12 Percent Interest on Prejudgment RI Personal Injury Awards punishes Insurance Delaying and Forcing a Trial
For decades there has been a joke floating around Rhode Island’s legal community which posits that the reason for 12 percent interest on Injury Judgments in Rhode Island is because RI lawyers and judges are bad at math. (12 percent per year on RI car accident judgments is 1 percent per month which is relatively easy to calculate.)
The high interest rate in Rhode Island levels the playing field between injured victims and big insurance companies.
Insurance companies often delay settlement to victims injured in car, truck, motorcycle and premises liability claims because they essentially profit off of the delay by earning interest on the reserves. If the insurance company settles the RI slip and fall or motor vehicle accident case before trial they are not required to pay interest. The twelve percent interest punishes insurance for delaying and forcing the injured victim or the victim’s estate to litigate their automobile or wrongful death claim at trial.
The twelve percent prejudgment interest also encourages insurance companies to settle prior to trial. The applicable statute in RI is 9-21-10:
§ 9-21-10 Interest in civil actions. – (a) In any civil action in which a verdict is rendered or a decision made for pecuniary damages, there shall be added by the clerk of the court to the amount of damages interest at the rate of twelve percent (12%) per annum thereon from the date the cause of action accrued, which shall be included in the judgment entered therein. Post-judgment interest shall be calculated at the rate of twelve percent (12%) per annum and accrue on both the principal amount of the judgment and the prejudgment interest entered therein. This section shall not apply until entry of judgment or to any contractual obligation where interest is already provided.
In Febuary 2014, Several legislators in RI proposed a bill to lower interest on prejudgment awards to six percent.
http://webserver.rilin.state.ri.us/BillText/BillText14/HouseText14/H7501.pdf This was proposed by Representatives Marcello, Hearn, Nunes, Ajello, and Morgan. This bill was referred to the house judiciary and has not become law in RI.
In my opinion this bill is unlikely to pass in Rhode Island because there are so many Rhode Island personal injury Plaintiff’s attorneys in the legislature in Rhode Island.
The American Tort Reform association, a conglomerate of big insurance and Corporate America, of course, supports lowering RI’s prejudgment interest rate. They state: “As a result of the excessive rate, Silverman noted, those who face lawsuits in Rhode Island are punished for defending themselves in court and plaintiffs may be overcompensated with interest awards that may, in some cases, even exceed their actual damages. The proposed legislation would adopt a more reasonable interest rate of 6 percent.” http://www.atra.org/newsroom/atra-urges-rhode-island-lawmakers-pass-important-tort-reforms
In Oden v. Carl Schwartz, M.D. a local surgeon challenged the legitimacy of the RI prejudgment interest statute.
The physician through his RI Medical Malpractice Attorneys asserted “… that the mandatory 12 percent prejudgment interest rate deprives a defendant of substantive due process because it infringes on a defendant’s fundamental right to a jury trial.” Id.
The RI Supreme Court, sitting in Providence, disagreed with all of his arguments and upheld the RI prejudgment interest statute.”This Court has consistently stated that prejudgment interest “is not an element of damages but is purely statutory, peremptorily added to the [compensatory damages] award by the clerk.” Metropolitan Property & Casualty Insurance Co. v. Barry, 892 A.2d 915, 919 (R.I. 2006) (quoting Barbato v. Paul Revere Life Insurance Co., 794 A.2d 470, 472 (R.I. 2002)). Moreover, “[t]he dual purpose of prejudgment interest is to encourage early settlement of claims and to compensate an injured plaintiff for delay in receiving compensation to which he or she may be entitled.” Id. (citing Martin v. Lumbermen’s Mutual Casualty Co., 559 A.2d 1028, 1031 (R.I. 1989)). Id.
According to the attorneys at Melick and Porter “Rhode Island has one of the most plaintiff-friendly prejudgment interest statutes in the nation. In most personal injury actions in Rhode Island, pre-judgment interest runs at a rate of 12% per year from the date of the accident per Rhode Island Gen. Laws § 9-21-10(a). The statute of limitations for personal injury claims is years or longer for a case to be reached for trial, defendants and their insurers frequently face a scenario in which more than 50% interest will automatically be added to any judgment rendered three years. Therefore, a plaintiff can wait almost three years after an accident and after 35% interest accrues before filing an action for personal injuries. Since it typically takes two against them. Thus, prejudgment interest oftentimes plays a significant role in deciding whether to settle or take a case to trial.”
Legal Notice per Rules of Professional Responsibility: The Rhode Island Supreme Court licenses all lawyers and attorneys in the general practice of law, but does not license or certify any lawyer / attorney as an expert or specialist in any field of practice. While this firm maintains joint responsibility, most cases of this type are referred to other attorneys for principle responsibility.