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Karen M. Lawhorne et vir. v. Employers Insurance Company of Wausau, No. 78, September Term, 1995. [Interpleader - Interest - Liability insurer initiated interpleader between bodily injury claimants without depositing net policy limits. Rule 2-221 does not require deposit of fund until ordered Held: Interest not payable on amount of fund while held

by court.

by insurer from interpleader institution to deposit with court.]

Circuit Court for Anne Arundel County Case #3109960/C-92-11520

IN THE COURT OF APPEALS OF MARYLAND No. 78 September Term, 1995 ____________________________________

KAREN M. LAWHORNE et vir. v.

EMPLOYERS INSURANCE COMPANY OF WAUSAU

____________________________________ Murphy, C.J. Eldridge Rodowsky Chasanow Karwacki Bell Raker, JJ. ____________________________________ Opinion by Rodowsky, J. ____________________________________ Filed: August 2, 1996

Presented

here

is

an

interpleader

action

brought

by

an

automobile liability insurer faced with multiple claims against an insured that exceeded the limits of the insuredUs coverage. issue is whether the claimants are entitled to interest The on

$849,680.16 for the period of more than two years that elapsed from the filing of the interpleader action to the payment of that sum into court, a delay principally caused by the bankruptcy of the insured. The circuit court would not order prejudgment interest,

and the Court of Special Appeals affirmed in an unreported opinion by a divided panel. We granted the claimantsU petition for

certiorari in order to consider this issue. The insurer and original plaintiff in interpleader is the respondent, Employers Insurance Company of Wausau (Employers). The

automobile accident underlying the interpleader action occurred on November 27, 1984. For a period encompassing that date Employers

had issued a business automobile policy to Beltran Corporation (Beltran) of Acton, Massachusetts and to its subsidiaries,

including Acton Foodservices Corporation (Acton), as additional named insureds. The accident occurred in Cecil County, Maryland

when a tractor trailer truck, operated on behalf of Acton by its employee, Louis Wallace Powell (Powell), pulled into the roadway of U.S. Route 301 at its then foggy intersection with Route 299. A

pickup truck, towing a horse trailer with two horses and proceeding on U.S. Route 301, crashed into the tractor trailer. Petitioner

Karen M. Lawhorne, then wife of petitioner Darrell F. Lawhorne, was

-2a passenger in the pickup truck. Mrs. Lawhorne suffered totally Two other persons

disabling injuries as a result of the accident.1

in the pickup truck suffered bodily injuries in the accident, the operator, Kelley Ann Corrigan, and her mother, Mary Anna Corrigan. The Lawhornes sued Acton and Powell in December 1985 in the Circuit defense. Court for Anne Arundel County. Employers undertook

Unknown to the Lawhornes and to Employers, Acton had

filed a petition for bankruptcy in Massachusetts in June 1985. The record is unclear as to whether Acton was the subject of one, or more than one, bankruptcy proceeding and, if more than one, precisely when any earlier proceeding terminated and any later proceeding commenced. It is clear, however, that on or about April

17, 1986, Beltran and various of its subsidiaries filed petitions under the Bankruptcy Code which were consolidated in the District of Massachusetts and that the consolidated proceedings included Acton. There is also an evidentiary conflict over the earliest

date as of which Employers was on notice that Acton was in bankruptcy. Imprecision and conflicts on these aspects of the

We were advised at oral argument that Mrs. Lawhorne died after the partiesU briefs were filed in this Court. Although we find no indication that a person has been substituted for Mrs. Lawhorne as a party, see Maryland Rules 8-401(b) and 2-241, Mr. Lawhorne, one of the petitioners, has standing in his own right, as an original defendant in the interpleader action, to pursue the appeal. In this opinion we shall refer to the applicants for review in this Court, as "the petitioners" or "the Lawhornes."

