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What Is Prejudgment Interest?

When you win your court case, you will generally receive monetary damages. Damages come in a few different forms, such as those meant to pay back medical bills and those meant to compensate for lost wages or pain and suffering.

In a court case, a party seeking a judgment, or a monetary award, can also be entitled to prejudgment interest if they win. Prejudgment interest is essentially additional money that a court can award based on the interest that the judgment would have earned over the period of time from when the claimant was entitled to receive those monies.

Can I Get Prejudgment Interest?

Whether or not your type of case will allow you to claim and collect prejudgment interest will depend on your state's laws.

Sometimes, certain types of cases will just not qualify. Generally, the amount of monetary damages, or the damages for which interest is sought, must be certain. For example, in a contract dispute, the amount of money in dispute will usually be rather specific and certain.

Under California law, "every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day."

If you are unsure whether your state allows prejudgment interest, you can seek out the help of a local attorney who should be able to let you know.

Why Prejudgment Interest Matters

Prejudgment interest can be helpful when it comes to motivating defendants to settle cases before trial, or a judgment is issued. This is because prejudgment interest can add up, particularly as cases can often take a year or two or longer to get through trial. For example, a one million dollar judgment would accrue $100,000 in interest every year at the "legal rate" of 10%.

A recent law passed in Texas was criticized for lowering the prejudgment interest rate in insurance cases, which used to be set at 18% in order to motivate insurers to settle claims quickly and not clog up the courts.

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