Today's Texas Supreme Court decision in Horizon v. Auld is both a gain and a loss for consumers. In its march for justice, the Texas Supreme Court took one step forward and one step back. We applaud their holding as it pertains to punitive damages. Today, perhaps as a result of the elevated public scrutiny this case has received, the Texas Supreme Court did the right thing by allowing punitive damages to stand in the face of such gross negligence. However, the Court negated its positive step forward with a big step backwards, disallowing prejudgment interest.
Prejudgment interest is compensation given to a plaintiff for the lost use of money.
A plaintiff can typically collect prejudgment interest if there is a lapse of time between the development of a claim and the date of judgment. In this case, the estate of Martha Hary lost the use of money it was entitled to for approximately five years. By stripping away prejudgment interest, the Court sent a signal to nursing homes and other defendants, encouraging them to stall when settling claims. In the nursing home context, many witnesses to alleged negligence are older and perhaps ill. By not settling and forcing a case to trial, nursing homes and their insurance companies increase their chance of avoiding liability even though a claim may be perfectly legitimate.