Pre-judgment interest is an often overlooked issue in personal injury cases. This refers to the interest accrued once a judgment is entered but before it is paid. So if you are in a car accident, sue the other driver and win a $100,000 judgment, you would then be entitled to interest on that money until it is fully paid. In New York State courts, the standard pre-judgment interest rate is 9% per year. (This rate is lower in federal courts, which determine pre-judgment interest based on the average yield of U.S. Treasury notes.)
While pre-judgment interest may seem like a small matter compared to the larger judgment, it can lead to significant litigation problems, as a pending case before a Manhattan federal judge illustrates.
GEICO v. Saco
This litigation began with a car accident nine years ago. In February 2006, a driver struck another vehicle in Brooklyn. The driver of the second vehicle “suffered significant injuries as a result of the collision and ultimately underwent multiple spinal surgeries,” according to court records. The victim accordingly sued the driver of the first vehicle in Brooklyn Supreme Court.
In 2010, Supreme Court granted the victim summary judgment, holding as a matter of law the driver of the first vehicle was solely responsible for the accident. A jury trial was then held in 2012 to ascertain damages. The jury ultimately awarded the victim more than $3.3 million.
The question then became how much of that award would the defendant's insurance company pay. Prior to the accident, the defendant had total applicable coverage of $1.3 million, which would cover less than half of the jury's award. During the state trial, the victim's attorney made numerous attempts to settle the case out of court. At one point, the victim said she would accept payment of the full $1.3 million policy limit as a final offer, provided the insurer also pay pre-judgment interest that had accrued since the judge entered summary judgment on liability.
The insurer balked at this demand. The defendant responded by claiming the insurer acted in bad faith during the settlement talks, and demanded it pay the full amount of the judgment. The insurer replied by filing a federal lawsuit in Manhattan, seeking a declaration it owed the defendant (and the victim) nothing beyond the $1.3 million policy limit.
In an April 2, 2015, order, U.S. District Judge Nicholas G. Garaufis rejected motions from both sides for summary judgment. He said there were still issues of fact to resolve with respect to the insurance contract and whether or not it covered pre-judgment interest in this case. Under New York law, Judge Garaufis explained, “insurers are not required to pay pre-judgment interest in excess of the policy limit, unless the insurance policy contains a more generous provision than what is required by” state insurance regulations.
Here, the judge said the defendant's contract with the insurer was “ambiguous” on the subject of pre-judgment interest. This is due to the fact there are actually two types of coverage in the defendant's policy: a $300,000 primary policy and a $1,000,000 umbrella policy. The contract uses slightly different language to describe both policies. Notably, the umbrella policy says the insurer will “pay interest accruing after a judgment is entered in a suit we defend; our duty to pay interest ends when we offer to pay that part of the judgment which does not exceed our liability limit.” This could support either side's reading of the contract, the judge said, so further proceedings are necessary.
Get Help Dealing With Insurance Companies
However this case turns out, it does highlight how pre-judgment interest can be a significant roadblock in settling a personal injury lawsuit. If you are a victim and seeking compensation from a negligent party, it is essential you work with an experienced New York personal injury attorney who knows how to delay with insurance companies. Contact our offices today if you would like to speak with someone right away.