Insurer's prejudgment interest starts when payment is due, not when claim was denied
Meridian Security Insurance Co. was responsible for paying $35,000 in prejudgment interest, starting from the date of each attorney invoice, a court ruled.
After concluding that Meridian Security Insurance Co. had a duty to indemnify an Anne Arundel County couple in an underlying trespass and nuisance lawsuit involving a neighbor, a Maryland federal judge further held that the insurer was responsible for prejudgment interest of $35,000, starting from the date of each attorney invoice.
U.S. District Judge Julie R. Rubin for the District of Maryland partially granted and partially denied Louis P. Batstone and Griffith R.D. Batstone’s motion for summary judgment on liquidated damages in a Feb. 14 opinion, after previously granting their motion for partial summary judgment regarding their breach-of-contract claim, and ordering that Meridian had a duty to defend them in an underlying lawsuit filed in Anne Arundel County Circuit Court.
In their motion, the Batstones looked to recover several expenses, including undisputed attorney fees and expenses of $146,856.46; prejudgment interest from the date Meridian denied coverage of $35,245.55; indemnification for unpaid attorney fees and expenses to the couple’s former counsel, Brennan Law Firm, of $11,813.59; and indemnification for any additional attorney fees and expenses owed to the current attorneys.
In part, Meridian argued that the Batstones miscalculated the prejudgment interest by calculating them from the date of the defendants’ original denial. The insurer argued that the couple was only entitled to prejudgment interest as it accrued, and that they were not entitled to damages for charges they deemed illegitimate, the challenged fees at issue in the Brennan litigation.
According to the Maryland Supreme Court, “a party is entitled to prejudgment interest as a matter of right where the obligation to pay and the amount due are ‘certain, definite, and liquidated by a specific date prior to judgment,’” Rubin’s order cited.
Rubin also noted that the district court’s reasoning in Charter Oak Fire v. American Capital (2017) was instructive as it concluded, “unlike claims for unliquidated damages, where the amount ‘has not been fixed by agreement or cannot be exactly determined by the application of rules or arithmetic or of law,’ the plaintiffs’ defense costs could be exactly determined.”
“Here, the court previously granted Plaintiffs’ motion for partial summary judgment as to their breach of contract claim and determined that Defendant had a duty to defend Plaintiffs in the Atkins litigation. The parties also stipulated to the total amount of attorneys’ fees and expenses sought in this matter. The obligation to pay is thus definite and the amount due is ‘certain, definite, and liquidated’ prior to the court’s order herein,” Rubin said.
In turning to the actual dispute of the calculation of prejudgment interest, the court agreed with Meridian’s argument that it should be calculated from the date of each attorney invoice, or the date each payment became due. According to the U.S. Court of Appeals for the Fourth Circuit’s 2020 decision in Parkway 1046 v. U.S. Home, “prejudgment interest accrues from the date where the obligation to pay and the amount due were both certain.”
Ultimately, the court calculated the total prejudgment interest to be $25,886.66.
Moreover, the court noted that it “has previously calculated prejudgment interest by using the invoice dates for the underlying attorneys’ fees,” and, thus, determined that the prejudgment interest amount the Batstones were entitled to “is calculated according to when the invoices were issued (and payment was thus due).”
Regarding the Batstones seeking indemnification for unpaid attorney fees and expenses to the Brennan Law Firm and future attorney fees and expenses, the court denied the motion. The court noted that they can seek an award of attorney fees or move to amend judgment if appropriate in the future.
In regard to the undisputed attorney fees, where the couple sought a total of $146,856.46, Rubin concluded that there is no genuine dispute of material facts as to the Batstones’ claims and granted summary judgment.
The Batstones’ attorney, Neal Cormac Baroody of Baroody and O’Toole in Baltimore, did not immediately respond to a request for comment.
Meridian’s attorney, Jonathan L. Schwartz of Freeman Mathis & Gary in Chicago, declined to comment.
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