Finks v. Cigna Insurance Company ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________________
)
CYNTHIA FINKS, )
)
Plaintiff, )
)
v. ) Civil Action No. 08-1272 (ESH)
)
LIFE INSURANCE COMPANY OF NORTH )
AMERICA, )
)
Defendant. )
__________________________________________ )
MEMORANDUM OPINION
Upon consideration of the parties’ submissions regarding prejudgment interest (Dkt. Nos.
21, 22), and for the reasons stated below, the Court orders defendant to pay plaintiff an
additional $4,082.37 in interest.
BACKGROUND
Plaintiff Cynthia Finks (“Finks”) filed suit to compel defendant Life Insurance Company
of North America (“LINA”) to provide Long Term Disability benefits to plaintiff, under the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.
Plaintiff alleges that she became disabled on or about September 7, 2006, as a result of chronic
Lyme disease. She alleges that, as a result of this disability, she was entitled to monthly
disability benefits beginning on December 7, 2009,1 and ending on July 21, 2009, when she
1
Plaintiff’s disability policy requires a 90-day elimination period. Thus, the benefits period began on
December 7, 2009, ninety days after plaintiff became first became disabled.
1
returned to work. Plaintiff further asserts that she is entitled to prejudgment interest totaling
$10,270.09.2
After this lawsuit was filed, LINA approved plaintiff’s disability benefits. On April 15,
2009, LINA issued a check to plaintiff for $121,217.52, representing LINA’s calculation of
$115,762.83 in disability benefits and $5,454.69 in interest.
ANALYSIS
Although defendant’s payment of plaintiff’s disability benefits resolved the central
dispute in this case, the parties continue to disagree regarding the amount of interest owed to
plaintiff.
In calculating the interest of $5,454.69, LINA applied the 3.25% prime rate that was in
effect in April 2009 for the entire period of delayed benefits without compounding the interest.
Plaintiff argues that LINA must instead apply the varying prime rates that were in effect during
each of the months that plaintiff was owed a disability monthly payment. Applying these
varying monthly prime rates (which ranged from 8.25% to 3.25%) to the disability benefits
payments that plaintiff should have received, and compounding monthly, plaintiff concludes that
defendant owes her a total of $10,270.09 in interest.3
The decision on whether to award prejudgment interest falls within this Court’s
discretion. See Forman v. Korean Air Lines Co., Ltd, 84 F.3d 446, 450 (D.C. Cir. 1996);
McKesson Corp. v. The Islamic Republic of Iran, 116 F. Supp.2d 13, 40 (D.D.C. 2000). Because
no exceptional or unusual circumstances exist that would make an interest award inequitable in
this case, the Court concludes that an award of prejudgment interest is appropriate. See Moore v.
2
Plaintiff concedes that the interest period commenced on March 6, 2007, the date on which the initial
disability payment should have been made.
3
Alternatively, plaintiff argues that the interest should be compounded annually and claims $10,063.98 in
interest.
2
CaptialCare, Inc., 461 F.3d 1, 13 (D.C. Cir. 2006) (holding that prejudgment interest on unpaid
ERISA benefits is presumptively appropriate); see also Rodgers v. United States, 332 U.S. 371,
(1947) (explaining that courts should weigh the “relative equities” when determining whether
prejudgment interest should be awarded where Congress has been silent on the subject).
The decision on how to compute prejudgment interest is also left to the Court’s
discretion. Forman, 84 F.3d at 450. In calculating a prejudgment award in an ERISA case, the
Court has three primary objectives: (1) preventing the unjust enrichment of the defendant; (2)
ensuring that the plaintiff is made whole; and (3) promoting settlement while deterring any unfair
benefit from litigation delay. Moore, 461 F.3d at 13.
As the D.C. Circuit has stated, the most appropriate prejudgment interest rate is the prime
rate, i.e., the rate that banks charge for short-term unsecured loans to credit-worthy customers.
Id. at 450; see Cement Division, Nat'l Gypsum Co. v. City of Milwaukee, 31 F.3d 581, 587 (7th
Cir.1994), aff'd, 515 U.S. 189 (1995); Mentor Ins. Co. v. Brannkasse, 996 F.2d 506, 520 (2d
Cir.1993); Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed.Cir.1991); see also
Alberti v. Klevenhagen, 896 F.2d 927, 938, vacated in part, 903 F.2d 352 (5th Cir.1990) (holding
a district court's failure to use the prime rate to be in error). Thus, this Court will rely upon the
Federal Reserve statistical release of prime rates (Exhibit 5 to plaintiff’s memorandum) to
determine the appropriate interest award. See In re NETtel Corp., Inc., 327 B.R. 8, 9 (Bankr. D.
Dist. Col. Apr. 15, 2005).
In light of the steep decline in interest rates over the past year, and mindful of the Court’s
objective to make the plaintiff whole, the Court has elected to apply the varying prime rates that
existed at the time that plaintiff would have received her monthly disability benefits payments.4
4
The historic prime rates are as follows: 8.25% (Mar. 6, 2007 – Sept. 6, 2007), 7.75% (Oct. 6, 2007),
7.71% (Nov. 6, 2007), 7.5% (Dec. 6, 2007), 7.25% (Jan. 6, 2007), 6.0% (Feb. 6, 2008 – Mar. 6, 2008),
3
By applying the prime rate that was in effect to the amount that was due and owing to plaintiff at
that time, the Court ensures that plaintiff is made whole. See Moore, 461 F.3d at 450
(recognizing the importance of “ensur[ing] that a beneficiary is fully compensated, including for
the loss of the use of money this is his”). The Court will not, however, compound the interest, as
plaintiff requests. See Rastall v. CSX Transp., Inc., 697 A.2d 46, 53 (D.C. Cir. 1997) (explaining
that prejudgment interest is not usually compounded absent a contractual provision).
The Court therefore concludes that Finks should be paid $9,537.06 in interest. As
defendant has already paid $5,454.69 in interest, it must pay plaintiff $4,082.37 in additional
interest within ten dates from the entry of judgment.5
/s/___________
ELLEN SEGAL HUVELLE
United States District Judge
Date: May 27, 2009
5.25% (Apr. 6, 2008), 5.21% (May 6, 2008), 5.0% (June 6, 2008 – Sept. 20, 2008), 4.5% (Oct. 21, 2008),
4.0% (Nov. 20, 2008), 3.79% (Dec. 21, 2008), 3.25% (Jan. 21, 2009 – May 27, 2009).
5
If the parties are unable to resolve the issue of attorney’s fees, defendant shall file its opposition on or
before June 8, 2009, and at that time, the Court will refer the matter to a magistrate judge.
4