Post-Judgment Interest Constitutes Covered Damages Under Excess Liability Policy

On December 17, 2013, the Court of Appeals issued a decision in Herzl Ragins, et al. v. Hospitals Insurance Company, Inc., Docket No. 234, holding that an excess liability carrier was required to pay post-judgment interest that exceeded the limit on the insured’s primary liability insurance.

In Ragins, the excess policy covered "all sums" that the insured was "legally obligated to pay as damages" in excess of the primary policy cap. The Court of Appeals held that interest on the underlying judgment was within the scope of coverage because the policy did not "limit the definition of 'sums' to any particular category of damages or liability, or otherwise exclude interest from its reach." In reaching this conclusion, the Court of Appeals reiterated the well-established principle that insurance contracts are construed broadly in favor of coverage. Therefore, "even if there were any ambiguity as to whether the covered sums under the insurance policy include interest, that ambiguity must be construed against [the insurance company] and in favor of" the insured.

Attorneys dealing with liability insurance policies should bear in mind that, unless expressly limited, courts will interpret coverage broadly to include interest and other sums the insured is "legally obligated to pay."