Orlofsky ADR Services

Post-Judgment Interest On A Mediation Award?

Pinske v. Allstate Property and Casualty Ins. Co., ____ (Ill.App.1st 2015), has several very interesting components. First, the parties agreed to use an alternative dispute resolution mechanism often referred to as mediation/arbitration. The case was submitted to an individual for mediation, but if the mediation failed, that same individual would adjudicate the case in a binding arbitration. There are pros and cons to using this ADR method because of the power and potential conflicts it gives the selected individual, but it certainly is a cost effective and speedy way of resolving a dispute.

The mediation produced a high-low agreement under which the parties would arbitrate the case, but the plaintiff would receive no less than $50,000 and no more than $100,000, regardless of what was awarded. After the arbitration, the plaintiff was awarded $194,000, which meant, pursuant to the mediated agreement, that the defendant had to pay $100,000. When the defendant delayed payment for various reasons, the plaintiff sought interest under the Illinois post-judgment interest statute. The court denied this, noting that interest can be added to an arbitration award, but not a settlement, and the payment in this case was based on a settlement, not an adjudicated award.

There are two further aspects of this ruling to be aware of. First, a New York case relied on by the Illinois court noted that if the award had been between $50,000 and $100,000, defendant’s obligation would have been based on an award, not a settlement, and post-judgment interest could apply. Defendant’s obligation was based on a settlement because it fell outside the range in the high-low agreement, and was therefore based on a settlement, not an  award.

The second aspect of this to keep in mind is that the interest dispute arose because of perceived delays in defendant’s payment. It appears that the high-low agreement did not have provisions specifying the timing of a payment under that agreement. Consequently, while high-low agreements can be a useful way of narrowing a dispute, parties should try to include provisions specifying the timing of any eventual payment.