To Allow Interest or Not Allow Interest In A Personal Injury Case?

Although it may sound Shakespearean, the question to allow interest or not allow interest in a personal injury case is not so dramatic.  Or is it?  Whether to allow pre-judgment interest is only the first question the Courts had to answer in determining whether a Plaintiff is entitled to pre-judgment interest as a sanction under Rule 68.  The next question was what is the applicable interest rate?  In  Metzier v. BCI Coca-Cola Bottling, the Supreme Court decided the second question.

Rule 68 is often used as a mechanism resolve lawsuits.  It allows one party to either offer judgment against the other or in favor of the other for a stated amount.  For example in a personal injury action, the Plaintiff may submit a Rule 68 offer of judgment in his/her favor for $10,000.00.  If the defendant decides not to accept this offer, and the judge/jury ultimately awards plaintiff judgment in an amount greater than the $10,000.00, under the rule, the Court may asses certain sanctions against the Defendant for not accepting the offer of judgment.  The policy for the rule is to  facilitate settlement and reduce the burden on the civil judicial system.

The rule provides the following as sanctions: (1) pay the other party’s reasonable expert witness fees, double taxable costs and prejudgment interest on unliquidated claims accruing from the date of the offer.  The question then was what is the applicable interest to charge?  Well in Metzier v. BCI Coca-Cola Bottling, the Arizona Supreme Court answered that question.

The Court framed the issues as whether prejudgment interest awarded as a  sanction pursuant to Arizona Rule of Civil Procedure 68(g) is interest on an “obligation” under A.R.S. § 44-1201(A) or “interest on a judgment” under § 44-1201(B).  The Court ultimately held that Rule 68(g) constitutes interest on a judgment thus the proper interest rate to be 4.25%.  In Metzeier the trial Court awarded interest at the rate of 10% per annum which calculated as $347,672.16 in pre-judgment interest.  The result of the Court’s decision reducing the interest rate to 4.25% resulted in a reduction of pre-judgment interest to $253,078.77.