Michigan Court of Appeals; Docket No. 164181; Published
Judges Fitzgerald, White, and Townsend; 2-1 (with Judge White Dissenting in Part); Opinion by Judge Fitzgerald
Official Michigan Reporter Citation: 212 Mich App 612; Link to Opinion 
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Underinsured Motorist Coverage: Underinsured Motorist Coverage in General
Revised Judicature Act – Arbitration (MCL 600.5001, et seq.)
Civil Judgments and Interest (MCL 600.6013)
CASE SUMMARY:
In this published Opinion by Judge Fitzgerald, Judge White concurring in part and dissenting in part, the Court of Appeals determined issues relating to whether interest was awardable on an arbitration award pursuant to a claim for underinsured motorist benefits, and, if so, the appropriate rate of interest applicable to such an award.
Paintiffs were injured in a motor vehicle accident and sought damages from the other driver's insurance carrier. After receiving damages from the other driver's insurance company, they brought an action in the circuit court against Michigan Mutual Insurance Company seeking a declaration that they were entitled to underinsured motorist benefits under their own insurance policy. Both parties requested arbitration, and the trial court ordered the matter to arbitration by stipulation of the parties, with the court retaining jurisdiction to determine issues relating to "interest, costs and attorney fees" An arbitration panel rendered an award subsequently, and the court then issued a judgment in the amount of the award. Thereafter, plaintiffs filed a motion for an award of interest, costs and attorney fees. The trial court at first issued an opinion awarding 5% interest commencing on the date of the arbitration award, pursuant to MCLA 438.7. Subsequently, in a supplemental opinion, based upon the holding in Gordon Sel-Way, Inc. v Spence Brothers, 438 Mich 488 (1991), the court determined that interest was mandated pursuant to MCLA 600.6013 and ordered that plaintiffs were entitled to such interest as an element of damages from the date of injury until the complaint was filed at the rate of 12% compounded annually, and that interest from the date of the complaint would be assessed in accordance with MCLA 600.6013.
The Court of Appeals first rejected the argument of the insurance company that interest was not an element of the plaintiffs' damages. Although the endorsement to the insurance policy does not contain an interest provision, the authority to award interest as an element of damages is derived from the broad language contained in the arbitration clause. Since the arbitration clause empowered the arbitrators to determine the proper amount of damages, which would include the determination of whether to include common law interest as an element of damages, the Court of Appeals held that an award of interest was appropriate under the circumstances. The Court of Appeals next addressed the issue of what interest rate applied to the arbitration award. The Court of Appeals held that the trial court correctly "borrowed" the 12% rate provided in the judgment interest statute, MCLA 600.6013, at the time of plaintiffs' injury in 1985. However, in the absence of any authority providing for the compounding of interest, the Court of Appeals felt that the trial court erred in compounding the interest awarded to plaintiffs.
Finally, the Court of Appeals determined the appropriate post-complaint rates of interest. Since, at the time the plaintiffs' complaint was filed, the parties were already contractually obligated to arbitrate their dispute, the presence of a prior arbitration agreement means that MCLA 438.7, rather than MCLA 600.6013, governs the award of "pre-judgment interest" in this case from the date the arbitration award was rendered until a motion was filed to confirm the award and reduce it to a judgment. Thereafter, MCLA 600.6013 governs the award of interest from the date the motion to confirm was filed until the date that the judgment was satisfied.
In summary, the Court of Appeals held that plaintiffs were entitled to interest as an element of damages at the rate of 12% simple interest from the date of the accident until the lawsuit was filed. Plaintiffs were not entitled to interest from the date the lawsuit was filed until the arbitration award was rendered, because there already existed a contractual agreement to arbitrate. The presence of a prior arbitration agreement means that MCLA 438.7 governs prejudgment interest from the date of the arbitration award. Plaintiffs were entitled to 5% interest pursuant to MCLA 438.7 from the time the arbitration award was rendered until the motion to confirm was filed, and to a 12% interest rate pursuant to MCLA 600.6013 from the date the motion to confirm was filed until the judgment was satisfied.
