Recovery of Interest: Part I-personal Injury
| Publication year | 1989 |
| Pages | 1063 |
| Citation | Vol. 06 No. 1989 Pg. 1063 |
1989, June, Pg. 1063. Recovery of Interest: Part I-Personal Injury
© J. Kent Miller
Previous articles in The Colorado Lawyer, most recently in 1986,(fn1) have summarized Colorado's statutory and common law authority for recovery of interest. Since then, there have been several decisions and new statutes which invite a revisitation of the topic. Colorado has experienced three years of substantial "tort reform" legislation. These new statutes use varying language in an attempt to limit tort recovery, but do not mention whether or not pre-judgment interest is within or excluded from the limitation. Colorado appellate courts have decided cases in which either an insurance policy or a mandatory insurance statute is construed on the question of whether interest is included or in addition to the policy limit. Finally, in trial courts in Colorado there is a dispute, unresolved by appellate decision, on the question of whether or not juries should be informed of the effect of personal injury pre-judgment interest.
This article is presented in two parts. Part I begins by identifying the Colorado statutes which control both post-judgment and pre-judgment interest. This is followed by a discussion of certain principles common to all interest claims. The remainder of Part I is devoted to application of the statute which deals only with personal injury claims, including an explanation of how interest accrues and is compounded and the effect of an appeal. Most significant in Part I is the analysis of various tort reform statutes and common law rules which must be reconciled with the statute allowing interest on personal injury claims.
Part II of this article will be printed in the July issue. In this second part will be a discussion of interest on claims other than for personal injury, including the alternative rate of interest determined by gain or benefit to the debtor. This will be followed by an analysis of the insurance issues created by a judgment debtor's obligation for pre-judgment and post-judgment interest. Also discussed will be the special rules for recovery of interest in federal cases. Part II will conclude with an appendix in which state and federal statutes are listed which apply to recovery of interest.
Post-judgment interest can be recovered on any money judgment, under CRS § 5-12-102(4), at 8 percent compounded annually from the date of judgment. The post-judgment interest rate can be more or less than 8 percent if the judgment was entered based on some contract or instrument in writing which provided for payment of interest at some other rate until the obligation is paid.(fn2) Post-judgment interest on personal injury claims accrues at the 9 percent rate provided in CRS § 13-21-101.
Post-judgment interest under CRS § 5-12-102 need not be requested and accrues even in cases which were initiated for relief other than damages, such as a mandamus action.(fn3) For 9 percent interest under CRS § 13-21-101, interest must be requested.(fn4) The post-judgment rule has never been affected by whether or not a claim was liquidated or unliquidated.(fn5) Post-judgment interest rates change to market rates when the judgment debtor appeals.(fn6)
Pre-judgment interest may be awarded under either of two statutes: CRS § 13-21-101 applies to personal injury claims only; CRS § 5-12-102 applies to all claims except personal injury unless a specific statute controls. In addition, there is the possibility of moratory interest, a common law recovery when the injured party has sustained a loss of use of money.(fn7) Before discussing the different rules for personal injury pre-judgment
J. Kent Miller, Denver, is a shareholder in Miller & McCarren, P.C. and author of the two-volume Colorado Personal Injury Practice, to be published in August by West Publishing Co.
Pre-judgment interest is not automatically awarded---it must be requested. Colorado has moved from a restrictive interpretation of this requirement(fn8) to a much more liberal construction in which almost any mention of the word "interest" will be sufficient to allow recovery.(fn9) The failure to plead a claim for interest is not cured by the market rate of interest statutes. Although these provisions apply to all appeals by judgment debtors, these statutes are ineffective unless a request for pre-judgment interest was made before entry of judgment.(fn10)
The change from pre-judgment interest to post-judgment interest does not occur until a judgment is final. For example, in a claim for breach of an employment agreement subject to Colorado's specific statute for attorney's fees and costs,(fn11) when the verdict was entered in 1982 and the court did not reduce the claim for attorney's fees to a judgment until 1984, post-judgment interest did not start on the attorney's fees until the judgment was final in 1984.(fn12)
Post-judgment interest accrues from the time an arbitration award is reduced to judgment.(fn13) Pre-judgment interest may not be awarded in arbitration on the same basis as if the dispute were resolved in litigation. When awards in either arbitration or litigation are offset by counterclaim or other set-off, interest is owed only on the balance due.(fn14) However, once an arbitration award is reduced to judgment, the courts cannot add pre-judgment interest.(fn15)
Tenders of partial satisfaction of judgment either to the judgment creditor or to the registry of the court, with conditions attached which fall short of unconditional payment, will not stop the running of post-judgment interest.(fn16) For the appellate courts to review an award of interest, specific findings are necessary when a claim includes elements of damages upon which different statutes or rules apply.(fn17)
Personal injury awards have been increased by interest, pursuant to Colorado statute, since 1911.(fn18) The most significant change to the statute, now CRS § 13-21-101, was in 1975. First, instead of interest accruing at the "legal rate,"(fn19) pre-judgment interest on personal injury claims, including wrongful death claims,(fn20) was increased to 9 percent per annum on all actions filed on or after July 1, 1975. Second, the 9 percent per annum rate would continue until the date of satisfaction of judgment.(fn21) The new direction was that personal injury judgments would continue to accrue interest at 9 percent even after judgment was entered, while post-judgment interest on all other judgments (not controlled by special statute) accrued at 8 percent.(fn22)
The next significant change to CRS § 13-21-101 was in 1979 and, with the exception of the additions relating to appeals, as discussed below, this is the law which controls today.(fn23) The 1979 amendment, in S.B. 463 of that year, changed the time from which interest would accrue. For the previous decades in which Colorado had allowed pre-judgment interest on personal injury claims, interest had run from the date of filing the action. S.B. 463 allowed the plaintiff to claim interest from the date the action accrued and added the provision for annual compounding of interest. However, it allowed compounding only from the date of filing suit.(fn24) This removed some but not all of the incentive for premature filing of cases which might be settled. In 1983, the Colorado Court of Appeals held that the amendment applied to actions which accrued before the effective date of the statute (1979) and liberally construed a plaintiff's pleading which requested "interest as provided by statute" as a claim for interest from the date the action accrued.(fn25)
There may be confusion as to when interest is to be compounded. The statute provides that the calculation shall include compounding of interest annually from the date such suit was filed. The judgment debtor will argue that the first compounding must take place one year from the date suit was filed. The more logical interpretation is that interest should be compounded on the date that suit is filed---on the sum of the verdict plus accrued simple interest to the date of filing, and then again every twelve months after the date suit was filed.
Assuming no appeal by the judgment debtor, personal injury pre-judgment interest continues to accrue compound interest, with compounding on each anniversary of the date suit was filed, until the judgment is totally satisfied. Any partial satisfaction of judgment will reduce the amount on which the 9 percent, compounded annually, computation will be made.(fn26)
The calculation of personal injury pre-judgment interest is a function of the court. It is not a jury question. The statute has always provided that when pre-judgment interest is claimed,
It is the duty of the court in entering judgment for the plaintiff in such action to add to the amount of damages, assessed by the verdict of the jury, or found by the court, interest on such amount calculated. . . .(fn27)
When a plaintiff makes a claim for greater pre-judgment interest than allowed by this statute, and a defendant fails to answer, the trial judge has no authority to award personal injury interest at a rate different than specified in CRS § 13-21-101.(fn28)
Interest on personal injury claims is usually a simple mathematical...
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