Pre-Verdict Interest

The purpose of pre-verdict interest is to require a person who owes money to pay for the time value of money, which is the advantage received from the use of that money over time. In contract dispute cases, Maryland provides for 6% prejudgment interest.

In personal injury cases, many of plaintiffs’ damages also occur immediately. Just like contract cases, Maryland personal injury victims are deprived of the use of money to which they are entitled to receive the moment they incur the injuries. Yet tort victims get no interest on money that accumulates.

Insurance companies are premised on time value of money. Take premiums, invest the money, and – reluctantly – pay out claims later. While I think the idea that insurance companies stall to delay making payment is sometimes overblown (administrative considerations give insurance companies some incentive to move files forward), there is still no question that there is economic incentive to delay because the longer they hold the money, the more interest they will receive.

In most serious personal injury cases – particularly product liability and medical malpractice cases, where the defendants want the suit to be filed to conduct discovery – the time between injury and compensation can be years. A verdict or a settlement is a determination that the defendant really should have paid the pre-verdict interestmoney at the time of the injury. Let’s not kid ourselves. The entire tort system is about money. The defendant causes plaintiff injury and the pain and loss from the injuries are converted to monetary value. Failing to provide for pre-verdict and pre-settlement interest is just another dagger in the ideal of making the plaintiff whole with monetary compensation.

Most of us with jobs that help people enjoy helping people and solving their problems. It is frustrating having to give the “justice in injury claims is delayed justice” speech. I wish I could at least tell them that the unfairness of delayed justice is mitigated by pre-verdict and even pre-settlement interest.

This wisdom will not prevail on our state legislatures in Maryland. Even in a relatively progressive state like Maryland, there is little inertia to pass legislation to help fairly compensate personal injury victims.

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