1

-3matter before us are immaterial, in view of our ground of decision, explained below. Employers filed the subject interpleader in the Circuit Court for Anne Arundel County on April 27, 1987. It named as defendants

EmployersU insureds, the bodily injury claimants, and property damage claimants, including a subrogated insurer. The complaint

alleged that Employers "will pay into the registry of this Court the sum of $1,000,000.00, less credit for payments heretofore made ...." The relief requested by the complaint included a court order

"directing and authorizing [Employers] to deposit with the Clerk of this Court the sum of $1,000,000, less credit for amounts

previously paid ... and, upon such payment, [discharging Employers] from any and all further obligations under the terms of its policy of insurance."2 Employers requested that the defendants be ordered

to "interplead and settle among themselves their rights and claims" to the amount payable under the liability policy, and that the defendants be enjoined from instituting or further prosecuting actions arising out of the accident. Answering the complaint for interpleader in June 1987, the Lawhornes raised no objection to the use of interpleader and Part IV.A.2 of the Employers policy in part states: "Our payment of the LIABILITY INSURANCE limit ends our duty to defend or settle." This aspect of interpleader actions filed by liability insurers is not involved in the issue before us, and we intimate no opinion thereon. Some of the legal problems involved in interpleaders brought by liability insurers are discussed in Morris, The Use of an Interpleader Action to Resolve Multiple Claims from One Accident, 51 Ins. Council J. 99 (Jan. 1984).
2

-4requested that the "appropriate sum" be paid into court and

invested in an interest-bearing account(s).

Employers did not

deposit the balance of the liability coverage with the court, and no party at that time sought a court order requiring the deposit. Almost two years later, on May 30, 1989, the Lawhornes moved for an order directing Employers to deposit the balance of the policy limits in court. court directed By an order of June 29, 1989, the circuit to deposit that balance, namely,

Employers

$849,680.16.

During the pendency of the interpleader Employers had

settled the property damage claims and had advanced $81,324.31 for the care of Mrs. Lawhorne. The order directing deposit of the

balance further directed the court clerk to make a distribution of that balance to the bodily injury claimants in specified amounts upon which they obviously had agreed. Employers paid the balance

into court on the day immediately following passage of the order to deposit. The Lawhornes and their counsel received $712,180.16.

During the period between the filing of the interpleader and the deposit of the funds, the parties to the interpleader, and others, were occupied in efforts to settle the tort claims. These

settlement negotiations involved the trustee in bankruptcy of Acton because, as explained below, the amount available under a policy of liability insurance issued to a debtor against whom tort claims are asserted is an asset of the debtorUs bankruptcy estate. Further,

inasmuch as Employers was willing to pay policy limits, Employers advised the Lawhornes to negotiate with ActonUs excess liability

-5carrier, Mission Insurance Company (Mission), a California-based insurer. liquidation In late 1986 or early 1987 Mission was placed in in California. Consequently, the settlement

negotiations expanded beyond the parties to the interpleader action and ActonUs trustee in bankruptcy to include the liquidator of Mission and the Massachusetts Insurance Insolvency Fund (MIIF). The lengthy negotiations led to a structured settlement under which EmployersU contribution was to be an annuity for Mrs. Lawhorne purchased from an affiliate of Employers. When the settlement

agreement was circulated for signature, however, the Acton trustee concluded, after analyzing claims and assets of the bankruptcy estate, that Acton could not fund its portion of the settlement. In addition, MIIF advised that it did not provide the level of coverage that had been anticipated. fell through. The Lawhornes then concentrated their efforts on lifting the bankruptcy stay. 1989. It was lifted by the Bankruptcy Court on May 15, The long awaited settlement

There followed in this interpleader action the LawhornesU

motion for an order directing the deposit of funds, described above, and a counterclaim by the Lawhornes seeking interest on the net of the liability policy limits. That counterclaim was decided That

favorably to Employers on its motion for summary judgment.

interest issue, however, was not resolved until May 1994, for reasons that are not relevant to the instant matter.

-6Petitioners contend that prejudgment interest is awardable in this case under: (1) the law governing interpleader actions; (2)

Maryland Code (1974, 1995 Repl. Vol.),

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