TRAINOR, J.
This is an appeal from a corrected judgment of
Background. The claim arises out of a motor vehicle accident that occurred on January 4, 2002, which resulted in serious injuries to Parker. Before her death on June 9, 2003, Parker reached a settlement agreement with the tortfeasor's insurer, Liberty Mutual Insurance Company (Liberty Mutual), for $100,000, the bodily injury per person liability coverage limit. Parker herself was insured under the Plymouth Rock policy. After Parker's death, the plaintiff, as executrix of Parker's estate, brought an underinsured motorist benefits claim against Plymouth Rock to recover the excess damages which Parker had sustained in the accident.
After making a demand upon Plymouth Rock for payment of first party underinsurance benefits, the parties were unable to agree on the amount of damages sustained by Parker and her estate. As a result, the plaintiff filed an application to compel arbitration in the Superior Court on December 31, 2007. The dispute was arbitrated, on March 18 and 29, 2010, to determine the total damages exclusive of interest and offsets. There was no written arbitration agreement between the parties beyond the Plymouth Rock policy, nor was there a written submission of issues to the arbitrator.
On May 7, 2010, the arbitrator issued a decision awarding the plaintiff $150,000 in gross damages. The parties agreed that they would resolve among themselves any offsets from the amount of gross damages. The arbitrator also wrote in the final paragraph of his decision: "The parties further agree that any question of interest will be determined by the court." Though the parties disagree on the exact nature of the agreement referenced by the arbitrator, there is no evidence on the record of the intent of the parties regarding interest beyond the text of the arbitrator's decision. A plain reading of the arbitrator's decision indicates that the interest issue was reserved to a Superior Court judge.
Following the arbitrator's decision, the plaintiff filed a motion to confirm the arbitrator's award, seeking postaward interest as well as preaward interest from December 31, 2007, the date of the filing of the application to compel arbitration, through May 7, 2010, the date of the gross damages award. The plaintiff also sought to have preaward and postaward interest calculated on the $150,000 gross award. Plymouth Rock opposed the motion on the grounds that the plaintiff is not entitled to preaward interest and that any interest awarded should be calculated on the $42,000 net award.
In a corrected judgment entered on January 20, 2011, a Superior Court judge confirmed the $150,000 gross award, but ordered it reduced to $42,000 as a result of the offsets. The judge awarded postaward interest calculated on the net award of $42,000, and declined to award preaward interest.
The plaintiff now appeals. She does not dispute the $42,000 net award, but argues that she is entitled to preaward interest, and that such interest should be calculated on the gross award of $150,000.
Discussion. Massachusetts law authorizes two types of arbitration
General Laws c. 175, § 113L, provides the requirements for uninsured and underinsured motorist coverage. See G. L. c. 175, § 113L(1), (2) & (4); Cardin v. Royal Ins. Co. of America, 394 Mass. 450, 452 (1985); Chenard v. Commerce Ins. Co., 56 Mass.App.Ct. 576, 579-582 (2002), S. C., 440 Mass. 444 (2003). Generally, § 113L addresses the provision of compensation due an injured party in the absence or insufficiency of the insurance carried by the person legally responsible for the injury. See Amica Mut. Ins. Co. v. Bagley, 28 Mass.App.Ct. 85, 88 (1989). Under the Plymouth Rock policy, as required by G. L. c. 175, § 111D, when the insurer and the insured cannot agree after an injury on the amount of damages owed, the issue shall be submitted to arbitration.
We must decide five issues. First, whether preaward interest is authorized by the Plymouth Rock policy and by Massachusetts law as part of the arbitration award. Second, whether the interest issue can be reserved by the parties and the arbitrator for determination by a Superior Court judge. Third, if the interest issue is properly before us, whether preaward interest should have been awarded. Fourth, whether the postaward interest and preaward interest, if any, should be calculated on the amount of gross damages as determined by the arbitrator, or on the amount
1. Preaward interest. The Supreme Judicial Court has held that "the entitlement of a party to preaward interest is a decision that is within the purview of the arbitrators." Connecticut Valley Sanitary Waste Disposal, Inc. v. Zielinski, 436 Mass. 263, 271 (2002). Generally, preaward interest "compensates the prevailing party for loss of the use of money that party, as determined by the judgment, should have had in the first place and not been obliged to chase. In that way compensatory damages are truly compensatory and, in monetary terms, the winner is no less well off for the chase." City Coal Co. of Springfield v. Noonan, 434 Mass. 709, 716 (2001), quoting from Makino, U.S.A., Inc. v. Metlife Capital Credit Corp., 25 Mass.App.Ct. 302, 320-321 (1987).
