Judgement Interest Reform

Problem

Although well‑intended, the practical effects of prejudgment interest statutes can be inequitable and counter‑productive.  Prejudgment interest laws can, for example, result in over‑compensation, hold a defendant financially responsible for delay the defendant may not have caused, and impede settlement.

ATRA's Position:

At a time when policymakers are attempting to lower the cost of the liability system in an equitable and just manner, prejudgment interest laws that currently exist and new proposals should be reviewed to ensure that they are structured fairly and in a way designed to foster settlement.  At a minimum, the interest rate should reflect prevailing interest rates by being indexed to the treasury bill rate at the time the claim was filed and an offer of judgment provision should be included.


Opposition Opinion:

The personal injury bar’s argument in support of prejudgment interest – that prejudgment interest compensates the plaintiff fully for losses incurred, encourages early settlements, and reduces delay in the disposition of cases – fails to address the hardship faced by defendants held financially responsible for litigation delays they may not have caused. 

Judgment Interest Reform: H.B. 2678 (2017)

West Virginia|2017

Sets the pre and post judgment interest rate at two

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Sets the pre and post judgment interest rate at two percentage points above the Fifth Federal Reserve District secondary discount rate provided the rate does not exceed nine percent or be less than four percent.


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Unchallenged

Prejudgment Interest Rate Reform: H.B. 223 (2017)

Kentucky|2017

Lowers the prejudgment interest rate from 12% to 6%. A

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Lowers the prejudgment interest rate from 12% to 6%. A judgment for unpaid child support will remain at the 12% rate. A judgment on a contract, note, or other written obligation will follow the interest rate specified in the contract. If an administrative law judge determines that a denial, delay, or termination in the payment of income benefits was without reasonable foundation, the interest rate will be 12%.


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Unchallenged

Post-Judgment Interest: H.B. 2162 (1994)

Arizona|1994

Applies only to postjudgment interest on medical liability actions, including

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Applies only to postjudgment interest on medical liability actions, including those resolved through ADR.  The postjudgment interest rate is tied to the federal postjudgment interest rate and now has a floor of 3% and a ceiling of 9%.


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Unchallenged

Prejudgment Interest Rate Reform: H.B. 375 (1995)

New Hampshire|1995

Sets the prejudgment interest rate at the 52 week discount

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Sets the prejudgment interest rate at the 52 week discount T-bill rate plus 2%.


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Unchallenged

Judgment Interest: H.B. 1214 (1997)

Louisiana|1997

Sets judicial interest to the average Treasury Bill Rate for

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Sets judicial interest to the average Treasury Bill Rate for 52 weeks plus 2%.  Provides varying rates of interest for actions pending or filed during the last 10 years.


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Unchallenged

Post- Judgment Interest Rate Reform: H. 3008 (2005)

South Carolina|2005

Reduced post judgment interest from a flat 12 percent to

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Reduced post judgment interest from a flat 12 percent to the prime rate plus four percent.


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Unchallenged

Post-Judgment Interest Reform: H.B. 393 (2005)

Missouri|2005

Specified that post-judgment interest is to be calculated at an

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Specified that post-judgment interest is to be calculated at an interest rate equal to the Federal Funds Rate plus five percent.


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Unchallenged

Judgment Interest Rate Reform: S.B. 576 (2006)

West Virginia|2006

Established that the rate for pre-and post-judgment interest may not

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Established that the rate for pre-and post-judgment interest may not exceed 11 percent per year or by less than 7 percent per year.


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Unchallenged

Judgment Interest Reform: Special Session S.B. 14 (2011)

Wisconsin|2011

Changes the pre- and post judgment interest rate in all

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Changes the pre- and post judgment interest rate in all civil cases from 12 percent to the Federal Reserve prime rate plus one percent, and provides the rate to be set twice a year (January 1 and July 1).


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Unchallenged

Judgment Interest: S.B. 69 (2014)

Utah|2014

Requires that in order for a plaintiff to receive prejudgment

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Requires that in order for a plaintiff to receive prejudgment interest, the plaintiff shall have tendered an offer of settlement.  S.B. 69 provides that prejudgment interest is only calculated from the date of a qualifying offer.  Under this legislation, the prejudgment interest rate is limited to two percentage points above the prime rate, as published by the Federal Reserve, but it may not be lower than 5% or higher than 10%.


