Yaldo v. North Pointe Insurance

Kelly, J.

In this case, we are asked to determine the applicable rate of interest on a judgment for plaintiff because of defendant’s failure to pay plaintiff’s claim under an insurance contract. We hold that the lower courts properly found that subsection 5 not subsection 6 of MCL 600.6013; MSA 27A.6013 is controlling. Therefore, we affirm the award of twelve percent interest to plaintiff.

i

In 1988, plaintiff sold his business, the New Inkster Market, to Kanouno Enterprises, Inc. Kanouno signed a land contract and executed a promissory note and security agreement. An insurance policy was issued, identifying the buyer as the named insured and designating plaintiff under a lender’s loss payable clause. In 1990, Kanouno defaulted on the land contract. Approximately one month later, the market burned.

Plaintiff filed a claim with defendant under the lender’s loss payable clause. When defendant refused to pay, plaintiff filed suit. The Wayne Circuit Court entered judgment in plaintiff’s favor in 1992 in the amount of $176,750.

Following unsuccessful appeals by defendant, plaintiff brought a motion to determine the rate of interest on the judgment. Plaintiff contended that the proper rate was twelve percent, compounded annually, as provided by MCL 600.6013(5); MSA 27A.6013(5). Defendant countered by asserting that the proper rate of interest ranged between six and *344seven percent pursuant to MCL 600.6013(6); MSA 27A. 6013(6).

The trial court agreed with plaintiff and awarded interest at the rate of twelve percent compounded annually as provided in MCL 600.6013(5); MSA 27A.6013(5). The Court of Appeals affirmed the trial court’s order. 217 Mich App 617; 552 NW2d 657 (1996). We granted defendant’s application for leave to appeal. 455 Mich 868 (1997).

n

A

The issue before us is whether subsection 5 or subsection 6 of MCL 600.6013; MSA 27A.6013 applies for the purpose of computing interest on the judgment. Because we are making a statutory interpretation, we review the issue de novo as a question of law. Cardinal Mooney High School v Michigan High School Athletic Ass’n, 437 Mich 75, 80; 467 NW2d 21 (1991). Subsection 5 provides:

For complaints filed on or after January 1, 1987, if a judgment is rendered on a written instrument, interest shall be calculated from the date of filing the complaint to the date of satisfaction of the judgment at the rate of 12% per year compounded annually, unless the instrument has a higher rate of interest. In that case interest shall be calculated at the rate specified in the instrument if the rate was legal at the time the instrument was executed. The rate shall not exceed 13% per year compounded annually after the date judgment is entered. [MCL 600.6013(5); MSA 27A.6013(5) (emphasis added).]

On the other hand, subsection 6 provides:

Except as otherwise provided in subsection (5) and subject to subsection (11), for complaints filed on or after Jan*345uary 1, 1987, interest on a money judgment recovered in a civil action shall be calculated at 6-month intervals from the date of filing the complaint at a rate of interest that is equal to 1% plus the average interest rate paid at auctions of 5-year United States treasury notes during the 6 months immediately preceding July 1 and January 1, as certified by the state treasurer, and compounded annually, pursuant to this section. Interest under this subsection shall be calculated on the entire amount of the money judgment, including attorney fees and other costs. However, the amount of interest attributable to that part of the money judgment from which attorney fees are paid shall be retained by the plaintiff, and not paid to the plaintiff’s attorney. [MCL 600.6013(6); MSA 27A.6013(6).]

Therefore, if an insurance policy is a “written instrument,” subsection 5 is applicable, and plaintiff is entitled to twelve percent interest compounded annually. If an insurance policy is not a “written instrument,” then subsection 6 is applicable, and plaintiff is entitled to a lower rate of interest.

Defendant argues that “written instrument” must be defined as a writing that expressly contains a rate of interest, such as a negotiable instrument. Allegedly, defendant’s definition alone gives meaning to the language of subsection 5 that states: “unless the instrument has a higher rate of interest.” Plaintiff counters by arguing that all written contracts, including insurance policies, fall within the definition of “written instrument.” The subsection 5 language referred to by defendant applies only in the event that the written instrument in question contains a rate of interest, and it is higher than twelve percent.

In order to reach a conclusion, we must determine whether the Legislature intended to include insurance policies within the definition of “written instrument.” *346The primary goal of judicial interpretation of statutes is to give effect to the intent of the Legislature. Farrington v Total Petroleum, Inc, 442 Mich 201, 212; 501 NW2d 76 (1993). In determining legislative intent, we look first at the words of the statute. If the language is clear and unambiguous, judicial construction is not normally permitted. If reasonable minds can differ regarding its meaning, then judicial construction is appropriate. Indenbaum v Michigan Bd of Medicine (After Remand), 213 Mich App 263; 539 NW2d 574 (1995). The Legislature is presumed to have intended the meaning it plainly expressed. Id.

We note that the Legislature did not define the term “written instrument” when it enacted MCL 600.6013; MSA 27A.6013. Nevertheless, we find the expression clear and unambiguous. An insurance policy is a written instrument. We refuse to rewrite the language of the statute effectively to limit “written instrument” to “negotiable instrument.” The expression “negotiable instrument” is well known and is used throughout the Uniform Commercial Code. Had the Legislature intended to restrict the applicability of subsection 5 to negotiable instruments or instruments containing a rate of interest, it could easily have used such terminology. Moreover, the language in subsection 5 cited by defendant merely recognizes that parties may write into their contracts their own terms relating to interest. If the parties choose to set no rate or to set a rate within legal limits higher than twelve percent, they are free to do it.

