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Insurer does not owe statutory interest on judgment because insured did not file counter-suit

The Cincinnati Insurance Company sued the owner of a buidling in Flint, seeking a declaratory judgment that it did not owe insurance benefits for replacing a defective fire alarm system.  The Insurer lost that action and was ordered to pay more than $500,000.00 in damages.  In the interim, the trial judge ordered it to pay statutory interest on the amount of the judgment, and the insured appealed arguing that it was entitled to punitive interest at a much higher rate because the insurer was dilatory in paying the claim.

On appeal, the Court first held that Cincinnati may be liable for punitive damages, but only if the insured documents that a "satisfactory proof of loss" was timely filed or escused by insurer misconduct.  Since there was no evidence on these points in the record, the case was returned to the trial court to address those questions.  The appellate panel went on to hold that statutory interest was not payable, because the Supreme Court's "Engler Majority" of insurance activists had ruled that statutory interest only starts when the Plaintiff files a complaint.  Since Cincinnati initiated this legal action and the insured did not file the "complaint," interest never started to run. The Court came to this conclusion even though the insured was not obligated to file a counter-claim when a declaratory judgment action is filed by the insurer.
Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
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