Copr. © West 2000 No Claim to Orig. U.S. Govt. Works
1994 WL 273367
(Cite as: 1994 WL 273367 (S.D.N.Y.))
Only the Westlaw citation is currently available.
United States District Court, S.D. New York.
AUTOMATIC FINDINGS, INC., d/b/a Seidman
THOSE CERTAIN UNDERWRITERS AT
LLOYDS AT LONDON AND ELSEWHERE
JEWELERS BLOCK POLICY NO. 243883100,
No. 92 CIV. 6191 (DLD).
June 20, 1994.
Weg and Meyers, P.C. (Joshua L. Mallin), for plaintiff.
Abrams & Martin, P.C. (Allen A. Kolber), for defendants.
DiCARLO, District Judge: [FN1]
*1 Plaintiff Automatic Findings, Inc., d/b/a Seidman Metals, filed this action for breach of contract against Defendants Those Certain Underwriters at Lloyds at London and Elsewhere. Plaintiff alleged Defendants, insurer of Plaintiff's premises, breached the contract by refusing to reimburse Plaintiff for the loss it suffered as a result of an armed robbery of its premises. Following a jury trial, a verdict in favor of Plaintiff was rendered in the amount of $907,350.00.
Plaintiff now moves for an order setting the date from which prejudgment interest shall accrue. According to Plaintiff, interest should begin to accrue on December 21, 1990, the date of the robbery; or, at the latest, on August 3, 1991, the date upon which payment of principal was due under the terms of the insurance contract.
Defendants agree Plaintiff is entitled to prejudgment interest, but contend the earliest date upon which interest should begin to accrue is August 3, 1991. In addition, Defendants argue that certain events and agreements between the parties resulted in a tolling of interest from the date interest commences until September 4, 1992.
1. The Date Upon Which Interest Commences
The court begins by noting that, because federal jurisdiction over this case is based on diversity and Plaintiff's right to prejudgment interest qualifies as a substantive right, this court must apply New York law. Adams v. Lindblad Travel, Inc., 730 F.2d 89, 93 (2d Cir.1984) (citation omitted). The statute governing the date from which interest is computed provides that "[i]nterest shall be computed from the earliest ascertainable date the cause of action existed ..." N.Y.Civ.Prac.L. & R. § 5001(b) (McKinney 1992). In an action to recover under a contract of insurance, the earliest ascertainable date the cause of action existed is the date the insured is first entitled to payment, which is in turn determined pursuant to the terms of the contract. Farmland Market Corp. v. North River Ins. Co., 481 N.Y.S.2d 80, 81 (1st Dept.1984) aff'd 490 N.Y.S.2d 187 (1985). In this case, the contract provides: 15. There shall be no abandonment to the Underwriters of any property, but the amount of loss or damage for which the Underwriters may be liable shall be payable thirty (30) days after satisfactory proof of loss, as herein provided, is received by the Underwriters.
Plaintiff served Proof of Loss on Defendants on July 3, 1991. No dispute exists as to whether the received Proof of Loss was satisfactory. In accordance with the above clause, Defendants were in breach upon failure to pay Plaintiff within 30 days thereafter. Therefore, the earliest date upon which interest may begin to accrue is August 2, 1991, the date of the breach.
Plaintiff argues that the earliest ascertainable date should instead be the date of the robbery, which is also the date the company was first notified of the loss. In support of its position, Plaintiff relies on Pioneer Food Stores Coop. Inc. v. Brokerage Surplus Corp., 416 N.Y.S.2d 274 (1st Dept.1979), wherein the court held that prejudgment interest began to run 60 days after the plaintiff first notified the insurer of its right to the proceeds. The plaintiff in Pioneer, who was not the owner of the insured property, never filed Proof of Loss. Therefore, the court considered the first notice to the insurer that Plaintiff was entitled to the proceeds as analogous to proof of loss in fixing the date from which prejudgment interest should begin to run. Id. at 275.
*2 In contrast to Pioneer, there is no need for this court to construct a date upon which Defendants were first notified of the loss. Plaintiff filed a Proof of Loss, and the contract fixes the date of the breach as 30 days after receipt of satisfactory Proof of Loss. Accordingly, the court holds that interest shall commence on August 2, 1991.
