Prejudgment interest included in “all damages” language in uninsured motorist insurance policy.


Where plaintiff’s uninsured motorist insurance policy stated that it covered “all damages” and prejudgment interest was not listed as a specific exception to coverage, the Court of Appeals ruled that the policy language was “sufficiently broad to include prejudgment interest.”

In Lewis v. State Farm, No. W2019-01493-COA-R3-CV (Tenn. Ct. App. Nov. 5, 2020), plaintiff was in an accident caused by an unknown driver who left the scene. Plaintiff was driving his brother’s car, and the company insuring the car settled with plaintiff. Plaintiff was also personally insured by defendant State Farm, with uninsured motorist coverage of up to $500,000 per accident.

Plaintiff filed this suit pursuant to Tenn. Code Ann. § 56-7-1206. After both settlement negotiations and mediation failed to produce a resolution, the case was tried in front of a jury, and the jury found the unknown motorist 100% at fault, awarding $275,000 in damages to plaintiff. Plaintiff filed a post-trial motion seeking prejudgment interest, which the trial court denied, finding that the insurance policy did not include prejudgment interest. This appeal followed, and the trial court was reversed.

The Court of Appeals began by looking at the language of the policy at issue here. The policy stated that “[t]he limit shown under ‘Each Person’ is the most we will pay for all damages resulting from bodily injury to any one insured in any one accident.” The policy also included a list of specific exceptions to coverage, and prejudgment interest was not included in that exception list. While the trial court seemed to base its opinion “on the fact that the subject policy does not specifically mention prejudgment interest,” the Court of Appeals pointed out that prejudgment interest was also not specifically excluded. Because “the policy at issue here contains a list of specific exclusions that does not include prejudgment interest,” the Court found that it “must presume that the policy exclusions are restricted to the enumerated items” and that prejudgment interest was thus not excluded.

The Court went on to explain that “the fact that the policy does not specifically state that State Farm will pay prejudgment interest is not fatal to the award of same.” Noting that Tenn. Code Ann. § 47-14-123 defines prejudgment interest as “an element of, or in the nature of, damages,” the Court found that the language “all damages” was broad enough to include prejudgment interest. After citing two cases that came to the same conclusion, the Court held that “the trial court erred in holding that the subject policy precludes an award of prejudgment interest.”

The finding that prejudgment interest could be awarded under the policy, however, did not completely resolve the case. The award of prejudgment interest is primarily guided by “principles of equity,” and the question of whether such damages are appropriate “falls squarely within the trial court’s purview.” The Court of Appeals therefore declined to address “whether an award of prejudgment interest [was] equitable under the facts and circumstances of this case” and remanded that question to the trial court.

While this case followed previous Tennessee opinions that reached the same conclusion, it is still an important opinion for attorneys who might deal with uninsured motorist policies. The language “all damages” is used in many policies, and this opinion lends further support to the interpretation that such language includes the potential award of prejudgment interest.  That said, look for insurers to start amending their policies to exclude coverage for prejudgment interest in UM claims.


NOTE:  the opinion is this case was released less than seven weeks after oral argument.

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