Travelers appealed to the Second Circuit, challenging, among other things, the district court's calculation of prejudgment interest. Travelers contended that although Warehouse Wines had submitted a sworn proof of loss on April 24, 2012, Warehouse Wines had not fully complied with the policy at that time and, therefore, Travelers had not become obligated to indemnify Warehouse Wines at that time.

The insurer reasoned that the policy obligated Warehouse Wines to submit to an examination under oath and permitted examination of its books and records, and it asserted that that examination had not been completed until March 29, 2013. Therefore, Travelers contended, prejudgment interest could not be assessed any earlier than April 28, 2013 – 30 days after full compliance, which was the date upon which Travelers had become obligated to indemnify Warehouse Wines.

The Second Circuit's Decision

The circuit court affirmed.

In its decision, the circuit court explained that Section 5001 of New York Civil Practice Law and Rules permitted a party that prevailed in a breach of contract action “to obtain prejudgment interest.” It added that interest was computed “from the earliest ascertainable date the cause of action existed,” and that, in an insurance coverage dispute, prejudgment interest had to be calculated from the date the insurer became obligated to indemnify the insured.

The Second Circuit acknowledged that the policy allowed Travelers to conduct an investigation into Warehouse Wines' claims. The circuit court pointed out, however, that Warehouse Wines had submitted a sworn proof of loss on April 24, 2012 – and it ruled that Travelers' obligation to indemnify began within 30 days of receipt of that proof of loss.

According to the Second Circuit, Travelers could not circumvent New York law “by denying coverage while conducting a nearly year-long investigation into Warehouse Wines' claims” and then, once it was adjudicated liable, avoid paying prejudgment interest from the “earliest ascertainable date the cause of action existed.”

In the opinion of the circuit court, to adopt Travelers' position would be to undermine the purpose of the law: “to make an aggrieved party whole.”

Accordingly, the Second Circuit concluded, because Warehouse Wines had submitted a sworn proof of loss on April 24, 2012, the district court had properly determined that prejudgment interest had begun to accumulate 30 days later, when payment was due, on May 24, 2012.

The case is Warehouse Wines and Spirits v. Travelers Property Casualty Co. of America, No. 16-2611-cv (2d Cir. Sep. 21, 2017). Attorneys involved include: For Appellant: CHRISTOPHER S. FINAZZO, Finazzo Cossolini O'Leary Meola & Hager, LLC, New York, NY. For Appellee: DENNIS T. D'ANTONIO (Joshua L. Mallin, on the brief), Weg and Myers, P.C., New York, NY.