Prejudgment interest provisions, nationally, evidence varying interest rates that are applicable to monetary judgment. Other issues arise that must be addressed to determine what the pay of sums due are for any particular coverage case. Rates vary from as little as the Federal Funds Rate and/or equivalent statutory formula to the 12% awardable under Massachusetts law.[1]Twenty-three states allow recovery of attorney’s fees, including Massachusetts.[2] These states often include a more generous prejudgment interest provision but the events that trigger its applicability vary widely.
This survey identifies, with more granularity, the mechanism for determining prejudgment interest. Where an insurer had denied a claim and many years have ensued until an adjudication of its duty to defend, prejudgment interest recovery can be significant. This, in turn, can make choice of the forum to pursue a coverage case, as well as what law that forum may apply, a critical decision element for coverage litigation. The analysis that follows should be read in concert with the percentage rates awarded for prejudgment interests in evaluating the best forum for pursuit an insurance coverage lawsuit.[3]
FROM THE DATE OF INVOICE AT A FIXED RATE
An insured is entitled to prejudgment judgement interest owed from the date the insured was invoiced.
California calls for a fixed rate which is typically tied to a statutorily proscribed interest rate that governs the entitlement of the insured to monies against the insurer for prejudgment interest.
California
Prejudgment interest “accrues at a rate of ten percent per year…[on] the date…Federal could have computed the amount owed…[when] billed for the attorney fees and costs.” [4] Prejudgment interest is computed as simple interest.[5]
FROM THE DATE DEMAND IS MADE AFTER SUMS SOUGHT ARE DUE
An insured is entitled to prejudgment interest calculated from the date the payment was demanded, typically in an invoice sent to the client for payment of attorney’s fees and costs.
Delaware
Prejudgment interest is computed from the date monies were payable based on the date they were due.[6]
Prejudgment interest is calculated over the 5% Federal Reserve Rate accounting for any fluctuations/surcharges that may arise every month.[7]
Ohio
“When money becomes due and payable upon any contract[8]…at the rate of ten percent per annum. ” [9]
WHEN A COMPLAINT IS FILED AGAINST THE INSURER SEEKING PREJUDGMENT RECOVERY
An insurer is entitled to prejudgment fees computed from the date the Complaint is filed.
Illinois
“Prejudgment interest[10] shall begin to accrue on the date the action is filed[11], calculated at the rate of 6% per annum.”[12]
Michigan
“[T]he interest on the judgment is calculated from the date of filing the complaint to the date of satisfaction of the judgment at the rate specified in the instrument,” unless stated otherwise in the contract.[13]
WHEN THE INSURED LEARNS OF THE GROUNDS FOR ASSERTED LIABILITY AGAINST THE INSURER
An insured is entitled to prejudgment interest the date the insurer failed to provide defense in accordance to its contractual obligation.
Georgia
“[P]rejudgment legal interest…at the rate of seven percent per annum simply interest[14] from the date of the breach [the contract].”[15]
North Carolina
“[T]he amount awarded on the contract bears interest from the date of breach.”[16]
Unless set by contract…prejudgment interest is computed… [on] 7% annually.[17]
Massachusetts
Prejudgment interest “shall be added…at the rate of twelve percent per annum from the date of the breach.”[18]
New York
“[P]rejudgment interest [is granted]… from ‘the earliest ascertainable date the cause of action existed.’”[19]
“Interest shall be at the rate of nine per centum per annum, except where otherwise provided by statute.”[20]
Pennsylvania
“[Prejudgment] interest begins to accrue at the time of the determination on the merits (the arbitrator’s issuance of the award) and continues to accrue through the entry of a judgment by the court confirming the award.”[21]
“[T]he rate of [prejudgment] interest is six percent per annum.”[22]
FROM THE DATE AFTER THE INSURER RECEIVED NOTICE OF A CLAIM
Florida
Prejudgment interest “begins to accrue from the date the insurer receives notice of the claim.”[23]
The percentage rate for prejudgment interest is established by the state Chief Financial Officer every quarter.[24]
BASED ON INSURERS RECEIPT OF CLAIM OR FILING OF COMPLAINT
Texas
“Prejudgment interest accrues… on the earlier of the 180th day after the date the defendant receives written notice of a claim or the date the complaint was filed… and ending on the day preceding the date judgment is rendered.”[25] The prejudgment interest rate is… 8.25%. as simple interest.[26]
CONCLUSION
Prejudgment interest operates not only to award monies to policyholders that may have incurred additional costs in pursuing litigation, but also to motivate insurers to settle cases before trial. A number of forums make the trigger for prejudgment interest recovery tied to the date the insurer failed to defend the insured. The right to recover prejudgment interest may accrue for any invoice submitted to defend a lawsuit as notice is the trigger.