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Unchallenged

Prejudgment Interest Reform: HB 4 (2003).

Texas|2003

Sets the prejudgment interest rate to the New York Federal

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Sets the prejudgment interest rate to the New York Federal Reserve prime rate, with a floor of 5% and a ceiling of 15%.


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Prejudgment Interest Reform: HB 971 (1995).

Texas|1995

Allows prejudgment interest only for damages that occurred before judgment.

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Allows prejudgment interest only for damages that occurred before judgment.


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Prejudgment Interest Reform: SB 6 (1987).

Texas|1987

Limits the period during which prejudgment interest may accrue if

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Limits the period during which prejudgment interest may accrue if the defendant has made an offer to settle the lawsuit.


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Prejudgment Interest- H.B. 2982 (2012)

Tennessee|2012

This bill establishes the Federal Reserve weekly average prime loan

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This bill establishes the Federal Reserve weekly average prime loan rate as the standard interest rate on judgments so long as such rate does not exceed 10%.


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Prejudgment Interest: H. 3403 (2000).

South Carolina|2000

Sets prejudgment interest rates at the prime rate plus one

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Sets prejudgment interest rates at the prime rate plus one percent.


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Prejudgment Interest Rate Reform: HB 5885 (1987).

Rhode Island|1987

Sets the prejudgment interest rate at the U.S. Treasury Bill

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Sets the prejudgment interest rate at the U.S. Treasury Bill rate.  Provides that interest accrues from the date the lawsuit is filed.


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Judgment Interest Reform: S.B. 1080

Oklahoma

Provides that if a rate of interest is specified in

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Provides that if a rate of interest is specified in a contract and does not exceed the lawful rate, postjudgment interest shall be calculated at the contractual rate.


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Judgment Interest Reform: S.B. 1080 (2013)

Oklahoma|2013

Provides that if a rate of interest is specified in

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Provides that if a rate of interest is specified in a contract and does not exceed the lawful rate, postjudgment interest shall be calculated at the contractual rate.


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Prejudgment Interest Reforms: HB 1603 (2009)

Oklahoma|2009

Provides that prejudgment interest does not begin to accrue until

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Provides that prejudgment interest does not begin to accrue until two years after the beginning of a lawsuit; reduced the interest rate charged.


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Challenged and Struck Down

Held unconstitutional by the Oklahoma Supreme Court in Douglas v. Cox Retirement Properties, June 2013.

Prejudgment and Postjudgment Interest Reform: HB 2661 (2004).

Oklahoma|2004

Sets prejudgment and postjudgment interest rate at the prime rate

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Sets prejudgment and postjudgment interest rate at the prime rate plus 2 percent (effective January 1, 2005).


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Prejudgment Interest Reform: SB 629 (2003).

Oklahoma|2003

Sets the prejudgment interest rate in medical malpractice cases to

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Sets the prejudgment interest rate in medical malpractice cases to the average U.S. Treasury Rate of the preceding calendar year.


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Prejudgment Interest Reform: SB 488 (1986).

Oklahoma|1986

Prohibits the assessment of prejudgment interest on punitive damages awards. 

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Prohibits the assessment of prejudgment interest on punitive damages awards.  Sets the prejudgment interest rate at 4% above the rate on the U.S. Treasury Bill.


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Prejudgment Interest Reform: HB 140 (2001); Amended RSA 336:1.

New Hampshire|2001

Sets the prejudgment interest rate at the 26-week discount U.S.

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Sets the prejudgment interest rate at the 26-week discount U.S. Treasury Bill rate.


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Prejudgment Interest Reform: LB 298 (1986).

Nebraska|1986

Reduces the rate of interest to 1% above the rate

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Reduces the rate of interest to 1% above the rate on U.S. Treasury Bill.


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Prejudgment Interest Reform: H.B. 393 (2005); § 355.176 R.S.Mo.

Missouri|2005

Specifies that prejudgment interest is to be calculated at an

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Specifies that prejudgment interest is to be calculated at an interest rate equal to the Federal Funds Rate plus three percent.


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Prejudgment Interest Reform: HB 700 (1987).

Missouri|1987

Permits the assessment of prejudgment interest only in cases where

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Permits the assessment of prejudgment interest only in cases where the judgment exceeds a settlement offer.