Preaward interest clearly is permitted by our case law, and such interest can be part of the damages a plaintiff "is legally entitled to recover" under G. L. c. 175, § 111D, inserted by St. 1959, c. 438, § 2.
2. Reservation of interest issue. Having determined that preaward interest can be awarded to a plaintiff in the arbitration of an underinsurance benefits claim, we turn to the issue whether the interest issue can be reserved for consideration by a Superior Court judge.
Generally, in a proceeding to confirm an arbitration award, a judge may not alter an arbitrator's decision that allows, denies, or fails to mention preaward interest. See Reilly v. Metropolitan Property & Liab. Ins. Co., 412 Mass. 1006, 1007 (1992); Blue Hills Regional Dist. Sch. Comm. v. Flight, 10 Mass.App.Ct. 459, 472-473 (1980); S. C., 383 Mass. 642 (1981); Sansone v. Metropolitan Property & Liab. Ins. Co., 30 Mass.App.Ct. 660, 661-663 (1991); Beals v. Commercial Union Ins. Co., 61 Mass.App.Ct. 189, 192 (2004); Diaz v. Cruz, 76 Mass.App.Ct. 773, 775 (2010).
In Sansone, we vacated the addition of preaward interest by a Superior Court judge. We concluded that the fundamental purpose of arbitration is to "avoid[] court proceedings" and is better "served by considering, in the absence of an explicit agreement
In this case, unlike in Sansone and Diaz, the arbitrator's award was not silent on the issue of preaward interest, but made reference to an explicit agreement that the issue would not be submitted to the arbitrator and that "[t]he parties ... agree that any question of interest will be determined by the court." There is no written arbitration agreement,
Notwithstanding our discussions in Sansone and Diaz, the
Our conclusion also is supported by prior holdings of this court suggesting the possibility of such a reservation
3. Should preaward interest be awarded? The judge ruled that postaward interest would enter on the net, postoffsets amount of
A claim for underinsurance benefits properly is considered to be a contract action. See Berkshire Mut. Ins. Co. v. Burbank, 422 Mass. 659, 660 (1996), quoting from Royal-Globe Ins. Co. v. Craven, 411 Mass. 629, 638 (1992) ("The basis of an insurer's obligation to pay underinsured motorist benefits `is not its actions resulting in personal injury but, rather, its contractual promise to indemnify against such injury'"); Kahn v. Royal Ins. Co., 429 Mass. 572, 575 (1999) (referring to claim for underinsurance benefits as "contract action"). In contract actions, interest automatically is added to damages "at the contract rate, if established, or at the rate of twelve per cent per annum from the date of the breach or demand." G. L. c. 231, § 6C, as appearing in St. 1982, c. 183, § 3. Furthermore, "[i]f the date of the breach or demand is not established, interest shall be added... at such contractual rate, or at the rate of twelve per cent per annum from the date of the commencement of the action."
In her motion to confirm the award, the plaintiff properly requested that preaward interest be added from the filing date of her application to compel arbitration. We see no reason why preaward interest should not be added to the arbitrator's award in these circumstances as part of the damages the plaintiff "is legally entitled to recover" under G. L. c. 175, § 111D, inserted by St. 1959, c. 438, § 2. It is worth reiterating that any determination that preaward interest shall be added to the net award of damages is a determination applicable only in circumstances where the interest issue has been reserved, as here. Had the issue not been reserved, the determination made by the arbitrator, including silence on the issue, would not be reviewable, either here or below.
5. Postaward interest. "[P]ostaward interest on an arbitral award is calculated on the entire amount of the award, which includes both the principal and interest." Connecticut Valley Sanitary Waste Disposal, Inc., 436 Mass. at 271. The postaward interest awarded by the judge therefore shall be recalculated based on the amount of net damages awarded, plus the addition of preaward interest.
So much of the corrected judgment as denies preaward interest is reversed and the case is remanded for calculation of such preaward interest on the net award of $42,000. In addition, so much of the corrected judgment as calculates postaward interest is vacated, and postaward interest shall be recalculated on the amount of the net award of $42,000 plus preaward interest. In all other respects, the corrected judgment is affirmed.
So ordered.