* David A. Gauntlett is a principal of Gauntlett & Associates. For more information, visit Gauntlett & Associates at www.gauntlettlaw.com.
[1] ALM GL ch. 231, § 6C
[2] See, David A. Gauntlett, Insurance Coverage for Intellectual Property Assets, Appendix B, Column 10. Wolters Kulwer (N.Y.), 2nd Edition (2021)
[4] Longs Drug Stores California, Inc. v. Federal Ins. Co., 2005 WL 2072296, *4 (N.D. Cal. Apr. 26, 2005): Cal. CIV § 3287(c) (“[I]nterest shall accrue at an annual rate equal to the weekly average one year constant maturity United Stated Treasury yield.”)
[5] Salton Bay Marina, Inc. Imperial Irrigation Dist., 172 Cal. App. 3d 914, 961 (1985).
[6] Dyncorp. v. Certain Underwriters at Lloyd’s, 2011 Del. Super. LEXIS 6892, *4 (Apr. 17, 2012)
[7] 6 Del. C. § 2301 (“Where there is no express contract rate, the legal rate of interest shall be 5% over the Federal Reserve discount rate including any surcharge as of the time from which interest is due…”)
[8] See, e.g. Persello v. Allstate Ins. Co., 20011 Ohio App. LEXIS 2813, *13 (2011) (The entry stated that "the applicable statute [R.C. 1343.03(A)] makes reference to the right of a creditor to an award of pre-judgment interest when the 'money' becomes ‘due and payable’. Plaintiff did not become a 'creditor' of Defendant nor did the money upon which interest might be calculated become ‘due and payable’ that amount was determined by the jury's verdict.")
[9] Load Switch, Inc. v. Ohio Univ., 2004 Ohio Misc. LEXIS 93, *17 (Ohio Ct. Cl. 2004); ORC Ann. 2743.18(A)(1)
[10] It is worth noting that prejudgment interest can be applied to attorney’s fees if “(1) the invoices clearly delineated the hours and rates charged and spent on the matter; and (2) the court finds that the requested fee is reasonable.” Conservation Campania Mgmt. Co. v. Rooks, Pitts & Poust, 290 F.3d 843, 853 (7th Cir. (Ill.) 2002).
[13] MCLS § 600.6013(2); See, Matich v. Modern Research Corp., 1988 Mich. LEXIS 521, *23 (Mich. 1988) (“An insurer whose policy includes the standard interest clause is required to pay prejudgment interest from the date of filing of a complaint until the entry of judgment, calculated on the basis of its policy limits, not on the entire judgment, and interest on the policy limits must be paid even though the combined amount exceeds the policy limits.”)
[15] Chacon v. Holcombe, 290 Ga. App. 767, 768 (2008)
[16] N.C. Gen. Stat. § 24-5(a)
[17] Id. See, e.g. Phillips v. Warren, 152 N.C. App. 619 (2002)
[18] ALM GL ch. 231, § 6C (It is worth noting, “[i]f the date of breach… is not established, interest shall be added…from the date of the commencement of the action.”)
[19] NIU Holdings LLC v. AT&T Mobility Holdings, B.V., 624 B.R. 22, 2020 Bankr. LEXIS 2861, *42 (Bankr. S.D.N.Y. 2020) [citing NY CLS CPLR § 5001(b)]
[20] NY CLS CPLR § 5004
[21] InterDigital Communs. Corp. v. Fed. Ins. Co., 607 F. Supp. 2d 718, fn. 19 (E.D. Pa. Apr. 20, 2009)
[23] Fla. Stat. § 627.70131(5)(a); See, e.g. State Farm Fla. Ins. Co. v. Silber, 72 So. 3d 286 (Fla 4th DCA 2011).
[26] Code § 304.103; See e.g., Helen of Troy, L.P. v. Zotos Corp., 511 F. Supp. 2d 703 (Under Texas law, an equitable award of prejudgment interest was to be granted…at 8.25 percent for the period starting 180 days after the packager first received written notice of the claim.”)