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Prejudgment Interest Reform: SB 2078 (1986).

Minnesota|1986

Prohibits the assessment of prejudgment interest on awards for future

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Prohibits the assessment of prejudgment interest on awards for future damages.


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Prejudgment Interest Reform: HB 5154 (1986).

Michigan|1986

Prohibits the assessment of prejudgment interest on awards for future

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Prohibits the assessment of prejudgment interest on awards for future damages.


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Prejudgment Interest Reform: HB 700 (1987).

Missouri|1987

Permits the assessment of prejudgment interest only in cases where

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Permits the assessment of prejudgment interest only in cases where the judgment exceeds a settlement offer.


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Prejudgment Interest Reform: SB 2078 (1986).

Minnesota|1986

Prohibits the assessment of prejudgment interest on awards for future

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Prohibits the assessment of prejudgment interest on awards for future damages.


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Prejudgment Interest Reform: HB 5154 (1986).

Michigan|1986

Prohibits the assessment of prejudgment interest on awards for future

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Prohibits the assessment of prejudgment interest on awards for future damages.


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Prejudgment Interest Rate Reform: LD 2520 (1988).

Maine|1988

Sets prejudgment interest rates and postjudgment interest rates at the

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Sets prejudgment interest rates and postjudgment interest rates at the U.S. Treasury Bill rate.


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Prejudgment Interest Rate Reform: (1997).

Louisiana|1997

Sets prejudgment interest rates at the average Treasury Bill rate

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Sets prejudgment interest rates at the average Treasury Bill rate for 52 weeks plus 2%.  Provided varying rates of prejudgment interest for actions pending or filed during the last 10 years.


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Prejudgment Interest Rate Reform: HB 1690 (1987).

Louisiana|1987

Sets prejudgment interest rates at the prime rate plus 1%

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Sets prejudgment interest rates at the prime rate plus 1% with a floor of 7% and a cap of 14%.


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Prejudgment Interest Rate Reform: HF 693 (1997); Amended Iowa Code § 535.3.

Iowa|1997

Sets the prejudgment interest rates at the U.S. Treasury Rate

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Sets the prejudgment interest rates at the U.S. Treasury Rate plus 2%.


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Prejudgment Interest Rate Reform: SF 482 (1987).

Iowa|1987

Prohibits the assessment of prejudgment interest for future damages.  (Other

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Prohibits the assessment of prejudgment interest for future damages.  (Other interest accrues from the date of commencement of the actions at a rate based on the U.S. Treasury Bill.)


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Prejudgment Interest Reform: HB 792 (2003).

Georgia|2003

Sets prejudgment interest rates at the Federal Reserve’s prime interest

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Sets prejudgment interest rates at the Federal Reserve’s prime interest rate plus 3%.


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Judgment Interest Rate Reform: H.B. 567 (2011)

Florida|2011

Provides that the judgment interest rate will be set in

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Provides that the judgment interest rate will be set in accordance with the interest rate as set by the Chief Financial Officer based on the discount rate of the Federal Reserve Bank of New York for the preceding 12 months plus 400 basis points (4 percent).  The interest rate on the judgment is to be adjusted annually on January 1 of each year.


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Prejudgment Interest Reform: SB 165 (1995).

Colorado|1995

Limits the amount of prejudgment interest that can be assessed

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Limits the amount of prejudgment interest that can be assessed between accrual of the action and filing of the claim to below the $1,000,000 limit on the total amount recoverable in medical liability claims.


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Judgment Interest Reform: S.B. 207 (2011); Amended Code of Ala. § 6-5-410.

Alabama|2011

Changes the rate of interest on judgments in Alabama from

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Changes the rate of interest on judgments in Alabama from 12% to 7.5%.  Prior to the enactment of S.B. 207, a defendant who lost a lawsuit and chose to appeal had to begin paying 12% post-judgment interest on the amount the court or jury awarded the plaintiff, creating a significant financial deterrent to appealing an unjust verdict.


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Prejudgment Interest Reform: HB 58 (1997).

Alaska|1997

Sets prejudgment interest rate at the Twelfth Federal Reserve District’s

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Sets prejudgment interest rate at the Twelfth Federal Reserve District’s discount rate plus 3%.  Prohibits the assessment of prejudgment interest for future damages and punitive damages.


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