January 6, 2012
On December 30, 2011, a divided panel of the Indiana Court of Appeals disagreed over application of Indiana's prejudgment interest statute in
Kosarko v. Estate of Herndobler, ___ N.E.2d ___ (Ind. Ct. App. 2011), Cause No. 45A03-1012-CT-668. Given the fundamental nature of the panel's disagreement over how the statute should be applied, it will be interesting to see if the Indiana Supreme Court grants transfer.
less..
In this case, two people were involved in an automobile accident. The plaintiff sued the defendant in February 2007 and, in March 2008, served the defendant with a settlement offer in the amount of $100,000, payable within 60 days. At that time, the plaintiff was claiming medical expenses in the amount of $23,216.49. The defendant rejected this offer. In September 2008, the plaintiff asserted that her medical expenses were $31,410.32. On March 25, 2009, the plaintiff provided the defendant with new medical bills and asserted that her medical expenses now totaled $72,733.58. The case was subsequently presented to a jury, who returned a verdict for the plaintiff in the amount of $210,000.
After the verdict, the plaintiff moved for prejudgment interest and the trial court denied that motion, concluding that the plaintiff's damages were not ascertainable within a time frame that justified granting the plaintiff's motion. The plaintiff appealed.
Normally, prejudgment interest is not available if the plaintiff does not make a qualified settlement offer within one year after the claim is filed. However, trial courts have the discretion to extend this time period based on a showing of good cause.
The majority reversed the the trial court's decision for the following reasons:
We find no dispute as to the amount of Kosarko's medical bills. Kosarko provided an accounting of her health care expenditures at all times during the case. As the trial court noted, Kosarko's medical bills increased as the case progressed. Nevertheless, a year elapsed from March 2009, when Kosarko notified Padula of the biggest increase in her medical bills, and the beginning of the trial in March 2010. Thus, Padula had ample opportunity to evaluate the known dollar cost of the dispute and consider settlement. There is no indication in the record before us that Kosarko's increased medical expenses were unnecessary, fraudulent, or unrelated to the automobile accident. There is also no evidence that Kosarko unduly delayed the surgery that caused the largest increase in her medical costs. Under such circumstances, "the defendant and not the plaintiff should bear the cost of the time value of money in the intervening period if the ultimate result is within the parameters set by the legislature."
Cahoon v. Cummings, 734 N.E.2d 535, 547 (Ind. 2000). The trial court abused its discretion by denying Kosarko's motion for prejudgment interest. Consequently, Kosarko is entitled to prejudgment interest in the amount of $79,627.40, which she requested in her motion.
In her dissent, Judge May stated that the focus of the Court's inquiry should have been on the information available to the defendant within the time for accepting or rejecting the settlement offer. Thus, she disagreed with the majority's decision to place the risk of increased damages through further medical treatment on the defendant.
The majority's decision puts a lot of emphasis on the purpose of the prejudgment interest statute, which is to encourage settlements. Both plaintiffs and defendants should take the anticipated costs of further medical treatment into account when making decisions that affect the application of this statute.
Lessons:
- A defendant's decision to reject a qualified settlement offer will not be excused by the fact that a plaintiff is still receiving medical treatment for his injuries.
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