We note that Michigan Courts have interchanged the term “written instrument” with “written contract” and “insurance contract.” For example, in Bowen v *347Prudential Ins Co of America,1 this Court stated: “A policy of insurance is the formal, written instrument in which a contract of insurance is embodied . . . .”2 Because Michigan Courts have a history of referring to insurance policies as written instruments, we are not prepared to change the clear and unambiguous term in subsection 5.3

B

Defendant argues that including insurance policies under the definition of “written instrument” would nullify MCL 500.2006(4); MSA 24.12006(4) of the Uniform Trade Practices Act. It provides:

When benefits are not paid on a timely basis the benefits paid shall bear simple interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum, if the claimant is the insured or an individual or entity directly entitled to benefits under the insured’s contract of insurance. Where the claimant is a third party tort claimant, then the benefits paid shall bear interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum if the liability of the insurer for the claim is not reasonably in dispute and the insurer has refused payment in bad faith, such bad faith having been determined by a court of law. . . . Interest paid pursuant to this section shall be off*348set by any award of interest that is payable by the insurer pursuant to the award.

We do not agree with defendant that our interpretation of MCL 600.6013(5); MSA 27A.6013(5) nullifies this provision. We acknowledge that, under some circumstances, there will be an overlap in the statutes. However, MCL 500.2006(4); MSA 24.12006(4) allows an insured to recover twelve percent interest from its insurer where no complaint has been filed to force payment. It applies when the insurance company is dilatory in making timely payments to the insured. Its puipose is to punish the insurance company. See McCahill v Commercial Union Ins Co, 179 Mich App 761; 446 NW2d 579 (1989). Merely because, under some circumstances, the two statutes overlap does not mean that we must change the clear and unambiguous language of MCL 600.6013(5); MSA 27A.6013(5).4

c

Defendant asserts that the Court of Appeals erred when it stated that, even if subsection 5 did not apply, twelve percent could have been awarded pursuant to MCL 500.2006(4); MSA 24.12006(4). Under the Uniform Trade Practices Act, defendant reasons, twelve percent interest can be awarded only when the claim is not reasonably in dispute.

*349We find that defendant misreads the Uniform Trade Practices Act. Clearly, plaintiff could have filed a claim under MCL 500.2006(4); MSA 24.12006(4). With respect to collection of twelve percent interest, reasonable dispute is applicable only when the claimant is a third-party tort claimant. Here, plaintiff is not such a claimant. Rather, he is seeking reimbursement for the loss of his business due to a fire. Therefore, plaintiff could have recovered interest at the rate of twelve percent per annum under the Uniform Trade Practices Act.

m

Finally, defendant argues, to include insurance policies within the definition of “written instrument” is to violate the company’s right to equal protection. Defendant asserts that it imposes a heavier penalty upon written contracts than upon oral contracts or tort defendants. Allegedly, no legitimate governmental interest is served by the distinction.

Defendant is not a member of a protected class, nor are fundamental rights involved. Therefore, defendant’s equal protection claim is reviewed using a rational basis test. Michigan State AFL-CIO v MERC, 453 Mich 362, 381; 551 NW2d 165 (1996) (Brickley, C.J.). Under that test, the challenged statute will be upheld if it furthers a legitimate governmental interest and if the classification is rationally related to achieving the interest. Id,.; Shavers v Attorney General, 402 Mich 554, 618; 267 NW2d 72 (1978). Defendant has the burden of demonstrating that the classification is arbitrary and irrational, given the objective of the statute. Smith v Employment Security Comm, 410 Mich 231, 271; 301 NW2d 285 (1981).

*350We find that defendant has not met its burden. The purpose of MCL 600.6013; MSA 27A.6013 is to compensate the claimant for delays in recovering money damages. McCahill, supra. The Legislature’s choice to impose a higher rate of interest on defendants who enter into written contracts is not arbitrary. First, there is a distinction between contract claims and tort claims. Tort claimants often do not have a preexisting relationship with their tortfeasors. On the other hand, there is a preexisting relationship between two parties who have signed a written contract. Greater expectations regarding performance and payments are likely to exist when the parties have established their rights and responsibilities before a controversy arises.

While so great a distinction is not found between written contracts and oral contracts, there is nevertheless a greater degree of certainty when a written contract is involved. It would be logical for the Legislature to impose a higher interest rate for written instruments. Defendant’s argument is especially weak in light of MCL 500.2006(4); MSA 24.12006(4), which provides for a twelve percent interest rate when an insurance company does not pay a claim on a timely basis.

rv

We conclude that the language of MCL 600.6013(5); MSA 27A. 6013(5) is clear and unambiguous. The lower courts properly found that the insurance contract in this case was a “written instrument.” Therefore, we affirm the award of twelve percent interest on the judgment.

*351Mallett, C.J., and Brickley and Cavanagh, JJ., concurred with Kelly, J.

178 Mich 63, 70; 144 NW 543 (1913).

See, also, Wells v Prudential Ins Co of America, 239 Mich 92, 96; 214 NW 308 (1927); Star Steel Supply Co v United States Fidelity & Guaranty Co, 186 Mich App 475, 482; 465 NW2d 17 (1990) (McDonald, J., dissenting).

We decline to rely on the ucc for guidance regarding the meaning of “written instrument.” We agree with the Court of Appeals that the ucc is distinguishable, because it does not address the same subject matter as MCL 600.6013; MSA 27A.6013. Also, the latter does not make reference to the ucc for definitional guidelines.

Defendant’s claim that our holding would negate the “reasonably in dispute” language of MCL 500.2006(4); MSA 24.12006(4) is based on a misreading of the statute. Its express terms indicate that the language applies only to third-party tort claimants. Where the action is based solely on contract, the insurance company can be penalized with twelve percent interest, even if the claim is reasonably in dispute.