What Is Prejudgment Interest?

What is prejudgment interest in personal injury law?

Prejudgment interest is the interest that accrues on a damage award from the date the injury occurred (or the claim arose) until the date of judgment. Its purpose is to compensate the injured party for the lost use of their money during the time between the injury and the court’s final decision.

• Interest on damages from injury date to judgment.

   

• Compensates for lost use of money.

   

• Encourages timely settlement.

   

• Helps make victims financially whole.

   

Why is prejudgment interest important?

Without it, a defendant could delay proceedings without financial penalty, effectively benefitting from holding onto money they owe. Prejudgment interest levels the playing field by ensuring victims are compensated for the delay.

• Discourages stall tactics.

   

• Rewards timely resolution.

   

• Ensures fuller compensation.

   

• Reflects time value of money.

   

How is prejudgment interest calculated?

The calculation depends on state law and can be based on a statutory interest rate or the prime rate. Some states calculate it from the date of the injury; others use the date the lawsuit was filed.

• Rate set by state statute or court rule.

   

• May start from injury date or filing date.

   

• Simple or compound interest may apply.

   

• Rules vary by jurisdiction.

   

Do all states allow prejudgment interest?

No. Some states allow it in personal injury cases, while others limit it to contract disputes or prohibit it altogether. Where allowed, the rules can differ significantly.

• Availability depends on state law.

   

• May apply only to certain case types.

   

• Some states prohibit it for personal injury.

   

• Check local statutes.

   

Conclusion:
Prejudgment interest can significantly increase a damage award and helps ensure injury victims are fairly compensated for the time they’ve waited for justice.