the defendant.” Kaiser Aluminum & Chem. Corp. v.

Bonjorno, 494 U.S. 827, 835-36 (1990) (brackets and internal

quotation marks omitted). In accord with this purpose, post-

judgment interest applies to the entire amount of damages a

plaintiff receives, including prejudgment interest. See

Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1031 (4th

Cir. 1993) (holding “that awarding post-judgment interest on the

entire amount the court awarded [the plaintiff], including

pre-judgment interest, most closely comports with the purpose of

post-judgment interest articulated by the Supreme Court”); see also

Bioventus LLC v. Trindent Consulting Int’l, Inc., No. 1:18cv815,

2020 WL 13669789, at *2 (M.D.N.C. Dec. 23, 2020) (“Post-judgment

9 Per said notice, the current rate for judgments is 5.16%.

12

interest applies to the entire money judgment, including

pre-judgment interest.”), aff’d, No. 21-1336, 2022 WL 2702425 (4th

Cir. July 12, 2022). As noted, “[s]uch interest shall be

calculated from the date of the entry of the judgment, at a rate

equal to the weekly average 1-year constant maturity Treasury

yield, as published by the Board of Governors of the Federal

Reserve System, for the calendar week preceding[] the date of the

judgment,” 28 U.S.C. § 1961(a)(footnote omitted), and “shall be

computed daily to the date of payment . . . [and] compounded

annually,” 28 U.S.C. § 1961(b).

“The Clerk will calculate post-judgment interest after the

judgment is entered, using this well-established formula.”

Bioventus, 2020 WL 13669789, at *2.

CONCLUSION

Defendants owe Plaintiffs prejudgment and post-judgment

interest on the $2 million due under the Big Boss Excess Policy.

IT IS THEREFORE ORDERED that Defendants shall pay prejudgment

interest on the $2 million due under the Big Boss Excess Policy at

an annual rate of 8% from October 2, 2019, through the date of the

judgment, and post-judgment interest thereafter, per day, pursuant

to 28 U.S.C. § 1961 until the judgment is paid.

This 20th day of June, 2023.

/s/ L. Patrick Auld

L. Patrick Auld

United States Magistrate Judge

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