Posted on: 23 December 2015Share
It's a fairly well-known fact that you may be entitled to obtain a variety of economic and non-economic damages such as medical expenses and pain and suffering after being in an accident. What may not be as well-known, however, is you may also be entitled to collect interest on the award before and/or after a court judgment has been rendered. Here's more information about the type of interest you may be granted, the amount, and when it may be calculated and added to your court award.
Prejudgment and Post-Judgment Interest
There are two types of interest you may be awarded: prejudgment and post-judgment. In tort cases like motorcycle accidents, prejudgment interest begins accruing the day the incident occurred and ends the day the judge or jury renders a verdict in the case and decides on the financial award. This interest is based on the idea of compensating the plaintiff for the loss of the use of his or her money while the lawsuit is ongoing. This type of interest is retroactively applied by the court clerk based on the amount of your court award.
For example, you are awarded $100,000 for your motorcycle accident and the prejudgment interest is set at 10 percent simple interest per year. If it took one year for your case to resolve starting from the day the accident occurred, the court clerk would add another $10,000 to the amount owed to you.
Post-judgment interest begins accruing the day you obtain your court award and ends when the defendant pays the judgment in full, and the rate is charged on the entire court judgment. So if your court award includes prejudgment interest, the post-judgment interest is charged on that money too (e.g. 10 percent post-judgment interest on $110,000 instead of just the $100,000). In general, you are responsible for calculating and collecting this money.
How Eligibility for and Amount of Interest is Established
Eligibility for this interest is established by state laws. Some states allow plaintiffs to collect both, but others only allow one to be charged. For instance, Louisiana limits plaintiffs to collecting post-judgment interest. Other states may allow interest to be charged if only certain conditions are met. In Kentucky, pre- and post-judgment interest is restricted to contract cases.
Each state sets a default rate that may be charged, and it may accrue as simple or compound interest. For example, the annual interest is 6 percent per year for tort cases and 1.5 percent per month for accident and health and first-party cases in Alabama. However, the rate may be overridden by contracts. For example, if your insurance company stipulates a prejudgment and post-judgment interest rate in your policy, then the court clerk will use that number. The court can also establish an interest rate that's different from what state law provides for.
Using Prejudgment and Post-Judgment Interest Rates to Your Advantage
It's perfectly within your rights to collect the interest that has accrued or is accruing on your court award. Doing so can help mitigate some of the costs involved with going to court such as attorney's fees and filing fees.
However, you can also use the interest as a tool to encourage the defendant to pay quickly. Since the interest is "extra" money, you can offer to discount the rate or eliminate it altogether in exchange for the defendant paying the principal quickly. This option works best with individuals who are paying out of their own pockets and small businesses that may not have a lot of cash reserves.
For more information about prejudgment and post-judgment interest rates or to discuss the viability of a motorcycle accident or other personal injury case, contact a personal injury attorney.