Prejudgment interest based on award minus PIP offset

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A car accident victim was entitled only to prejudgment interest on the part of her jury verdict that was not offset by personal injury protection benefits, the Appeals Court has ruled.

A jury had returned a $6,301 judgment to plaintiff Faria Simmons, which was reduced by $3,963 for PIP benefits she received from her insurer as reimbursement for medical expenses.

Rejecting the plaintiff’s argument that prejudgment interest should be calculated on the gross jury award, a Superior Court judge ruled that interest could be calculated only based on the net award.

The Appeals Court affirmed the decision.

“[G.L.c. 231, §6B, the prejudgment interest statute], does not apply to the portion of the jury’s award constituting PIP benefits because those benefits are not ‘damages in tort actions’ but a creature of contract between the insured and automobile insurer, ‘granted in lieu of damages otherwise recoverable by the insured person or persons in tort,’” Judge Paul Hart Smyth wrote on behalf of the panel.

Smyth added that “assessing prejudgment interest on an award for damages before the award is reduced by PIP benefits would run counter to the express provision in G.L.c. 90, §34M, [the PIP statute], that individuals who would otherwise be responsible for damages are exempt from tort liability to the extent PIP benefits apply.”

The 14-page decision is Simmons v. Chace, Lawyers Weekly No. 11-024-25.

No appellate case on point

Defense counsel Gregory M. Noble of Walpole said the issue was straightforward and that he was unsure as to the basis for the belief that the plaintiff was somehow entitled to interest on a judgment for benefits she received contemporaneously.

“Where PIP benefits are paid contemporaneously to a plaintiff for treatment they’ve incurred, and interest is there to compensate the prevailing plaintiff for lack of use of those funds, there is no lack of use when it comes to PIP benefits,” Noble said.

The closest thing we could find was an appeal of an arbitration decision that [the judge] referenced during oral argument. This full opinion should prevent further appeals on this same issue.

— Gregory M. Noble, Walpole

Still, he said, the decision is helpful because there was no appellate case on point.

“The closest thing we could find was an appeal of an arbitration decision that Judge Smyth referenced during oral argument,” Noble said. “This full opinion should prevent further appeals on this same issue.”

Lawrence P. Almagno Jr. of Cranston, Rhode Island, who represented the plaintiff, could not be reached for comment.

But Robert E. Mazow of Salem, who represents plaintiffs in personal injury cases and medical providers in PIP disputes with auto insurers, said the decision serves as a reminder that even when a jury awards full damages, PIP payments will chip away at both the judgment and interest.

Unfortunately, he said, juries do not know that PIP payments will offset any judgment, which may lead to less-than-full recovery for injured parties.

“For those of us who handle personal injury cases, we must be precise in our demand calculations and mindful of how PIP offsets impact the final judgment,” Mazow said,

Wayne H. Peereboom of Westfield emphasized that the language of the special verdict slip in the case mirrored the language of the prejudgment interest statute by tasking the jury with determining what amount of money would fairly and adequately compensate the plaintiff for the injuries she suffered from the accident.

In response, the jury rendered a single verdict for pecuniary damages for personal injuries to the plaintiff.

Because the jury is not privy to the ministerial act of deducting PIP payments from the verdict, Peereboom said, there is no way of knowing whether the verdict would have been higher had the jury been aware of the deduction.

Meanwhile, he said, given the fact that a very high percentage of individuals in the commonwealth have health insurance coverage, jurors may have assumed medical bills were paid and therefore did not include them in the verdict.

“It is impossible to determine what, if any, weight the jury placed on medical bills in calculating the amount of compensation to the victim,” he said. “It is the function of the jury to fairly and adequately compensate the victim. Where it is impossible to differentiate the basis for the verdict, it would seem the policy reflected in the [prejudgment interest statute] should control and interest be assessed on the entire verdict.”

Verdict offset

Simmons sued defendant Nicole Cace in Superior Court for injuries she suffered in an auto accident in Brockton.

Cace conceded that her negligent operation caused Simmons’ injuries, leaving the amount in damages as the sole issue in dispute at trial.

The parties stipulated that Simmons incurred $4,104 in medical bills but disputed what was owed for pain and suffering.

Cace sought to limit the award to damages for the stipulated medical bills, while Simons sought an additional $14,396.

The jury returned a judgment for $6,301.

The parties agreed that the award should be reduced by $3,963 for PIP benefits Simmons had previously received from her insurer.

But Simmons requested that prejudgment interest be calculated on the entire $6,301 award.

Cace, on the other hand, asked that interest be calculated based on the net amount of the verdict; in other words, the award minus the PIP payout.

Judge Janet L. Sanders ordered that prejudgment interest be calculated on the net sum of $2,338.

Simmons appealed.

On the net

In affirming Sanders’ decision, the Appeals Court panel found that the express language of the PIP statute removes PIP benefits from the scope of compensatory damages contemplated by the prejudgment interest statute.

It does that by providing that PIP benefits “are granted in lieu of damages otherwise recoverable by the injured person or persons in tort as a result of an accident occurring within [Massachusetts],” Smyth said, quoting the statute.

Instead, PIP benefits are paid pursuant to a contract between the policyholder, who pays premiums for such benefits, and the carrier, which is obligated to pay such benefits when due, Smyth said.

“Stated differently, ‘the accident victim loses [her] right to recover in tort to the extent [she] is eligible for [PIP] benefits,’” Smyth wrote, quoting the Supreme Judicial Court’s 1971 Pinnick v. Cleary decision.

In drawing that conclusion, the Appeals Court rejected Simmons’ assertion that Massachusetts caselaw has long stood for the proposition that prejudgment interest applies to the entire jury award, regardless of the source or components of the award.

“The case law on which the plaintiff relies relates only to the assessment of interest on the entirety of a compensatory damages award after the award has been either bifurcated or apportioned; the authority does not extend to noncompensatory pecuniary payments that may be included in a damages award,” Smyth said.