2. Applicable Tolls
The court must next determine whether any period of time prior to the date of the verdict is to be excluded. Defendants argue that interest be tolled for a period of 140 days, from the day that interest begins to run, due to Plaintiff's delay in producing its principal to appear for an Examination Under Oath, and its failure to respond to repeated requests by Defendant for necessary documents. In addition, Defendants request that the court toll interest for 249 days, starting one year after the date of the loss, during which time Plaintiff expressly agreed to waive interest as a condition of Defendants' granting extensions of time for Plaintiff to commence this action.
A. Delay During Pretrial Discovery
Defendants contend that Plaintiff is not entitled to prejudgment interest for two separate periods: (1) from August 3, 1991 through October 29, 1991, during which Plaintiff's principal and eyewitness to the robbery refused to appear at an Examination Under Oath, and sought to have his earlier Examination Under Oath declared a nullity; and (2) from October 29, 1991 through December 21, 1991, during which Plaintiff failed to provide documentation and information repeatedly requested by Defendants.
The statute governing Plaintiff's entitlement to prejudgment interest provides that "[i]nterest shall be recovered upon a sum awarded because of a breach of performance of a contract ..." N.Y.Civ.Prac.L. & R. § 5001(a) (McKinney 1992) (emphasis added). "Under the law of New York, therefore, prejudgment interest is normally recoverable as a matter of right in an action at law for breach of contract." Adams v. Lindblad Travel, Inc., 730 F.2d at 93 (citation omitted).
Prejudgment interest "is a form of compensation intended to make the injured party whole." Mitsui & Co. v. American Export Lines, Inc., 636 F.2d 807, 824 (2d Cir.1981) (citations omitted). During the period for which Defendant seeks a toll, Defendant had the use of money due Plaintiff under the terms of the contract between the parties. To toll interest for the period during which Plaintiff was deprived of the use of its money would be contrary to CPLR § 5001(a), and would fail to make Plaintiff whole for its loss.
Moreover, Defendant was not prejudiced by the delay. While Plaintiff's principal was unable to attend another Examination Under Oath and may have delayed in returning documents, Defendant's investigation was ongoing. During the periods of delay, Defendant took the depositions of 5 witnesses, and multiple reports by Defendant's investigator were being compiled.
*3 Accordingly, the court denies Defendants' request that interest be tolled during the pretrial discovery period.
B. Express Waivers
Defendants request that the court toll interest for the period from December 21, 1991 through September 4, 1992 based on express waivers of interest contained in various agreements between the parties. Under the terms of the insurance contract, Plaintiff was required to commence suit against Defendants within one year of the date of loss. On December 13, 1991, Plaintiff made the first of seven (7) requests for an extension of time in which to commence its action. A provision of the extension agreement, signed by both parties, required that "[i]nterest, if any, applicable to be paid on this claim by the interested insurance underwriters is not to be calculated and payable during any period of time for which the time of the assured to commence litigation has been extended by agreement." Defs.' Aff. In Opp'n at Ex. 3, Letter dated December 19, 1991, from Abrams & Martin, to Weg & Myers. Plaintiff argues this waiver is ineffective because Defendants' extensive investigation necessitated the delay in commencing the action.
Once the parties have entered into an agreement to toll interest, this court will not disturb the terms of the agreement absent a showing that the contested terms are invalid. Plaintiff has not disputed the validity of the agreement.
The terms of the extension agreement provided that interest is not to be calculated "during any period of time for which the time of the assured to commence litigation has been extended by agreement." "A civil action is commenced by filing a complaint with the court." Fed.R.Civ.P. 3. Plaintiff filed its complaint with the court on August 14, 1994. Accordingly, interest is tolled for the period from December 21, 1991 through August 14, 1992.
3. Rate of Interest
The statute governing the rate of prejudgment interest provides that "[i]nterest shall be at the rate of nine per centum per annum, except where otherwise provided by statute." N.Y.Civ.Prac.L. & R. § 5004 (McKinney 1981). In accordance with § 5004, the applicable rate of prejudgment interest is nine (9) percent per annum.
The court holds that prejudgment interest on the jury's verdict of $907,350.00 shall commence on August 2, 1991, and continue until January 26, 1994, the date of the jury's award, except that accrual of interest shall be suspended for the period from December 21, 1991 through August 14, 1992 pursuant to the terms of the extension agreement entered into by the parties. Interest for the applicable period will accrue at the rate of nine (9) percent per annum.
FN1. Sitting by designation.